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Income Tax Appellate Tribunal, DELHI BENCH ‘SMC-1’, NEW DELHI
Before: Sh. N. K. Saini
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘SMC-1’, NEW DELHI Before Sh. N. K. Saini, Accountant Member Asstt. Year : 2011-12 Mansarover Investment Ltd., Vs Income Tax Officer, 28, Najaf Garh Road, Ward-6(2), New Delhi-110015 New Delhi (APPELLANT) (RESPONDENT) PAN No. AAACM0211C Assessee by : None Revenue by : Sh. Amit Katoch, Sr. DR Date of Hearing : 27.06.2016 Date of Pronouncement : 29.06.2016 ORDER
This is an appeal by the assessee against the order dated 12.08.2014 of ld. CIT(A)-IX, New Delhi.
Following grounds have been raised in this appeal:
“1. On facts and in the circumstances of the case and in law, the Id. Commissioner of Income Tax (Appeals)(CIT (A)) erred in confirming the disallowance of Rs. 14,22,882/- made out of interest expenses. 2. On facts and in the circumstances of the case and in law, the lower authorities erred in holding/confirming the above disallowance without establishing direct nexus to the effect that interest 2 Mansarover Investment Ltd. bearing borrowing were diverted in giving interest free advances.
On facts and in the circumstances of the case and in law, the Id. GIT (A) erred in confirming the above disallowance which is contrary to the established principle of taxation that tax cannot be levied on notional income.
4. The Id. CIT (A) ought to have deleted the above interest disallowance/addition by holding that the interest free advances were given out of own funds/interest free funds.
5. The appellant craves leave to add, amend, and modify all or any of the above grounds of appeal
.”
3. During the course of hearing nobody was present on behalf of the assessee. However, a written submission has been made by the Director of the assessee which read as under:
“1. It is most respectfully submitted that we are filing written submissions. These submissions may therefore kindly be considered in response to notice of hearing. 2. The only effective ground of appeal is confirmation of the disallowance of Rs. 14,22,882/- made out of interest expenses.
3. The Ld. CIT(A) has upheld the said disallowance vide para 5.3 of his order by following his own order in immediately preceding year i.e. AY 2010-11.
3 Mansarover Investment Ltd.
The appellant had filed appeal against the order of CIT(A) in the preceding year also and the Hon'ble ITAT vide its order in dated 11/5/2016 vide para 6 of the order ( copy enclosed) has held as under:- ...."The assessee has further demonstrated that it has sufficient interest free funds in the form of share capital and reserves and surplus. On these facts and circumstances of the case, we are of the considered opinion that the disallowance should be deleted and the issue should be set aside to the file of the AO for verification of the claim of the assessee that it had sufficient interest free funds to make these interest free advances. ....."
Since the facts are same in this year, we request your honour to kindly set aside the case with a direction to AO for verification of the claim in this year as well as has been done in the immediately preceding year and oblige.” Thanking You Yours Faithfully For Mansarover Investment Limited Sd/- (Director) 4. The ld. DR could not controvert the aforesaid contention of the assessee in the written submissions dated 22.06.2016 which had been reproduced in the former part of this order.
5. After considering the submissions of the ld. DR and the written submissions of the assessee, it is noticed that an identical issue having similar facts has already been adjudicated by the ITAT Delhi Bench 4 Mansarover Investment Ltd. “D”, New Delhi in assessee’s own case in for the assessment year 2010-11 wherein the relevant findings have been given in paras 5 & 6 of the order dated 11.05.2016 which read as under: “5. The A.O. at page 2 of his order has listed out the loans taken by the assessee from six companies. Out of this the loan taken from Manjula Finances Ltd. of Rs.1,78,00,000/- was an interest fee loan. On page 3 the A.O. listed out the companies to which the assessee has given loans and advances. Out of the six companies, the assessee had given interest free loans to Rohit Tower Building Ltd. of Rs.1,71,00,000/- and to Jindal Systems P.Ltd. Rs.5,00,000/-. The claim of the assessee is that it has sufficient interest free funds and that these funds were given as interest free advances to these two entities and hence no disallowance can be made u/s 36(1)(iii) of the Act.
We find that the assessee had made elaborate submissions before the Ld.CIT(A). In our view the Ld.CIT(A) has erred in not applying the propositions laid down by Hon’ble Mumbai High Court in the case of CIT vs Reliance Utilities & Power Ltd. reported in 313 ITR 340 (Mum), to the facts of the case. When there are sufficient interest free funds available with the assessee, the presumption should be that such funds have been given as interest free advances. The assessee has further demonstrated that it has sufficient interest free funds in the form of share capital and reserves and surplus. On these facts and circumstances, we are of the considered opinion that the disallowance should be deleted and the issue should be set aside to the file of the A.O. for verification of the claim of the assessee that it had sufficient interest free funds to make these interest free advances. The A.O. is directed to apply the ratio of the judgement of Hon’ble Bombay High 5 Mansarover Investment Ltd. Court in the case of Reliance Utilities & Power Ltd. (supra).” 6. Since the facts for the year under consideration are identical to the facts involved in the preceding year. Therefore, respectfully following the earlier order dated 11.05.2016 in assessee’s own case in ITA No. 6722/Del/2014 for the assessment year 2010-11, the issue involved in the present appeal is restored to the file of the AO to be adjudicated in the same manner as was directed in the aforesaid referred to order dated 11.05.2016.
In the result, the appeal of the assessee is allowed for statistical purposes. (Order Pronounced in the Court on 29/06/2016)