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Income Tax Appellate Tribunal, DELHI BENCHES : B : NEW DELHI
Before: SHRI R.S. SYAL & SHRI KULDIP SINGH
ORDER PER R.S. SYAL, AM:
This appeal by the assessee is directed against the order passed by the CIT(A) on 30.9.2013 in relation to the Assessment Year 2009-10.
The only issue raised in this appeal is against the confirmation of disallowance of interest u/s 36(1)(iii) of the Income-tax Act, 1961 (hereinafter also called `the Act’) to the extent of Rs.36 lac.
Briefly stated, the facts of the case are that the assessee company made interest free loan amounting to Rs.4 crore to Shri Vikram Bakshi. It was noticed by the AO that the assessee claimed interest expenditure of Rs.13.81 crore. It was seen that on the one hand, the assessee had obtained interest bearing funds and, on the other hand, it gave interest free loan to its director. On being called upon to explain as to why the disallowance of proportionate interest be not made, the assessee submitted that it was running one of its restaurants under operating lease from Sector 18, Noida, UP. The assessee initiated purchase of building on leasehold basis from M/s Vikram Bakshi & Co. Pvt. Ltd. The consideration was agreed at Rs.4.40 crore and an advance of Rs.4 crore was given. The balance of Rs.40 lac was payable only on the transfer of property up to which date the underlying lease was to continue. Due to the delay on the part of the Noida Authority in approving the transfer in the name of the assessee which was required as per the original lease agreement with the authority, the execution of sale deed was pending. It was, further submitted that the advance was made for the purchase of Noida property for running its restaurant therefrom. The AO did not accept the assessee’s contention by noticing that it had not filed any documentary evidence from where it could be ascertained that the advance was given for the purpose of business. Relying on certain decisions, he made an addition of Rs.64 lac by applying interest rate of 16% on advance of Rs.4 crore. The ld. CIT(A) restricted this addition to Rs.36 lac by reducing interest rate to 9% on Rs.4 crore. The assessee is aggrieved against the sustenance of addition to this extent.
We have heard the rival submissions and perused the relevant material on record. The ld. AR relied on an application for transfer of property dated 21.9.2005 made in favour of the assessee, a copy of which is available at page 197 to 202 of the paper book. The ld. AR also placed reliance on Agreement to sell dated 22.7.2002 entered into between M/s Vikram Bakshi & Co. Pvt. Ltd. and the assessee in support of the contention that the Agreement for the transfer of property in favour of the company was entered into in the year 2002 which did not materialize because of the inaction on the part of the Noida Authority. Our attention was also drawn towards other correspondence with the Noida Authority.
In the light of the above material, it was contended that since the advance of Rs.4.00 crore was given for business purpose, there was no need to make any disallowance of interest. In the opposition, the ld. DR strongly urged that these documents were not before the authorities below. We find from the assessee’s paper book that the documents starting from page 99 up to page 206 were not before the AO or CIT(A). Since these documents are of immense relevance in deciding the controversy, which were admittedly not before the authorities below, we are of the considered opinion that the ends of justice would meet adequately if the impugned order is set aside and the matter is restored to the file of the AO. We order accordingly and direct him to decide this issue afresh as per law, after allowing adequate opportunity of hearing to the assessee.
In the result, the appeal is allowed for statistical purposes.
The order pronounced in the open court on 16.11.2016.