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Income Tax Appellate Tribunal, “H” BENCH, MUMBAI
Before: SHRI D. KARUNAKARA RAO, AM & SHRI AMARJIT SINGH, JM
आयकर अपील सं/ (िनधा�रण वष� / Assessment Year:2011-12) बनाम/ M/s. Shakti Corporation Asst. Commissioner of Shop No.1, Income Tax 25(2) Vs. Ratnadeep Building, Mumbai Carter Road, Borivali (E) Mumbai – 400066 �थायी लेखा सं./जीआइआर सं./PAN/GIR No. :ABIFS6261N (अपीलाथ� /Appellant) (��थ� / Respondent) .. Assessee by: Shri Nishit Gandhi Revenue by: Shri M. C. Omi Ningshen सुनवाई की तारीख / Date of Hearing: 05.01.2017 घोषणा की तारीख /Date of Pronouncement: 31.03.2017 आदेश / O R D E R PER AMARJIT SINGH, JM:
The assessee has filed the present appeal against the order dated 21.06.2016 passed by the Commissioner of Income Tax (Appeals)-44, Mumbai [hereinafter referred to as the “CIT(A)”] relevant to the A.Y.2011-12.
2. The assessee has raised the following grounds:-
ITA No.4870/M/2016 A.Y.2011-12 “1. The payments to the Vendor Mr.Purushottam Bitra Rs.5,00,000.00 is payable towards settlement; which shall be fully allowed as the liability is determined and is certain on the part of the assessee firm and has gone down over a period of time. And the said liability is of the assessee firm u/s.41(1) of the Income Tax Act, 1961, thus allowable as expense for the assessee firm and the addition be deleted.
The interest on unsecured loans shall be fully allowed considering the genuineness of the expenses and as there is no nexus between the money received are advanced as interest free loan to sister concern and hence the said addition to be deleted.”
The brief facts of the case are that the assessee filed its return of income on 29.09.2011 declaring total income to the tune of Rs.20,21,091/-. The case was selected for scrutiny under Computer Aided Scrutiny Selection (CASS). Notice u/s.143(2) of the Income Tax Act, 1961 ( in short “the Act”) dated 06.08.2012 was issued and served upon the assessee. Thereafter, on account of the transfer of the case records to the present Assessing Officer, notice u/s.142(1) of the Act dated 07.08.2013 was issued. The assessee firm was in the construction activity running their business in the name and style of M/s. Shakti Corporation. The firm was incorporated for carrying out business of Builders, Developers, Construction Contractors, sub contractors etc. Under the year of consideration the assessee sold a plot of land which was acquired for development. The assessee purchased the property and shown the liability to the tune of Rs.5,00,000/- in case of Purushottam Bitra and Rs.6,00,000/- in case of Mr. Ganga Prasad Chetnarayan total to the tune of Rs.11,00,000/- Since the liability was not discharged therefore the same was added to the income of the assessee. It was also found that the assessee shown the interest payment to the tune of Rs.7,52,686/- up to the financial year 2010-
ITA No.4870/M/2016 A.Y.2011-12 11 and the year under consideration the interest was paid to the tune of Rs.2,07,900/- @ 12% per annum to the various parties / concerns for loan taken. However, it was also found that the assessee provided interest free loan to the tune of Rs.45,35,000/- to M/s. Kamani Enterprises its sister concern. Therefore, in the said circumstances the interest to the tune of Rs.7,52,686/- was disallowed and added back to the income of the assessee. Feeling aggrieved the assessee filed an appeal before the CIT(A) and found that Rs.6,00,000/- was paid on later date, therefore, the addition to the extent of Rs.6,00,000/- was deleted and the addition to the tune of Rs.5,00,000/- was confirmed. The interest was also confirmed, therefore, the assessee has filed an appeal before us.
ISSUE NO.1:-
Under this issue the assessee has challenged the confirmation of the addition to the tune of Rs.5,00,000/- payable to confirming party Mr. Purushottam Bitra. It is not in dispute that the assessee purchased the plot of land with old structures standing thereon by virtue of conveyance dated 07.09.2007. Thereafter, the assessee firm after acquiring the said property entered into a cancellation deed with Mr. Purushottam Bitra and agreed to pay Rs.24,00,000/- as settlement, Rs.14,00,000/- were payable on clearance of litigations pending in the High Court. In the A.Y.2010-11 the assessee firm paid Rs.10,00,000/- vide cheque no.998038 dated 04.11.2010 and Rs.4,00,000/- vide cheque no.998048 dated 15.11.2010 and Rs.1,00,000/- vide cheque no.998041 dated 21.03.2011 totaling to a sum of Rs.15,00,000/-. Out of the balance Rs.9,00,000/- remaining thereafter, Rs.4,00,000/- have been paid during the F.Y.2011-12 on 25.06.2012 vide
ITA No.4870/M/2016 A.Y.2011-12 cheque no.119694. Therefore, an amount of Rs.5,00,000/- was pending. Thereafter, the said property was sold to the third party i.e. Shri Halai Brahmakstriya Panch. It is specifically contended by the learned representative of the assessee that the liability of Rs.5,00,000/- has been shown in the books of account which is liable to be allowable in view of the law settled in case of The Commissioner of Income Tax Delhi-II vs. Jain Exports Pvt. Ltd., Judgment delivered on 24th May 2013 and Shri Nitin S. Gar Vs. The ACIT, Circle-4, Surat, ITA No.169,170, 171 and 172/Ahd/2009, order dated 4th June 2010. However, on the other hand the learned departmental representative has strongly relied upon the order passed by the CIT(A) in question. We have heard the arguments advanced by the learned representative of the parties and perused the record. We found that the assessee purchased the land from M/s. Gangaprasad Chetnarayan Mishra by virtue of conveyance deed dated 07.09.2007 lies at page 37 to 87 of the paper book. It is also not in dispute that the assessee firm entered into deed of cancellation with Mr. Purushottam Bitra and agreed to pay an amount of Rs.24,00,000/- on account of settlement. The said cancellation deed is also on the file lies at page 88 to 99 of the paper book. It is also not in dispute that subsequently the said property was transferred by virtue of conveyance deed date 22.12.2010 lies at page 100 to 145 of the paper book. The assessee paid an amount to Mr. Purushottam Bitra through cheques during the F.Y.2010-11 and 2011-12. The amount of Rs.5,00,000/- was payable which has been shown in the books of ITA No.4870/M/2016 A.Y.2011-12 account. Since the liability has been shown in the books of account and has yet not been discharged therefore the same is liable to be allowable in accordance with law. In this regard we find the support of the law settled in case of The Commissioner of Income Tax Delhi-II vs. Jain Exports Pvt. Ltd., Judgment delivered on 24th May 2013 and Shri Nitin S. Gar Vs. The ACIT, Circle-4, Surat, ITA No.169,170, 171 and 172/Ahd/2009, order dated 4th June 2010. Therefore, in the said circumstances, we are of the view that the CIT(A) has wrongly made the addition of Rs.5,00,000/- which is hereby ordered to be deleted. Accordingly, this issue is decided in favour of the assessee against the revenue.
ISSUE NO.2
So far as the issue no.2 is concerned, under this issue the assessee has challenged the addition of interest to the tune of Rs.2,07,900/-. The Assessing Officer noticed that the assessee paid the interest free loan to the tune of Rs.45,35,000/- to M/s. Kamini Enterprises, a sister concern but paid the interest to the tune of Rs.2,07,900/- against loan taken by him. The assessee has shown the loan taken from the various parties in its ledger. Thereafter, the said loan along with interest was paid fully. The interest free loan was given to the sister concern of the assessee firm M/s. Kamini Enterprises. The interest paid to the parties is not required to be equated to the interest free loan paid to the sister concern, assessee firm M/s. Kamini Enterprises. Therefore, in the said circumstances, the interest is not liable to be disallowed. Accordingly, the finding of the CIT(A) on this issue is ITA No.4870/M/2016 A.Y.2011-12 wrong against law and facts and is ordered to be set aside and we delete the interest to the tune of Rs.2,07,900/-. Accordingly, this issue is decided in favour of the assessee against the revenue.