Everplus Securities & Finance Ltd., New Delhi v. DCIT, New Delhi

ITA 3623/DEL/2013 | 2010-2011
Pronouncement Date: 14-11-2014 | Result: Allowed

Appeal Details

RSA Number 362320114 RSA 2013
Assessee PAN AAACE2672H
Bench Delhi
Appeal Number ITA 3623/DEL/2013
Duration Of Justice 1 year(s) 5 month(s) 7 day(s)
Appellant Everplus Securities & Finance Ltd., New Delhi
Respondent DCIT, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 14-11-2014
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted B
Tribunal Order Date 14-11-2014
Date Of Final Hearing 01-10-2014
Next Hearing Date 01-10-2014
Assessment Year 2010-2011
Appeal Filed On 06-06-2013
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B NEW DELHI BEFORE SHRI S.V. MEHROTRA : ACCOUNTANT MEMBER AND SHRI H.S. SIDHU : JUDICIAL MEMBER ITA NO. 3623/DEL/2013 ASSTT. YR: 2010-11 EVERPLUS SECURITIES & FINANCE LTD. VS. DCIT CIR. 11 (1) 28 NAJAF GARH ROAD NEW DELHI. NEW DELHI. PAN: AAACE 2672 H ( APPELLANT ) ( RESPONDENT ) APPELLANT BY : SHRI K. SAMPATH ADV. RESPONDENT BY : SHRI GAURAV PUOEJA DR DATE OF HEARING : 01-10-2014 DATE OF ORDER : 14-11-2014. O R D E R PER S.V. MEHROTRA A.M:- THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECT ED AGAINST THE ORDER OF CIT(APPEALS)-XIII NEW DELHI DATED 5-4-2013 IN APPE AL NO. 38/2012-13 FOR A.Y. 2010-11. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE CO MPANY IN THE RELEVANT ASSESSMENT YEAR WAS ENGAGED IN THE BUSINESS OF SALE AND PURCHASE OF SHARES AND ADVANCING OF LOANS. IT HAD FILED ITS RETURN OF INCOME DECLARING LOSS AT RS. 7 18 270/-. IN COURSE OF ASSESSMENT PROCEEDINGS THE AO NOTICED THAT ASSESSEE COMPANY HAD ADVANCED LOANS TO ITS VARIOUS SISTER CO NCERNS. HE NOTICED THAT ASSESSEE HAD ADVANCED A LOAN OF AN AMOUNT OF RS. 8 .24 CRORE TO ITS RELATED CONCERN NAMELY M/S GAGAN SPONGE IRON LTD. ON WHI CH THE ASSESSEE HAD 2 3623/DEL/2013 EVERPLUS SECURITIES & FINANCE LTD. NOT CHARGED ANY INTEREST. THUS THE ASSESSEE HAD AD VANCED INTEREST FREE LOAN TO SISTER CONCERN. ON THE OTHER HAND THE ASSESSEE HAD TAKEN VARIOUS UNSECURED LOANS FROM VARIOUS PARTIES ON WHICH IT WA S PAYING HUGE INTEREST OF AN AMOUNT OF RS. 1 29 75 911/-. HE SHOW CAUSED THE ASSESSEE AS TO WHY THE ENTIRE METHODOLOGY ADAPTED BY IT MAY NOT BE CONSIDE RED AS DIVERSION OF INTEREST BEARING FUNDS. 3. THE ASSESSEE IN ITS REPLY POINTED OUT THAT IT HA D NOT GIVEN THE INTEREST FREE ADVANCES OUT OF INTEREST BEARING BORROWINGS. I N OTHER WORDS THE ADVANCE WAS GIVEN OUT OF ASSESSEES OWN INCOME OR INTEREST FREE BORROWINGS MADE IN EARLIER YEARS. IT WAS POINTED OUT THAT THE BORROWINGS AS ON 31-3- 2009 AND 31-3-2010 WERE 40.51 CRORES AND 41.75 CROR ES. THUS THERE WAS ONLY A MARGINAL INCREASE IN THE BORROWINGS DURING T HE YEAR WHICH WAS ALSO ON ACCOUNT OF INTEREST BEING CREDITED TO THE P ARTIES ACCOUNT. THUS NO SUBSTANTIAL FRESH BORROWINGS HAD BEEN MADE DURING T HE YEAR AND THEREFORE THERE WAS NO QUESTION OF THE SAID ADVANCE BEING MA DE OUT OF FRESH BORROWINGS. THUS IT WAS SUBMITTED THAT THE ADVANCE WAS GIVEN OUT OF EARLIER YEARS FUNDS THAT TOO FROM OWN FUNDS/ INTEREST FREE FUNDS. 4. THE AO DID NOT ACCEPT THE ASSESSEES CONTENTION FOR THE REASON THAT DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE H AD TAKEN FRESH LOANS OF AN AMOUNT OF RS. 1.24 CRORES FROM PARTIES ON WHICH IT WAS PAYING INTEREST. THE ASSESSEE HAD SUBMITTED THAT IT HAD ALREADY DISALLOW ED AN AMOUNT OF RS. 1 00 59 321/- FROM THE TOTAL INTEREST EXPENDITURE O N ACCOUNT OF PROVISIONS OF SECTION 14A. THEREFORE AN AMOUNT OF RS. 29 16 590/ - OF INTEREST EXPENDITURE REMAINED DEBITED TO THE P& L A/C WHICH CATERS TO T HE INTEREST EXPENDITURE OF FRESH LOANS OF THE RELEVANT ASSESSMENT YEAR. NEXUS COULD NOT BE ESTABLISHED BETWEEN THE MONEY THAT CAME TO THE COMPANY AND WHIC H HAD GONE OUT. THE 3 3623/DEL/2013 EVERPLUS SECURITIES & FINANCE LTD. AO RELYING ON THE DECISIONS IN THE CASES OF HIGHWA Y CONSTRUCTION CO. P. LTD. VS. CIT 199 ITR 702 (GAU.); CIT VS. M.S. VENK ATESHWARAM 222 ITR 163 (MAD.); MADHAV PRASAD JATIA VS. CIT 118 ITR 200 (SC); MIR MOHAMMAD ALI VS. CIT 38 ITR 413 (MAD); CIT VS. GANU RAO & SONS 185 ITR 324 (MAD.) DISALLOWED THE ENTIRE SUM OF RS. 29 16 590. 5. IN APPEAL THE LD. CIT(A) CONFIRMED THE ACTION O F AO. AGGRIEVED THE ASSESSEE IS IN APPEAL BEFORE US. FOLLOWING EFFECTIV E GROUND IS RAISED: 2. ON FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING DISALLOWANCE OF INTEREST OF RS. 29 16 59 0/-. 6. LD. COUNSEL FOR THE ASSESSEE REFERRED ASSESSEES LETTER DATED 21-5-2012 ADDRESSED TO AO CONTAINED AT PAGE 22 OF PB WHERE IN THE SOURCE OF GIVING LOAN TO SISTER CONCERN IS GIVEN TO DEMONSTRATE THA T NONINTEREST BEARING FUNDS WERE GIVEN AS LOANS TO SISTER CONCERNS. THIS LETTER WAS GIVEN BEFORE AO. LD. COUNSEL REFERRED TO PAGE 8 OF CIT(A)S ORDER WHER EIN LD. CIT(A) HAS INTER ALIA OBSERVED AS UNDER: DURING THE COURSE OF APPELLANT PROCEEDINGS THE APP ELLANT WAS TOLD TO DEMONSTRATE WITH EVIDENCE THAT INTEREST FR EE FUNDS ARE FROM OWN RESERVES AND INTEREST FREE FUNDS AND NOT F ROM BORROWED FUNDS ESPECIALLY IN VIEW OF THE ADMITTED FACT THAT THERE IS A COMMON POOL OF FUNDS FROM WHERE ALL BUSI NESS TRANSACTIONS ARE DONE AND THERE IS NO SEPARATE FUND OR BANK ACCOUNTS FROM WHERE ADVANCES ARE MADE. THE APPELLAN T HAS NOT SUBMITTED ANY SUCH EVIDENCE AND MADE THE CLAIM THAT HE HAS GOT INTEREST FREE FUNDS TO THE EXTENT OF RS. 38 52 41 3 53/- OUT OF WHICH ADVANCES OF RS. 8.4 CRORES WERE GIVEN. 7. LD. COUNSEL SUBMITTED THAT FROM THE ABOVE OBSERV ATION IT IS EVIDENT THAT LD. CIT(A) HAS NOT AT ALL CONSIDERED LETTER DA TED 21-5-2012 (SUPRA). 4 3623/DEL/2013 EVERPLUS SECURITIES & FINANCE LTD. 8. HAVING CONSIDERED THE SUBMISSIONS OF BOTH THE PA RTIES WE FIND THAT THE CONTENTION OF ASSESSEE REGARDING LOAN TO SISTER CON CERN OUT OF NON-INTEREST BEARING FUNDS AS WAS DEMONSTRATED VIDE LETTER DATED 21-5-2012 BEFORE THE AO WAS NOT CONSIDERED BY LD. CIT(A). WE THEREFORE RESTORE THE MATTER TO THE FILE OF CIT(A) TO DECIDE THE ISSUE AFRESH AFTER TAKING INTO CONSIDERATION ASSESSEES LETTER DATED 21-5-2012(SUPRA) AFTER AFF ORDING OPPORTUNITY OF BEING HEARD TO BOTH THE PARTIES. WE ORDER ACCORDINGLY. 9. IN THE RESULT ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES ONLY. ORDER PRONOUNCED IN OPEN COURT ON 14-11-2014. SD/- SD/- ( H.S. SIDHU ) ( S.V. MEHROTRA ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 14-11-2014. MP COPY TO : 1. ASSESSEE 2. AO 3. CIT 4. CIT(A) 5. DR