DCIT 9(1), MUMBAI v. AHUJA PLATINUM PROPERTIES LTD, MUMBAI

ITA 2953/MUM/2011 | 2007-2008
Pronouncement Date: 30-10-2013 | Result: Partly Allowed

Appeal Details

RSA Number 295319914 RSA 2011
Assessee PAN AAECA4138L
Bench Mumbai
Appeal Number ITA 2953/MUM/2011
Duration Of Justice 2 year(s) 6 month(s) 15 day(s)
Appellant DCIT 9(1), MUMBAI
Respondent AHUJA PLATINUM PROPERTIES LTD, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 30-10-2013
Appeal Filed By Department
Order Result Partly Allowed
Bench Allotted A
Tribunal Order Date 30-10-2013
Date Of Final Hearing 23-09-2013
Next Hearing Date 23-09-2013
Assessment Year 2007-2008
Appeal Filed On 15-04-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH MUM BAI . . BEFORE SHRI B. R. MITTAL JM AND SHRI SANJAY ARORA AM ./ I.T.A. NO. 7153/MUM/2010 ( / ASSESSMENT YEAR: 2005-06) & ./ I.T.A. NO. 2953/MUM/2011 ( / ASSESSMENT YEAR: 2007-08) DY. CIT RANGE 9(1) ROOM NO. 223 AAYAKAR BHAVAN M. K. ROAD MUMBAI-400 020 / VS. AHUJA PLATINUM PROPERTIES LTD. A-1 RAJPIPLA LINKING ROAD SANTACRUZ (W) MUMBAI-400 054 ! ./' ./PAN/GIR NO. AAECA 4138 L ( !# /APPELLANT ) : ( $!# / RESPONDENT ) $ ./ C.O. NO. 122/MUM/2011 (ARISING OUT OF ITA NO.2953/MUM/2011) ( / ASSESSMENT YEAR: 2007-08) AHUJA PLATINUM PROPERTIES LTD. A-1 RAJPIPLA LINKING ROAD SANTACRUZ (W) MUMBAI-400 054 / VS. DY. CIT RANGE 9(1) ROOM NO. 223 AAYAKAR BHAVAN M. K. ROAD MUMBAI-400 020 ! ./' ./PAN/GIR NO. AAECA 4138 L ( $ /CROSS OBJECTOR ) : ( $!# / RESPONDENT ) % & ' / REVENUE BY : SHRI SURENDRA KUMAR ()*+ & ' / ASSESSEE BY : SHRI REEPAL TRALSHAWALA (%- & . / DATE OF HEARING : 23.09.2013 /01 & . / DATE OF PRONOUNCEMENT : 30.10.2013 2 ITA NO. 7153/M/10 2953/M/11 & CO NO. 122/M/11 AHUJA PLATINUM PROPERTIES LTD. (A.Y. 05-06 & 07-08) 2 / O R D E R PER SANJAY ARORA A. M.: THIS IS A SET OF TWO APPEALS U/S.253 OF THE OF THE INCOME TAX ACT 1961 (THE ACT HEREINAFTER) BY THE REVENUE FOR TWO SUCCESSIVE YEAR S BEING ASSESSMENT YEARS (A.YS.) 2005-06 AND 2007-08 IN THE ASSESSEES CASE WITH TH E ASSESSEE OBJECTING TO THE ORDER BY THE FIRST APPELLATE AUTHORITY FOR THE LATER YEAR I .E. A.Y. 2007-08 VIDE ITS CAPTIONED CROSS OBJECTION (CO). THE APPEALS RAISING COMMON ISSUES WERE FIXED FOR HEARING AND HEARD TOGETHER AND ARE BEING DISPOSED OF VIDE A COMMON CONSOLIDATED ORDER. 2. AT THE VERY OUTSET IT WAS CLAIMED BY THE LD. AU THORIZED REPRESENTATIVE (AR) THE ASSESSEES COUNSEL THAT ALL BUT ONE OF THE ISSUES ARISING IN THE INSTANT APPEALS AND CROSS OBJECTION ARE COVERED BY THE ORDER BY THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR A.Y. 2003-04 PLACING A COPY OF THE SAID ORDER ON RECORD (IN ITA NOS. 4558 & 4723/MUM/2007 DATED 24.06.2011). HE WOULD THEN TAKE US TO THE RELEVANT PARTS OF THE SAID ORDER TO EXHIBIT OF THE ISSUES BEING THE SAME ARISING OUT OF THE SAME MEMORANDUM OF UNDERSTANDING (MOU) AND THE SAME SET OF FACTS S O THAT THE TRIBUNALS ORDER FOR THAT YEAR IN ITS CASE WOULD BE APPLICABLE FOR THE CURREN T YEARS AS WELL. GROUND 3 FOR A.Y. 2007-08 AS WELL AS GD. A OF THE ASSESSEES CO CO NCERN A FRESH ISSUE AND ON WHICH ARGUMENTS WOULD BE REQUIRED TO BE MADE. 3. WE HAVE HEARD THE PARTIES AND PERUSED THE MATER IAL ON RECORD. 3.1 GROUND NO. 1 FOR BOTH THE YEARS IS IN RESPECT O F SHARING OF COMMON POOL EXPENSES. FOR THE PURPOSE OF OUR DISCUSSION WE SHALL REFER T O THE FIGURES FOR A.Y. 2005-06. THE ASSESSEE CLAIMED RS.1 08 00 859/- BY WAY OF DEBIT TO ITS PROFIT AND LOSS ACCOUNT TOW ARD REIMBURSEMENT OF ADMINISTRATIVE/CONSULTANCY CHARGES TO TWO GROUP CONCERNS NAMELY M/S. JAIGOPAL CONSULTANCY SERVICES PVT. LTD. (RS.84 .15 LACS) AND M/S. AHUJA RESOURCE MANAGEMENT (RS.23.85 LACS). LIKEWISE FOR A.Y. 2007- 08 FOR WHICH THE TOTAL CHARGE STOOD AT RS.17.23 LACS. THE A.O. FOUND THE ASSESSEE S CLAIM UNACCEPTABLE INASMUCH AS THE ASSESSEE HAD FAILED TO EXHIBIT THE BASIS OF THE ALL OTMENT OF THE EXPENDITURE STATED TO BE 3 ITA NO. 7153/M/10 2953/M/11 & CO NO. 122/M/11 AHUJA PLATINUM PROPERTIES LTD. (A.Y. 05-06 & 07-08) INCURRED FOR GROUP CONCERNS MERELY REFERRING TO A MOU WHICH AGAIN IS ONLY AN INTERNAL DOCUMENT APPLICABLE TO THE GROUP CONCERNS. FURTHER IT IS NOT SHOWN THAT THE FIRM AHUJA RESOURCE MANAGEMENT WHICH IS SAID TO MANAGE THE MA N-POWER FOR THE ENTIRE AHUJA GROUP COMPANIES SO THAT WHATEVER EXPENDITURE IS IN CURRED BY THE SAID FIRM ON APPOINTMENT OR MAINTENANCE OF THE MAN POWER IS SHAR ED AMONGST ALL THE CONSTITUENT COMPANIES IS EQUIPPED WITH ANY PARTICULAR SKILL OR A HIGHER CALIBRE IN THE RELEVANT AREA I.E. VIS--VIS THE ASSESSEE-COMPANY. THE COMMERCIA L EXPEDIENCY OF THE EXPENDITURE NEEDS TO BE PROVED AND THE FACT THAT THE PAYEE RET URNS THE AMOUNT RECOVERED AS A PART OF ITS INCOME WOULD NOT BE SUFFICIENT FOR THE PURPOSE RELYING ON THE DECISION IN THE CASE OF GANESH SOAP WORKS VS. CIT [1986] 161 ITR 876 (MP). HE ACCORDINGLY DISALLOW ED 30% OF THE EXPENDITURE SO CLAIMED. THE LD. CIT(A) ALLOWED THE ASSESSEES CLAIM RELYING ON THE DECISION BY HIS PREDECESSOR FOR A.YS. 2003-04 AND 2006-07 FINDING NO LEGAL OR FACTUAL BASIS IN THE OBJECTIONS SOUGHT TO BE RAISED BY THE REVENUE. THE FIRM M/S. JAIGOPAL CONSULTANCY SERVICES PVT. LTD. IS A COMMON POOL COMPANY OPERAT ING ON NO PROFIT NO LOSS BASIS SERVING NINE OTHER COMPANIES BY WAY OF PROVIDING AD MINISTRATIVE AND MANAGEMENT SERVICES TO THE GROUP CONCERNS. THE COST IS RECOVER ED IN PROPORTION TO THE CONSTRUCTION/DEVELOPMENT COST INCURRED BY EACH OF T HE GROUP COMPANIES. NO CASE FOR INVOCATION OF SECTION 40A(2)(A) OF THE ACT IS MADE OUT. SIMILARLY FOR THE CHARGES PAID TO M/S. AHUJA RESOURCE MANAGEMENT WHICH CHARGES ON TH E BASIS OF EXPENDITURE INCURRED ON THE APPOINTMENT OR MAINTENANCE OF THE MAN POWER SUPPLIED TO THE CONSTITUENT COMPANIES. AGGRIEVED THE REVENUE IS IN APPEAL. 3.2 WE HAVE HEARD THE PARTIES AND PERUSED THE MATE RIAL ON RECORD. THE TRIBUNAL HAS SINCE UPHELD THE ORDER OF THE FIRST APPELLATE AUTHO RITY FOR A.Y. 2003-04 RELIED UPON BY THE LD. CIT(A). THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS THE CASE OF BOTH THE PARTIES BEFORE US CONTINUES TO BE THE SAME. UNDER THE CIRC UMSTANCES WE THEREFORE FIND NO REASON TO TAKE ANY DIFFERENT VIEW OF THE MATTER AND ACCORDINGLY UPHOLD THE IMPUGNED ORDER FOLLOWING THE ORDER BY THE TRIBUNAL FOR A.Y. 2003-04. WE DECIDE ACCORDINGLY. 4 ITA NO. 7153/M/10 2953/M/11 & CO NO. 122/M/11 AHUJA PLATINUM PROPERTIES LTD. (A.Y. 05-06 & 07-08) 4. GROUND NO.2 BY THE REVENUE FOR BOTH THE YEARS CO NCERNS THE DISALLOWANCE OF INTEREST PAID BY THE ASSESSEE TO AHUJA PROPERTIES L TD. A SISTER CONCERN ON THE GROUND OF IT BEING PAID IN EXCESS I.E. U/S.40A(2)(A). THE TRIB UNAL WAS SIMILARLY CONFRONTED WITH THE SAID ISSUE FOR A.Y. 2003-04 WHICH STANDS DEALT WIT H VIDE PARAS 41 TO 44 OF ITS ORDER DATED 24.06.2011 SUPRA; THE LAST PARA CONTAINING ITS RELE VANT FINDINGS : 44. WE HAVE HEARD THE RIVAL CONTENTIONS. THE LEARN ED D.R. RELIED ON THE ORDER OF THE AO. WE HAVE CONSIDERED THE SUBMISSION. WE FIND THAT AHUJA PROPERTIES IS GROUP CONCERN CARRYING ON THE BUSINES S OF FINANCING I.E. IT BORROWS FROM THE MARKET AND LENDS TO ANY OF THE GRO UP CONCERNS IN REQUIREMENT OF FUND. LOANS ARE MOSTLY BORROWED THRO UGH BROKERS AND HENCE BROKERAGE OF 3% IS CHARGED OVER AND ABOVE TH E RATE OF INTEREST. IN ASSESSEES CASE LOANS BORROWED FROM OUTSIDERS WERE IN MAJORITY OF CASE AT THE RATE OF INTEREST INCLUDING BROKERAGE RANGING 18 % TO 27%. THUS AVERAGE RATE OF INTEREST WORKED OUT TO MORE THAN 18% AS AGA INST THE FINDING OF THE AO THAT THE ASSESSEE BORROWED FROM OUTSIDERS/OTHERS @ 15%. AHUJA PROPERTIES HAS IN TURN BORROWED FUNDS FROM OUTSIDER S AND HAS PAID INTEREST RANGING FROM 15% TO 21%. IT HAS CHARGED TO ALL THE GROUP CONCERNS AT THE RATE OF 19.5% AND FROM THE PROFIT AND LOSS ACCOUNT OF AHUJA PROP. IT CAN BE SEEN THAT IT HAS INCURRED EXPENSES FOR MAINTAINING THE LOANS AND AFTER REDUCING THE PAYMENT OF INTEREST TO OUTSIDERS HAS SHOWN SOME PROFIT EARNING ON FINANCING BUSINESS AND OFFERED THE SAME FOR TAX AND PAID TAX. THE ASSESSEE IS A LOSS MAKING COMPANY AND HENCE TH ERE IS NO AVOIDANCE OF TAX. IN SUCH CIRCUMSTANCES NO DISALLOWANCE CAN BE M ADE BY INVOKING THE PROVISIONS OF SEC.40A(2)(B) OF THE ACT AS LAID DOWN IN THE FOLLOWING DECISIONS CIT VS AMRIT SOAP C. 308 ITR 287 (P&H) & DCIT VS. J.H. FINVEST (P) LTD. 21 ITR (TRIB) 620 (DEL). WE THEREF ORE FIND NO GROUNDS TO INTERFERE WITH THE ORDER OF THE CIT(A) AND DISMISS GROUND NO.3 RAISED BY THE REVENUE. THE A.O. FOR THE CURRENT YEAR HAS ASSUMED THE MARKE T RATE AT 15% P.A. I.E. AS FOR A.Y. 2003-04 AS AGAINST THE INTEREST PAID @ 21.25% P.A. AND 20.50% P.A. FOR THE TWO SUCCESSIVE YEARS RESPECTIVELY. A DISALLOWANCE FOR T HE EXCESS @ 6.25% P.A. AND 5.50% P.A. RESPECTIVELY FOR THE SAID YEARS WAS ACCORDINGL Y WORKED OUT BY HIM. THE LD. CIT(A) DELETED THE DISALLOWANCE FOLLOWING THE ORDER OF HIS PREDECESSOR FOR A.Y. 2003-04 REPRODUCING THE SAME IN HIS ORDER SO THAT THE SAME FORMS PART OF HIS ADJUDICATION REFER PARA 4.2 AND 6.2 OF THE IMPUGNED ORDERS FOR THE TWO SUCCESSIVE YEARS RESPECTIVELY. 5 ITA NO. 7153/M/10 2953/M/11 & CO NO. 122/M/11 AHUJA PLATINUM PROPERTIES LTD. (A.Y. 05-06 & 07-08) 5. BEFORE US WHILE THE REVENUE RELIED ON THE ASSES SMENT ORDER I.E. THE FINDINGS BY THE A.O. THE ASSESSEES CASE WAS OF THE MATTER BEI NG SIMILARLY COVERED BY THE DECISION BY THE TRIBUNAL IN ITS CASE FOR A.Y. 2003-04. THIS SUM S UP THE ASSESSEES CASE BEFORE US. 6. WE HAVE HEARD THE PARTIES AND PERUSED THE MATER IAL ON RECORD. THE TRIBUNAL ON BEING CONFRONTED WITH THIS ISSUE FOR A.Y. 2003-04 DECIDED THE MATTER WHICH STANDS DEALT WITH AT PARAS 41 TO 44 OF ITS ORDER DATED 24.06.201 1 SUPRA; THE LAST PARA CONTAINING ITS RELEVANT FINDINGS HAVING BEEN REPRODUCED HEREINABOV E. 6.1 THE ASSESSEES EXPLANATION/S WHICH FINDS REPRO DUCTION IN THE ASSESSMENT ORDERS FOR BOTH THE YEARS UNDER REFERENCE STANDS PERUSED. IT IS STATED THAT THE INTEREST RATE IF RECKONED WITH REFERENCE TO THE PEAK AMOUNT BORROWED DURING THE RELEVANT YEAR/S WORKS OUT TO AN INTEREST RATE OF 16.60% P.A. AND 13.50% P .A. FOR A.Y. 2005-06 AND 2007-08 RESPECTIVELY AND AS SUCH THE INTEREST RATE PAID M UST BE REGARDED AS REASONABLE. THE SAME ONLY NEEDS TO BE STATED TO BE REJECTED. WHAT IS REL EVANT IS THE RATE AT WHICH THE INTEREST IS PAID AND WHICH BY DEFINITION WOULD ONLY BE WITH RE FERENCE TO THE SUMS AVAILED OF FROM TIME TO TIME; BEING ONLY A PRICE FOR MAKING AVAILAB LE A RESOURCE (MONEY) AND WHICH ALSO EXPLAINS ITS PRICE BEING DEFINED W.R.T UNIT OF TIME . THIS IS PARTICULARLY SO WHERE THE AMOUNT IS NOT FIXED BUT KEEPS FLUCTUATING AS IN T HE FORM OF A CURRENT ACCOUNT AS IN THE INSTANT CASE. IN FACT THE ASSESSEE HAS ITSELF BEEN CHARGED AND HAS PAID INTEREST ON THAT BASIS. AS SUCH TO COMPUTE THE INTEREST RATE ON THE BASIS OF THE PEAK AMOUNT OUTSTANDING DURING THE YEAR I.E. IN RECKONING THE INTEREST RA TE FOR THE PURPOSE OF ITS COMPARABILITY WITH REFERENCE TO THE FAIR MARKET RATE (PRICE) THER EOF IS MISCONCEIVED AND MISLEADING AND STANDS RIGHTLY REJECTED BY THE A.O. IN FACT THE AS SESSEES EXPLANATION ITSELF IS A TACIT ADMISSION OF THE PREVAILING INTEREST RATE BEING LOW ER INASMUCH AS IT JUSTIFIES THE INTEREST PAID ON THE BASIS OF INCURRING INTEREST COST AT A M UCH LOWER RATE OF 16.60% P.A. AND 13.50% P.A. FOR THE TWO YEARS RESPECTIVELY. 6.2 THE LD. CIT(A) FOR A.Y. 2003-04 ALLOWED THE ASS ESSEES APPEAL ON THE BASIS OF A FACTUAL FINDING OF THE PREVAILING INTEREST RATE GR OSS OF BROKERAGE TO BE IN THE RANGE OF 6 ITA NO. 7153/M/10 2953/M/11 & CO NO. 122/M/11 AHUJA PLATINUM PROPERTIES LTD. (A.Y. 05-06 & 07-08) 18% P.A. SO THAT THE SAME IS COMPARABLE WITH INTER EST RATE INCURRED PARTICULARLY CONSIDERING THAT THE INTEREST ON MARKET LOANS IS TO BE PAID UP-FRONT EFFECTIVELY PUSHING UP THE INTEREST RATE (COST) WHILE IN THE INSTANT CASE THE INTEREST HAS BEEN CHARGED IN ACCOUNT AT THE YEAR-END. THESE FINDINGS AS WOULD BE NOTED ST OOD CONFIRMED BY THE TRIBUNAL. 6.3 OUR FIRST OBSERVATION IN THE MATTER THEREFORE IS THAT THERE HAS BEEN NO FACTUAL EXAMINATION OF THE MATTER BY THE LD. CIT(A) FOR THE CURRENT YEAR WHO HAS DECIDED THE SAME DE HORS THE ASSESSEES EXPLANATION AND THE FACTS AND CIRCU MSTANCES OF THE CASE. THE RATE OF INTEREST AS FOR ANY OTHER RESOURCE IS SUB JECT TO MARKET FLUCTUATIONS OVER TIME WITH IN FACT AS IS COMMON KNOWLEDGE THE INTEREST RATES HAVING WITNESSED A STEEP DECLINE FOR OVER A DECADE NOW WITH IN FACT THE SAME SHOWING SO ME CLIMB IN THE RECENT PAST IN RESPONSE TO THE INFLATIONARY CONDITIONS IN THE ECON OMY. SURPRISINGLY AND INTERESTINGLY THE RATES IN THE INSTANT CASE ARE AT AN INCREASE WITH R EFERENCE TO THE RATE OF 19.5% FOR A.Y. 2003-04 BEING AT 21.25% FOR A.Y. 2005-06 DECLININ G MARGINALLY TO 20.50% FOR A.Y. 2007-08. LIKEWISE THERE IS NO BASIS TO THE FINDING OF THE BROKERAGE RATE AT 3% WHICH AGAIN CANNOT BE CONSIDERED AS CONSTANT. RATHER IN A FREE AND COMPETITIVE MARKET PARTICULARLY IN THE REGIME OF DECLINING INTEREST RA TES THE SAME OUGHT TO BE MUCH LOWER THOUGH THE SAME IS ONLY A MATTER OF FACT SO THAT I T WOULD NEED TO BE ESTABLISHED. FURTHER EVEN ASSUMING THE SAME TO BE AT 3% P.A. DURING THE PERIOD RELEVANT TO A.Y. 2003-04 WOULD NOT BY ITSELF JUSTIFY ITS ASSUMPTION AT THE S AME RATE FOR THE RELEVANT YEARS PARTICULARLY CONSIDERING THAT THE SAME DOES NOT FOR M PART OF THE ASSESSEES EXPLANATION NOR IS THERE ANY MATERIAL ON RECORD IN SUPPORT THER EOF. THE RELIANCE BY THE LD. CIT(A) ON THE ORDER BY HIS PREDECESSOR FOR A.Y. 2003-04 IS TH US COMPLETELY MISPLACED; THE ASSESSEE ITSELF NOT CONTENDING FOR IDENTITY OF FACTS AND CIR CUMSTANCES. THAT APART THERE IS NO BASIS FOR THE ASSUMPTION OR THE FINDINGS AS TO THE IDENTI TY OF FACTS ONLY WHEREBY THE FINDINGS FOR A.Y. 2003-04 WOULD BECOME APPLICABLE FOR THE CU RRENT YEAR/S. FURTHER WE HAVE ALREADY OPINED THAT THE INTEREST RATES ARE SUBJECT TO VARIATION OVER TIME SO THAT A FINDING IN ITS RESPECT WOULD NEED TO PRECEDE A FACTUAL EXAMINA TION AND DETERMINATION. 7 ITA NO. 7153/M/10 2953/M/11 & CO NO. 122/M/11 AHUJA PLATINUM PROPERTIES LTD. (A.Y. 05-06 & 07-08) IN THIS VIEW OF THE MATTER THE RELIANCE ON THE ORD ER BY THE FIRST APPELLATE AUTHORITY FOR A.Y. 2003-04 AS WELL AS BY THE ASSESSEE ON THE ORDER BY THE TRIBUNAL ENDORSING THE FINDINGS OF THE FIRST APPELLATE AUTHORITY FOR THAT YEAR BEFORE US WOULD THEREFORE BE OF NO MOMENT OR ASSISTANCE. IN FACT IF ANYTHING THE ORD ER OF THE FIRST APPELLATE AUTHORITY CAN ONLY BE CONSIDERED AS IN ENDORSEMENT OF THE INTERES T RATE/S I.E. INDEPENDENT AND APART FROM BROKERAGE FOR THE PREVIOUS YEAR RELEVANT TO A .Y. 2003-04 AS BEING IN THE RANGE OF 15% P.A. AS ASSUMED BY THE A.O. FOR THAT YEAR AS A LSO FOR THE CURRENT YEARS. AS REGARDS THE ASSESSEES EXPLANATION FOR THE CURRENT YEARS W E HAVE ALREADY EXPRESSED OUR VIEW OF IT BEING WITHOUT MERIT. 6.4 UNDER THE CIRCUMSTANCES THEREFORE WE ONLY CON SIDER IT FIT AND PROPER TO RESTORE THIS ISSUE BACK TO THE FILE OF THE LD. CIT(A) FOR A N ADJUDICATION AFRESH IN ACCORDANCE WITH LAW BY ISSUING DEFINITE FINDINGS OF FACT AND AFTE R ALLOWING PROPER OPPORTUNITY OF HEARING TO BOTH THE SIDES. WE DECIDE ACCORDINGLY. 7. GROUND NO.3 OF THE REVENUES APPEAL FOR AY 2005- 06 IS IN RESPECT OF A DISALLOWANCE U/S. 40A(2)(A) QUA PURCHASE OF BUILDING MATERIAL FROM ASSOCIATE CONCE RNS WHO ARE ALSO IN THE SAME BUSINESS OF REAL ESTATE DE VELOPMENT AS THE ASSESSEE. THIS ISSUE HAS BEEN CONSIDERED BY THE TRIBUNAL IN THE ASSESSEE S CASE FOR A.Y. 2003-04 WHEREIN A SIMILAR DISALLOWANCE FOR RS.96.79 LACS WAS MADE BY THE REVENUE PER PARAS 31 TO 38 OF ITS ORDER (SUPRA) DECIDING THE SAME VIDE PARAS 39 AND 40. THE TRIBUNAL FOUND THAT NO MATERIAL HAD BEEN BROUGHT ON RECORD BY THE REVENUE TO PROVE THE CLAIM BY THE ASSESSING OFFICER (A.O.) THAT THE RATE CHARGED BY THE ASSOCIATE CONCE RN M/S. TOPAIM PROPERTIES PVT. LTD. WAS ON THE HIGHER SIDE. AS A READING OF THE RELEVAN T PARTS OF THE SAID ORDER WOULD SHOW IT TACITLY APPROVED OF THE ASSESSEES CLAIM FOR THE CU RRENT YEAR/S AS WELL INASMUCH AS A PART OF THE STOCK WHICH REMAINED UNUSED WITH THE ASSESS EE COMPANY WAS RETURNED BACK SUBSEQUENTLY AT THE SAME RATES. NO FRESH MATERIAL H AS BEEN BROUGHT ON RECORD BY THE REVENUE FOR THE CURRENT YEAR TO JUSTIFY ITS CLAIM F OR INVOCATION OF SECTION 40A(2)(A) QUA THE IMPUGNED PURCHASES. THE FACTS BEING THE SAME W E HAVE NO HESITATION IN ACCEPTING THE 8 ITA NO. 7153/M/10 2953/M/11 & CO NO. 122/M/11 AHUJA PLATINUM PROPERTIES LTD. (A.Y. 05-06 & 07-08) ASSESSEES CLAIM AND CONFIRM THE INVALIDITY OF THE INVOCATION OF SAID SECTION FOR THE CURRENT YEAR. WE DECIDE ACCORDINGLY. 8. GROUND NO. 3 OF THE REVENUES APPEAL FOR A.Y. 20 07-08 AND THE FIRST TWO GROUNDS OF THE ASSESSEES CO I.E. A(1) AND A(2) RELATES TO THE DISALLOWANCE U/S. 36(1)(III) ON ACCOUNT OF ADVANCES PAID TO SISTER CONCERNS BEING PERSONS COVERED U/S. 40A(2)(A) OF THE ACT ON INTEREST-FREE BASIS; THE ASSESSEE HAVING IT SELF AVAILED OF INTEREST BEARING LOANS AND HAVING NOT BEEN ABLE TO ESTABLISH COMMERCIAL EXPEDI ENCY. ACCORDINGLY THE INTEREST CAME TO BE DISALLOWED @ 15% P.A. THE SAME STOOD CONFIRME D ON THE SAME BASIS; THE ASSESSEE BEING UNABLE TO IMPROVE ITS CASE IN ANY MANNER BEFO RE THE LD. CIT(A). SHE HOWEVER RESTRICTED THE DISALLOWANCE TO THE TRANSACTIONS DUR ING THE YEAR AND BESIDES ALLOWED THE ASSESSEE RELIEF AGAINST THE INTEREST-FREE CREDITS F ROM SISTER CONCERNS ARISING DURING THE YEAR. AGGRIEVED BOTH THE PARTIES ARE IN APPEAL. 9. BEFORE US WHILE THE REVENUE RELIED ON THE ORDER BY THE ASSESSING AUTHORITY THE ASSESSEE WOULD ON THE ORDER BY THE TRIBUNAL FOR A.Y . 2003-04 FURTHER SUBMITTING THAT IT WAS INCLINED TO FOREGO ITS CLAIM/S IN CASE THE MATT ER WAS TREATED AS COVERED THEREBY AND THE REVENUES APPEAL DISMISSED. 10.1 WE HAVE HEARD THE PARTIES AND PERUSED THE MAT ERIAL ON RECORD INCLUDING THE ORDER BY THE TRIBUNAL FOR A.Y. 2003-04 (SUPRA). THE TRIBU NAL RELYING ON THE DECISION BY THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. RELIANCE UTILITIES & POWER LTD. [2009] 313 ITR 340 (BOM) FOUND THAT THE ASSESSEES CLAIM OF HAVING SUFFICIENT INTEREST- FREE ADVANCES (RS.12.88 CRORES) TO COVER THE INTERE ST-FREE ADVANCES (RS.4.16 CRORES) QUA WHICH THE IMPUGNED DISALLOWANCE HAD BEEN WORKED OUT AS VALID. THIS IS AS THIS WOULD PRIMA FACIE RAISE A PRESUMPTION OF AVAILABILITY OF SUFFICIENT INTEREST-FREE FUNDS SO THAT NO DISALLOWANCE IS CALLED FOR. FOR THE CURRENT YEAR THE A.O. HAS IN FACT DONE EXA CTLY THAT. THE IMPUGNED DISALLOWANCE OF RS.16 53 270/- HAS BEEN WORKED OUT BY HIM BY APPLYING THE INTEREST RATE OF 15% P.A. ON THE EXCESS OF INTEREST-FREE ADVANCES GIVEN (RS.670.27 LACS) OVER THE 9 ITA NO. 7153/M/10 2953/M/11 & CO NO. 122/M/11 AHUJA PLATINUM PROPERTIES LTD. (A.Y. 05-06 & 07-08) INTEREST-FREE ADVANCES (CREDIT) AVAILED OF BY THE A SSESSEE (RS.560.05 LACS) I.E. AT RS.110.22 LACS . THE LD. CIT(A) EXAMINED THE ASSESSEES CASE FROM THE STAND POINT OF S. A. BUILDERS LTD. VS. CIT [2007] 288 ITR 1 (SC) TO FIND THAT NO CASE OF COMM ERCIAL EXPEDIENCY STOOD MADE OUT. THE RELIEF ALLOWED BY HE R TO THE ASSESSEE IS AGAIN ON THE SAME PREMISE OF AVAILABILITY OF ADEQUATE INTEREST-FREE C APITAL I.E. AS FOUND FAVOUR WITH THE TRIBUNAL FOR A.Y. 2003-04 SO THAT THE CREDIT TO TH AT EXTENT WAS TO BE ALLOWED. THE ASSESSEE IN FACT DISPUTES THIS STATING THAT THE YEAR-END BA LANCES ARE NOT INDICATIVE OF THE FUNDS BEING AVAILED OF AND ALSO DISBURSED DURING THE COUR SE OF THE YEAR. 10.2 CLEARLY FIRSTLY NO CASE FOR COMMERCIAL EXPED IENCY HAS BEEN MADE OUT. THE ASSESSEES SUBMISSION BEFORE THE LD. CIT(A) REPROD UCED AT PARA 7.2 (PGS.9-14) OF THE IMPUGNED ORDER STANDS PERUSED. THE AVENUE OF THE MO NIES LENT HAVE FIRSTLY BEEN EXPLAINED ONLY IN TERMS OF THE NET MONIES LENT I.E . NET OF RECOVERY MADE DURING THE YEAR ACCOUNT-WISE. ONCE THE ASSESSEE HAS RECOVERED ITS M ONEY IT IS LIABLE TO ESTABLISH COMMERCIAL EXPEDIENCY FOR THE TOTAL AMOUNT LENT/ADV ANCED DURING THE YEAR SAVE WHERE SHOWN AS SOURCED FROM INTEREST-FREE BORROWINGS. FUR THER IN EACH CASE EVEN AS NOTED BY THE LD. CIT(A) THE SAME IS FOR THE PURPOSE OF THE BUYERS BUSINESS INDEPENDENT AND APART FROM THE ASSESSEES BUSINESS WITH WHICH NO CONNECT ION STANDS SPECIFIED MUCH LESS ESTABLISHED. IN FACT IN SOME CASES THE PAYMENTS BY THE BORROWERS HAVE BEEN FOR ADMITTEDLY NON-BUSINESS PURPOSES VIZ. FOR PAYMENT OF INCOME-TAX (AS IN THE CASE OF AHUJA DEVELOPMENT PVT. LTD. AND SHREE AHUJA PROPERT IES & DEVELOPERS) OR FOR PERSONAL PURPOSES (AS IN THE CASE OF JAGDISH AHUJA GAUTAM AHUJA AND VANDANA AHUJA). 10.3 THE ASSESSEES PLEA RAISED PER ITS GROUND A(2 ) THAT ONLY ADVANCES TO SISTER CONCERNS OUGHT TO BE TAKEN INTO ACCOUNT INASMUCH AS THE A.O. HAS INVOKED SECTION 40A(2)(A) ALSO DOES NOT STAND THE TEST OF SCRUTINY. THE A.O. THOUGH REFERS TO SECTION 40A(2)(B) CLEARLY STATES OF THE ASSESSEE HAVING GI VEN INTEREST-FREE LOANS OR ADVANCES TO VARIOUS PARTIES AND OF HAVING SIMILARLY RECEIVED I NTEREST-FREE LOANS/ADVANCES FROM VARIOUS PARTIES. EVEN THE TITLE TO PARA 7 OF THE AS SESSMENT ORDER WHEREAT THIS ASPECT STANDS DISCUSSED SPEAKS OF DISALLOWANCE OF PROPORTIONATE INTEREST PAID ON ACCOUNT OF INTEREST- 10 ITA NO. 7153/M/10 2953/M/11 & CO NO. 122/M/11 AHUJA PLATINUM PROPERTIES LTD. (A.Y. 05-06 & 07-08) FREE LOANS/ADVANCES GIVEN. WHY THE ASSESSEE IN PL EADING ITS CASE BEFORE THE TRIBUNAL FOR A.Y. 2003-04 ON WHICH IT RELIES PROVIDES THE DETA ILS OF INTEREST-FREE LOANS/ADVANCES RECEIVED AND PAID FROM ALL PARTIES. 10.4 THE HONBE HIGH COURT IN RELIANCE UTILITIES & POWER LTD. (SUPRA) DECIDED THE MATTER ON THE BASIS OF THE FINDING OF FACT BY THE T RIBUNAL OF SUFFICIENT INTEREST-FREE CAPITAL EVEN AS WAS THE CASE WITH THE TRIBUNAL IN THE ASSES SEES CASE FOR A.Y. 2003-04. THAT THE SAID DECISION BY THE HONBLE COURT IS RENDERED ON T HE FACTS OF THE CASE STANDS CONFIRMED BY IT IN GODREJ & BOYCE MFG. CO. LTD. V. DY. CIT [2010] 328 ITR 81 (BOM). THE MATTER IS THUS PRIMARILY AND PRINCIPALLY FACTUAL . WE HAVE ALREADY CLARIFIED OF THE DECISION OF THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR A.Y. 2003-0 4 AS HAVING BEEN INFLUENCED BY THE YEAR-END BALANCES ALSO ADOPTED BY THE A.O. IN THE INSTANT CASE (THE INTEREST-FREE ADVANCES EXCEEDING THE INTEREST-FREE ADVANCES AVAILED I.E. ON THE BASIS OF THE YEAR-END BALANCES) AND WHICH MAY NOT BE INDICATIVE OF THE CORRECT FUND AVAILMENT OBTAINING DURING THE YEAR EVEN AS ARGUED BY THE ASSESSEE ITSELF. TOWARD THIS WE ARE IN AGREEMENT WITH THE ASSESSEE THAT IT IS THE AVERAGE OUTSTANDING DURING THE YEAR AND NOT THE YEAR-END BALANCE THAT IS RELEVANT. THIS IS AS THE BALANCE MAY NOT BE CONSTAN T BUT VARY FROM TIME TO TIME. SECONDLY INTEREST AS A MEASURE OF THE RESOURCE COST WOULD DEPEND ON THE RESOURCE ACTUALLY UTILIZED. IN FACT THE INTEREST INCURRED A PART OF WHICH IS DISALLOWED FOR DIVERSION FOR NON- BUSINESS PURPOSES IS ONLY IN TERMS OF ITS AVERAGE UTILIZATION. AGAIN AS FUNDS ARE GENERALLY RAISED ONLY FOR BUSINESS PURPOSES THE AS SESSEE WOULD NEED TO ESTABLISH NON UTILIZATION OF INTEREST-FREE FUNDS FOR BUSINESS PUR POSES AS AT THE BEGINNING OF THE YEAR. WITHOUT DOUBT HOWEVER WHERE THERE IS ADEQUATE APP LICATION FOR BUSINESS PURPOSES THE PRESUMPTION WOULD BE OF THE SAME BEING FROM INTERES T BEARING BORROWINGS WITH THE BALANCE FUNDING BEING MET BY OWN RESOURCES OR INTER EST-FREE BORROWINGS. 10.5 WE ACCORDINGLY ONLY CONSIDER IT FIT AND PROP ER THAT THE MATTER IS RESTORED BACK TO THE FILE OF THE FIRST APPELLATE AUTHORITY TO ESTABL ISH AVAILABILITY OF SUFFICIENT INTEREST-FREE FUNDS WITH THE ASSESSEE DURING THE YEAR TOWARD INTE REST-FREE LOANS AND ADVANCES GIVEN BY IT AND TO RESTRICT THE DISALLOWANCE IF ANY TO TH E EXTENT OF DEFICIENCY THEREIN RECKONING 11 ITA NO. 7153/M/10 2953/M/11 & CO NO. 122/M/11 AHUJA PLATINUM PROPERTIES LTD. (A.Y. 05-06 & 07-08) THE SAME ON AN AVERAGE BASIS; THE FUNDS BEING FUNGI BLE AND IN A STATE OF CONSTANT FLUX. THE A.O. HAS APPLIED THE INTEREST RATE AT 15% P.A. FIN DING THE SAME AS REASONABLE AND HAVING IN FACT DISALLOWED THE EXCESS AS NOT REASONABLE. TH E INTEREST RATE TO BE APPLIED WOULD BE THE ACTUAL RATE AT WHICH INTEREST STANDS SUFFERED B Y THE ASSESSEE I.E. ON AN AVERAGE INCLUDING ON INTEREST BEARING BORROWINGS FROM THE A SSOCIATE CONCERNS. THE SAME WOULD HOWEVER BE SUBJECT TO THAT CONSIDERED REASONABLE F OR THE CURRENT YEAR I.E. QUA ASSOCIATE CONCERNS AND WHICH IS THE SUBJECT MATTER OF ADJUDI CATION OF GROUND 2 OF THE REVENUES APPEAL SINCE RESTORED TO THE FILE OF THE FIRST APP ELLATE AUTHORITY. THE LD. CIT(A) SHALL DECIDE THE MATTER BY ISSUING DEFINITE FINDINGS OF F ACT AND AFTER ALLOWING DUE OPPORTUNITY OF THE HEARING TO BOTH THE SIDES. THIS DECIDES THE RELEVANT GROUNDS. 11. GROUND B OF THE ASSESSEES CO AS EXPLAINED B Y THE LD. AR STANDS OMITTED TO BE DECIDED BY THE LD. CIT(A). THE RELEVANT ISSUE I.E. MAINTAINABILITY OF THE ADDITION ON ACCOUNT OF CESSATION OF LIABILITY U/S. 41(1) AT RS.2 35 211/- WE FIND TO HAVE NOT BE EN DECIDED BY THE LD. CIT(A) EVEN AS THE SAME STOOD R AISED BEFORE HER BY THE ASSESSEE VIDE GROUND NO.8 OF ITS APPEAL DISPUTING THE CORRESPOND ING ADDITION EFFECTED VIDE PARA 8 OF THE ASSESSMENT ORDER. UNDER THE CIRCUMSTANCES THEREFOR E WE ONLY CONSIDER IT FIT AND PROPER THAT THE MATTER IS RESTORED BACK TO THE FILE OF THE LD. CIT(A) FOR AN ADJUDICATION AFRESH IN ACCORDANCE WITH LAW AFTER HEARING BOTH THE SIDES. W E DECIDE ACCORDINGLY. 12. IN THE RESULT THE REVENUES APPEALS FOR BOTH T HE YEARS ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES AND THE ASSESSEES CO IS ALLOW ED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON OCTOBER 30 2 013 SD/- SD/- (B. R. MITTAL) (SANJAY ARORA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER - MUMBAI; 3( DATED : 30.10.2013 %.(../ ROSHANI SR. PS 12 ITA NO. 7153/M/10 2953/M/11 & CO NO. 122/M/11 AHUJA PLATINUM PROPERTIES LTD. (A.Y. 05-06 & 07-08) ! ' #$%& ' &$ / COPY OF THE ORDER FORWARDED TO : 1. !# / THE APPELLANT 2. $!# / THE RESPONDENT 3. 4 ( ) / THE CIT(A) 4. 4 / CIT - CONCERNED 5. 7%89 $ (:) . :)1 - / DR ITAT MUMBAI 6. 9;* <- / GUARD FILE ! ( / BY ORDER )/(* + (DY./ASSTT. REGISTRAR) - / ITAT MUMBAI