DCIT CEN CIR 6, MUMBAI v. B D & P HOTELS (I) P. LTD, MUMBAI

ITA 6366/MUM/2009 | 2004-2005
Pronouncement Date: 27-01-2011 | Result: Dismissed

Appeal Details

RSA Number 636619914 RSA 2009
Assessee PAN AABCB4615J
Bench Mumbai
Appeal Number ITA 6366/MUM/2009
Duration Of Justice 1 year(s) 1 month(s) 17 day(s)
Appellant DCIT CEN CIR 6, MUMBAI
Respondent B D & P HOTELS (I) P. LTD, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 27-01-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 27-01-2011
Assessment Year 2004-2005
Appeal Filed On 10-12-2009
Judgment Text
DCIT VS BD&P HOTELS INDIA PVT LTD PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI B BENCH MUMBAI BEFORE SHRI D MANMOHAN VP AND SHRI PRAMOD KUMAR A M ITA NO. 4120 4121 4122 4123/MUM/2009 ASSESSMENT YEAR 2004-05 2005-06 2006-07 2007-08 DY COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 6 MUMBAI .APPELLANT VS. B D & P HOTELS INDIA PVT LTD . RESPONDENT LE ROYAL MEREDIAN ASCENT CENTRE NEAR SAHAR INTERNATIONAL AIRPORT ANDHERI EAST MUMBAI 400099 PAN : AABCB4615J ITA NO. 6366/MUM/2009 ASSESSMENT YEAR 2004-05 DY COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 6 MUMBAI .APPELLANT VS. B D & P HOTELS INDIA PVT LTD . RESPONDENT LE ROYAL MEREDIAN ASCENT CENTRE NEAR SAHAR INTERNATIONAL AIRPORT ANDHERI EAST MUMBAI 400099 PAN : AABCB4615J APPELLANT BY : SHRI N K BALODIA RESPONDENT BY : SHRI B V JHAVERI O R D E R PER BENCH : 1. ALL THESE FIVE APPEALS PERTAIN TO THE SAME ASSES SEE INVOLVE SOME COMMON ISSUES ARISING OUT OF SAME SET OF FACTS AND WERE HEARD TOGETHER. AS A MATTER OF CONVENIENCE THEREFORE ALL THE FIVE APPEALS ARE BEING DISPOSED OF BY WAY OF THIS CONSOLIDATED ORDER. DCIT VS BD&P HOTELS INDIA PVT LTD PAGE 2 OF 5 2. WE WILL FIRST TAKE UP TWO APPEALS PERTAINING TO THE ASSESSMENT YEAR 204-05 I.E. ITA NOS. 4120/MUM/09 AND 6366/MUM/09. THESE TWO SEPARATE APPEALS FOR THE SAME ASSESSMENT YEAR ARE F ILED BY THE ASSESSING OFFICER BECAUSE THE CIT(A) HAD PASSED TWO SEPARATE ORDERS FOR THIS ASSESSMENT YEAR FIRST ORDER DATED 26 TH FEBRUARY 2009 DISPOSING OF ASSESSEES APPEAL FOR THE SAID ASSESSMENT YEAR IN T HE MATTER OF ASSESSMENT UNDER SECTION 143(3) R.W.S. 153 OF THE I NCOME TAX ACT; AND SECOND ORDER DATED 19 TH JUNE 2009 DISPOSING OF THE RECTIFICATION PETITION IN THE MATTER OF THE ORDER DATED 26 TH FEBRUARY 2009. 3. SO FAR AS THIS ASSESSMENT YEAR IS CONCERNED A F EW MATERIAL FACTS NEED TO BE TAKEN NOTE OF. THE ASSESSEE OWNER OF HOTEL LE MEREDIAN IS ENGAGED IN THE HOTEL BUSINESS AND WITH A VIEW TO EXPAND I TS HOTEL BUSINESS THE ASSESSEE INVESTED RS 15 CRORES AS SHARE CAPITAL MON EY IN SIDHIVINAYAK REALTORS PVT LTD WHICH IN TURN ACQUIRED HOTEL TUL IP STAR AT JUHU MUMBAI. IT WAS IN THIS BACKDROP THAT THE ASSESSING OFFICER NOTED THAT ON ONE HAND THE ASSESSEE HAS BORROWED INTEREST BEARING FUNDS A ND ON THE OTHER HAND THE ASSESSEE HAS INVESTED THESE INTEREST BEARING FU NDS AS SHARE APPLICATION MONIES WITHOUT CHARGING ANY INTEREST. THE ASSESSEES PLEA THAT THE MONEY WAS INVESTED ON THE GROUNDS OF COMME RCIAL EXPEDIENCY WAS REJECTED BY THE ASSESSING OFFICER. ACCORDINGLY A DISALLOWANCE OF RS 13 55 855 ON ACCOUNT OF INTEREST PAID IN RESPECT O F SUCH INVESTMENTS OUT OF BORROWED FUNDS WAS MADE BY THE ASSESSING OFFICE R. AGGRIEVED ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). LEA RNED CIT(A) UPHELD THE GRIEVANCE OF THE ASSESSEE AND HELD THAT IN VIEW O F HONBLE SUPREME COURTS JUDGMENT IN THE CASE OF SA BUILDERS LTD VS CIT (288 ITR 1) THE DISALLOWANCE IS TO BE DELETED. LEARNED COMMISSIONER (APPEALS) UPHELD THE PLEA OF THE ASSESSEE THAT CONTRIBUTION WAS A MEASUR E OF COMMERCIAL EXPEDIENCY EVEN AS ASSESSEE SUCCEEDED ON THIS GRO UND THE ASSESSEE FURTHER APPLIED FOR RECTIFICATION OF MISTAKE INASMU CH AS ACCORDING TO THE ASSESSEE THE ASSESSEES INTEREST FREE FUNDS WERE F AR IN EXCESS OF THE NON- INTEREST BEARING INVESTMENTS IN SHARE APPLICATION MONEY. ON THESES FACTS ACCORDING TO THE ASSESSEE PRESUMPTION HAD TO BE TA KEN THAT THE DCIT VS BD&P HOTELS INDIA PVT LTD PAGE 3 OF 5 INVESTMENT WAS MADE OUT OF INTEREST FREE FUNDS. THE CIT(A) UPHELD THIS RECTIFICATION AS WELL AND HELD THAT IN ANY EVENT QUESTION OF DISALLOWANCE OF INTEREST UNDER SECTION 36(1)(III) CANNOT ARISE I N THIS CASE BECAUSE THE ASSESSEE HAD SUFFICIENT INTEREST FREE FUNDS AVAILAB LE FOR THE INVESTMENTS IN QUESTION. THE ASSESSING OFFICER IS IN APPEAL BEFORE US AGAINST BOTH OF THESE DECISIONS. 4. WE HAVE HEARD THE RIVAL CONTENTIONS PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED THE FACTUAL MATRIX OF THE CASE AS ALSO THE APPLICABLE LEGAL POSITION. 5. WE HAVE NOTED THAT THE CIT(A) HAS GIVEN A CATEGO RICAL FINDING ABOUT THE AVAILABILITY OF ADEQUATE NON INTEREST BEARING F UNDS SO AS TO MEET INVESTMENT IN SHARE CAPITAL OF SIDHIVINAYAK REALTOR S PVT LTD AND THERE IS NO MATERIAL BEFORE US TO CONTROVERT THESE FINDINGS NOR THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS EVEN CHALLENGED THE SE FINDINGS. WE HAVE ALSO NOTED THAT IN VIEW OF THE LAW LAID DOWN BY HO NBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS RELIANCE UTILITIES & PO WER LIMITED (313 ITR 340) WHEN SUFFICIENT INTEREST FREE FUNDS ARE AVAIL ABLE TO THE ASSESSEE THE PRESUMPTION HAS TO BE THAT INVESTMENTS ARE MADE OUT OF SUCH INTEREST FREE FUNDS. IN THIS VIEW OF THE MATTER THE CONCLUSIONS ARRIVED AT BY THE CIT(A) ARE CORRECT AND DONOT CALL FOR ANY INTERFERENCE. NO SPECIFIC INFIRMITIES ARE POINTED OUT IN THE ORDER PASSED UNDER SECTION 154 E ITHER. IN VIEW OF THESE DISCUSSIONS AS ALSO BEARING IN MIND ENTIRETY OF TH E CASE WE APPROVE THE CONCLUSIONS ARRIVED AT BY THE CIT (A) IN BOTH OF TH ESE APPEALS AND DECLINE TO INTERFERE IN THE MATTER. 6. ITA NOS. 4120/MUM/09 AND 6366/MUM/09 ARE THER EFORE DISMISSED. 7. AS REGARDS THE REMAINING APPEALS I.E. ITA NO. 4 121 TO 4123/MUM/2009 FOR ASSESSMENT YEAR 2004-05 TO 2007- 08 THE SHORT DCIT VS BD&P HOTELS INDIA PVT LTD PAGE 4 OF 5 ISSUE THAT WE ARE REQUIRED TO ADJUDICATE IS WHETHER OR NOT THE LEARNED COMMISSIONER (APPEALS) WAS JUSTIFIED IN DELETING TH E IMPUGNED DISALLOWANCES OF INTEREST PAID ON BORROWINGS AS AT TRIBUTABLE TO INTEREST FREE INVESTMENTS BY WAY OF SHARE CAPITAL SUBSCRIPTI ON IN SIDHIVINAYAK REALTORS PVT LTD. 8. SO FAR AS THESE APPEALS ARE CONCERNED MATERIAL FACTS ARE THE SAME AS FOR THE ASSESSMENT YEAR 2004-05 AS DISCUSSED ABOVE EXCEPT TO THE EXTENT THAT THE ASSESSEE HAS NOT MADE OUT A CASE FOR AVAIL ABILITY OF ADEQUATE NON- INTEREST BEARING FUNDS OUT OF WHICH INVESTMENTS HAV E BEEN MADE. THE GROUND ON WHICH RELIEF HAS BEEN GRANTED BY THE CIT( A) IS ON THE SHORT GROUND OF COMMERCIAL EXPENDIENCY. 9. LEARNED COUNSEL FOR THE ASSESSEE VERY FAIRLY STA TES THAT THE ISSUE IS NOW COVERED AGAINST THE ASSESSE BY ORDER DATED 30 TH JULY 2010 PASSED BY A COORDINATE BENCH IN ASSESSEES OWN CASE. IT IS S UBMITTED THAT THE ASSESSEE IS IN APPEAL BEFORE HONBLE HIGH COURT AG AINST THE STAND SO TAKEN BY THE COORDINATE BENCH AND THAT ACCORDINGLY THE SE APPEALS CAN ALSO BE DECIDED AGAINST THE ASSESSEE. HE HOWEVER HASTENS TO ADD THAT THIS SUBMISSION SHOULD NOT BE CONSTRUED AS CONCEDING THE MATTER ON MERITS BUT IT IS ONLY THAT IN ALL FAIRNESS THE FORUM OF ADJUDICATION MUST SHIFT TO HONBLE HIGH COURT. HE SUBMITS THAT HE HAS A STRONG CASE ON MERITS BUT GIVEN THE FACT THAT THE MATTER IS UNDER CONSIDERATI ON BEFORE HONBLE HIGH COURT AND APPRECIATING THE FACT THAT NORMALLY BENCH ES ARE NOT INCLINED TO TAKE DIFFERENT VIEW OF THE MATTER ON THE SAME SET O F FACTS AND THAT TOO IN THE SAME ASSESSEES CASE HE DOES NOT WISH TO URGE THE TRIBUNAL TO TAKE A DIFFERENT VIEW OF THE MATTER THAN THE VIEW SO TAKEN BY THE COORDINATE BENCH. LEARNED DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAND URGES US TO FOLLOW THE STAND OF THE CO-ORDINATE BENCH AND AL LOW THE APPEAL ON MERITS. 10. HAVING REGARD TO THE RIVAL CONTENTIONS AND HAV ING PERUSED THE MATERIAL ON RECORD WE DEEM IT FIT AND PROPER TO MA INTAIN CONSISTENCY IN DCIT VS BD&P HOTELS INDIA PVT LTD PAGE 5 OF 5 THE STAND TAKEN BY THE TRIBUNAL PARTICULARLY AS HO NBLE HIGH COURT IS NOW IN SEISIN OF THE MATTER ON MERITS. WITH THESE OBSERVATIONS IN CONFORMITY WITH THE VIEW TAKEN BY THE CO-ORDINATE BENCH VIDE O RDER DATED 30 TH JULY 2010 WE UPHOLD THE GRIEVANCE OF THE ASSESSING OFFI CER AND RESTORE THE IMPUGNED DISALLOWANCES OF INTEREST UNDER SECTION 36 (1)(III). THE RELIEF GRANTED BY THE CIT(A) IS THUS VACATED. 11. ITA NO. 4121 TO 4123/MUM/2009 FOR ASSESSMENT YEAR 2004-05 TO 2007-08 ARE THUS ALLOWED. TO SUM UP WHILE ITA NOS . 4120 AND 6366/MUM/09 ARE DISMISSED ITA NO. 4121 TO 4123/MUM /2009 ARE ALLOWED. PRONOUNCED IN THE OPEN COURT ON 27 TH JANUARY 2011. SD/- SD/- [D MANMOHAN] [PRAMOD KUMAR] VICE PRESIDENT ACCOUNTANT MEMBER MUMBAI : 27 TH DAY OF JANUARY 2011. COPIES TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT MUMBAI 4. THE CIT(A) MUMBAI 5. DR BENCH ITAT MUMBAI 6. GUARD FILE TRUE COPY BY ORDER ETC ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL MUMBAI