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Income Tax Appellate Tribunal, NAGPUR BENCH : NAGPUR
Before: S.S.VISWANETHRA RAVI & DR. DIPAK P. RIPOTE
आयकर अपीलीय अिधकरण �ायपीठ नागपुर म�। IN THE INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH : NAGPUR BEFORE S.S.VISWANETHRA RAVI, JUDICIAL MEMBER AND DR. DIPAK P. RIPOTE, ACCOUNTANT MEMBER आयकर अपील सं. / ITA No.375/NAG/2017 िनधा�रण वष� / Assessment Year : 2010-11 Shri Deepak Sitaram The Deputy Commissioner of Laddhad Laddhad Hospital, Vs Income Tax, Akola Circle, Behind Shivaji College, Akola. Wankhede Layoiut, Buldhana – 443001. PAN: AARPL 4180 F Appellant / Assessee Respondent / Revenue Assessee by None. Revenue by Shri G.J.Ninawe – DR Date of hearing 10/11/2022 Date of pronouncement 16/11/2022 आदेश/ ORDER PER DR. DIPAK P. RIPOTE, AM: This is an appeal filed by the Assessee against the order of ld.Commissioner of Income Tax(Appeals)-1, Nagpur dated 17.07.2017 emanating from the order of the Assessing Officer dated 14.03.2013. The Assessee has raised the following grounds of appeal: “1] Learned C.I.T.(A) erred in confirming the disallowance the Interest amounting to Rs.2,80,926/- out of disallowance the interest made by A.O. amounting to Rs.3,69,635/-. 2] Learned C.I.T.(A) erred in not properly appreciate the fact of the case and various submission filed before the A.O. and before her.
ITA No.375/NAG/2017 for A.Y.2010-11 Shri Deepak Sitaram Ladhad [A]
3] Assessee craves to urge additional grounds at the time of hearing, if necessary.” 2. Brief facts of the case: The assessee is a Medical Practitioner filed return of income on 20.09.2010 declaring total income of Rs.46,07,912/- for A.Y. 2010-11. The case was selected for scrutiny. After giving opportunity to the assessee, the Assessing Officer(AO) passed the assessment order under section 143(3) on 14.03.2013. In the assessment order, the AO has observed that assessee had advanced interest free loans of Rs.24,64,227/- to following persons:
Name of The parties Amount of interest free loan/deposits(Rs) 1. Vidya Niketan Society 1,90,000/- 2. Dr. Ajay Mahajan 1,21,561 3. Dr. Sangita Laddhad 18,23,383 4. Pankaj laddad Institute 2,90,000/- of Technology 5. U B Mahajan 6283 6. Sitaram Laddhad 33,000 Total 24,64,227 3. The AO observed that assessee had claimed interest expenditure of Rs.26,53,824/-. The AO calculated notional interest @15% which works out to Rs.3,69,635/- on the interest free advances and disallowed the said amount of Rs.3,69,635/- under section 36(1)(iii) r.w.37(1) of the Act. Aggrieved by the same, assessee filed appeal before the ld.CIT(A). The ld.CIT(A) accepted assessee’s explanation only with respect to the loan amount given to Dr.Ajay Mahajan. Accordingly, the ld.CIT(A) directed the AO to
ITA No.375/NAG/2017 for A.Y.2010-11 Shri Deepak Sitaram Ladhad [A]
recalculate the disallowance which works out to Rs.2,80,926/- instead of Rs.3,69,635/- made in the assessment order.
Aggrieved by the same, the assessee filed appeal before this Tribunal.
None appeared on behalf of the assessee. However, assessee has filed written submissions. We have heard ld.Departmental Representative(ld.DR) of the Revenue and perused the records and considered the written submissions filed by the assessee. The relevant part of the written submissions of the assessee is reproduced as under: “5] It was submitted before the lower authorities and it is submitted with respect that none of advances to said four persons were from the interest bearing borrowed funds. In respect of Vidya Niketan the amount of Rs.1,90,000/- was given in the year 2006-07 while the cash credit limit was sanctioned only in F.Y.2007-08. In respect of U.B. Mahajan he was a visiting doctor and during the year TDS of Rs.6,283/- was made which was debited to his account. In respect of Pankaj Laddhad Institute it was just an temporary advance from Assessee's own capital and not from interest bearing borrowed fund and also because the Assessee was expecting professional receipt and patients from it and hence it was considered expedient not to charge interest on such temporary advance. In respect of Dr. Smt. Sangeeta Laddhad she was giving her services in the Hospital as a gynecologist and the payments were in normal course of business as was also in earlier years and further even the payments were from Assessee's own fund and not from interest bearing borrowed funds.
ITA No.375/NAG/2017 for A.Y.2010-11 Shri Deepak Sitaram Ladhad [A]
In short the submission of the Assessee is that Assessee's capital both opening and closing, as also profit of the year far exceeded the above said four impugned advances amounting to Rs.23,09,667/- detailed as under:-
(1) Vidya Niketan Rs. 1,90,000/- (2) Dr. Smt. Sangita Laddhad Rs.18,23,384/- (3) Pankaj Laddhad Institute Rs. 2,90,000/- (4) U.B.Mahajan Rs. 6,283/- Rs.23,09,667/- As against the above the Assessee had non-interest bearing fund as under:- (i) Interest free loans from friends and Relatives (see CIT(A)’s order P.3) Rs. 3,24,444/- (ii) Closing balance in Capital Account Rs. 26,20,886/- Rs. 29,65,330/- The details of capital account is given below for ready reference. (The balance sheet and profit and loss a/c. with all schedules and annexures are also attached herewith).
Opening Capital Rs.96,11,085/- Add Capital introduced including agricultural income Rs. 4,15,120/- Profit of the year Rs. 33,36,323/- Rs.37,51,443/- Rs.37,51,443/- Rs.1,33,62,528/- Less: Withdrawals of the year Rs.1,07,41,642/- Closing balance Rs. 26,20,886/- From the above it will be seen that the Assessee had sufficient fund by way of capital, income and non-interest bearing loans which far exceeded the advances to above said four persons amounting to Rs.23,09,667/- and coupled with the fact that no part of interest bearing loan amount was advanced to the said four persons.”
ITA No.375/NAG/2017 for A.Y.2010-11 Shri Deepak Sitaram Ladhad [A]
The assessee relied on the following case laws: Commissioner of Income Tax Vs. Tin Box Co. (2003) 260 ITR P.637 (Del) Principal Commissioner of Income Tax Vs. Gaursons Reallity (P) Ltd. (2020) 422 ITR P.123 (Del) Commissioner of Income Tax Vs. Sambandham Mills Ltd. (2008) 298 ITR P.306 (Madras)
The ld.DR relied on the orders of the Lower Authorities.
On perusal of the submissions of the assessee, it is observed that assessee had opening capital of Rs.96,11,085/- and there was agricultural income of Rs.4,15,120/- during the year. Profit during the year was Rs.37,51,443/- whereas the interest free loan was only Rs.23,09,667/-. Thus, assessee had sufficient interest free own funds to make the advance of Rs.23,09,667/-. It is also observed that the amount of Rs.1,90,000/- given to Vidyaniketan was given in the year 2006-07 while assessee had taken the cash credit facility in F.Y.2007-08. Thus, the amount of Rs.1,90,000/- which was advanced to Vidyaniketan was out of assessee’s non-interest bearing funds. In this context, the reliance is placed on Hon’ble Bombay High Court decision in CIT Vs. Reliance Utilities and Power Ltd., 313 ITR 340 (Bom) in which the Hon’ble High Court has held that, “The principle therefore would be that if there are funds available both interest-free and overdraft and/or loans taken, then a presumption would arise that investments would be out of the
ITA No.375/NAG/2017 for A.Y.2010-11 Shri Deepak Sitaram Ladhad [A]
interest-free fund generated or available with the company, if the interest-free funds were sufficient to meet the investments.” Therefore, respectfully following the Hon’ble Bombay High Court in the present case, assessee was having sufficient interest free funds, therefore, it is presumed that advances were made out of interest free funds, hence, it is held that no disallowance of interest is required interest free advances. Accordingly, the AO is directed to delete the disallowance of Rs.3,69,635/-. Hence, the grounds of appeal raised by the assessee are allowed.
In the result, appeal of the Assessee is Allowed.
Order pronounced in the open Court on 16th November, 2022.
Sd/- Sd/- (S.S.VISWANETHRA RAVI) (DR. DIPAK P. RIPOTE) ACCOUNTANT MEMBER JUDICIAL MEMBER पुणे / Pune; �दनांक / Dated : 16th Nov, 2022/ SGR* आदेशक��ितिलिपअ�ेिषत / Copy of the Order forwarded to : अपीलाथ� / The Appellant. 1. ��यथ� / The Respondent. 2. 3. The CIT(A), concerned. 4. The Pr. CIT, concerned. िवभागीय�ितिनिध, आयकर अपीलीय अिधकरण, नागपुर ब�च, 5. नागपुर / DR, ITAT, Bench, Nagpur. गाड�फ़ाइल / Guard File. 6. आदेशानुसार / BY ORDER, // TRUE COPY // Senior Private Secretary आयकर अपीलीय अिधकरण, पुणे/ITAT, Pune.