SPM Auto Pvt. Ltd., New Delhi v. DCIT, New Delhi

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G NEW DELHI BEFORE SHRI R.P. TOLANI JUDICIAL MEMBER AND SHRI K.D. RANJAN ACCOUNTANT MEMBER ITA NOAS.280/DEL/09 & 573/DEL/2010 ASSESSMENT YEAR 2005-06 & 2006-07 SPM AUTO PVT. LTD. VS. ADDL. CIT RANGE 9 WZ-406S JANAK PARK C.R. BLDG. HARINAGAR NEW DELHI. NEW DELHI. PAN : AABCS 4821 P (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI B.L. GUPTA RESPONDENT BY : SHRI A.K. SINHA SR. D.R. ORDER PER R.P. TOLANI JM: THESE ARE TWO APPEALS FILED BY THE ASSESSEE AGAINS T TWO SEPARATE ORDERS OF THE CIT(A)-XII NEW DELHI DATED 16.10.2008 AND 15.1 0.2009 FOR THE ASSESSMENT YEARS 2005-06 AND 2006-07 RESPECTIVELY RAISING THE FOLLOWING COMMON GROUND EXCEPT VARIATION IN THE AMOUNT OF DISALLOWANCE:- THE LD. CIT(A) IS ERRED IN LAW AND ON FACTS IN CON FIRMING DISALLOWANCES OF RS.6 40 640/- (RS.4 51 336/- FOR T HE ASSESSMENT YEAR 206-07) ON ACCOUNT OF INTEREST WHIC H WAS BONAFIDELY CLAIMED IN THE RETURN OF INCOME. 2. LD. COUNSEL FOR THE ASSESSEE CONTENDS THAT THE A SSESSEE HAD BORROWED INTEREST BEARING FUNDS PART OF WHICH WAS ADVANCED T O ITS SISTER CONCERN ON INTEREST ITA NO.280/DEL/09 & ITA NO.573/DEL/10 2 FREE BASIS. EVEN CIT(A) DISALLOWED PROPORTIONATE I NTEREST RELYING ON THE FOLLOWING JUDGMENTS:- I) CIT V. ABHISHAK INDUSTRIES LTD. (2006) 157 TAXMA N 257; II) K.SOMASUNDARAM & BROS. V. CIT 238 ITR 939; III) CIT V. M.S. VENKATESWARAN 222 ITR 163; IV) CIT V. P. GANU RAO & SONS 185 ITR 323 (MAD.); V) CIT V. V.I. BABY & CO. 254 ITR 248. LD. COUNSEL FOR THE ASSESSEE FURTHER CONTENDS THAT INTEREST-FREE FUNDS WERE ADVANCED TO ITS SISTER CONCERN FOR COMMERCIAL EXPED IENCY. THEREFORE NO PROPORTIONATE DISALLOWANCE CAN BE MADE IN THIS CASE . RELIANCE WAS PLACED ON THE FOLLOWING JUDGMENTS:- I) CIT NEW DELHI V. DCM LTD. (2009) 177 TAXMAN 30 0 (DELHI); II) CIT V. H.B. STOCK HOLDINGS LTD. (2010) 215 TAXX ATION 58 (DELHI); III) CIT V. DALMIA CEMENT BHARAT LTD. (2010) 215 TA XATION 51 (DELHI); IV) S.A.BUILDERS LTD. V. CIT(APPEALS) CHANDIGARH & ANR. 2006-(ITI)- GJX-0570-SC 2007 (288) ITR-0001-SC ; V) SUTLEJ COTTON MILLS LTD. V. ACIT (ACIT CIT V. S UTLEJ COTTON MILLS LTD.) 1997-(ID2) GJX-0421-TDEL 1998-(060)-TTJ-000 1-TDEL 3. THE LD. D.R. CONTENDS THAT ASSESSEE HAD NOWHERE TAKEN THE PLEA THAT THE SAME WAS ADVANCED FOR COMMERCIAL EXPEDIENCY AND REL IED ON THE ORDER OF THE LOWER AUTHORITIES. LD. COUNSEL FOR THE ASSESSEE IN THE REJOINDER FILED A COPY OF LETTER DATED 24.12.2007 ADDRESSED TO THE DCIT CIRC UMSTANCES.9(1) NEW DELHI CLAIMING THAT THESE ADVANCES WERE MADE FOR COMMERCI AL EXPEDIENCY. 4. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL AVAILABLE ON RECORD. LD. COUNSEL FOR THE ASSESSEE HAS RELIED ON THE JUDGMENT OF HON'BLE ITA NO.280/DEL/09 & ITA NO.573/DEL/10 3 SUPREME COURT IN THE CASE OF S.A. BUILDERS (SUPRA) WHEREIN IT HAS BEEN HELD THAT INTEREST-FREE ADVANCES CAN BE GIVEN TO SISTER CONCE RN/ASSOCIATE CONCERN FOR COMMERCIAL EXPEDIENCY. ASSESSEE HAD RAISED THIS PL EA BEFORE THE ASSESSING OFFICER THOUGH NOT WITH FULL DETAILS. IN VIEW OF T HESE FACTS WE ARE INCLINED TO SET ASIDE THIS ISSUE FOR BOTH THE YEARS BACK TO THE FIL E OF THE ASSESSING OFFICER TO DECIDE THE SAME AFRESH IN ACCORDANCE WITH THE HON'B LE SUPREME COURT JUDGMENT IN THE CASE OF S.A. BUILDERS (SUPRA). THE ASSESSEE SHA LL ESTABLISH THE COMMERCIAL EXPEDIENCY REQUIRED FOR MAKING INTEREST-FREE ADVANC ES BEFORE HIM. 5. IN THE RESULT APPEALS ARE ALLOWED FOR STATISTIC AL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 27.4.2010 SD/- SD/- (K.D. RANJAN ) ( R.P. TOLANI ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 27.04.2010. VSK COPY FORWARDED TO: - 1. APPELLANT-ASSESSEE 2. RESPONDENT-REVENUE 3. CIT 4. CIT(A) 5. DR ITAT NEW DELHI. DEPUTY REGISTRAR