Somani Services (P) Ltd., Kolkata v. ACIT, Central Circle - XI, Kolkata, Kolkata

ITA 822/KOL/2010 | 2006-2007
Pronouncement Date: 09-07-2010

Appeal Details

RSA Number 82223514 RSA 2010
Assessee PAN AAICS2046K
Bench Kolkata
Appeal Number ITA 822/KOL/2010
Duration Of Justice 2 month(s) 13 day(s)
Appellant Somani Services (P) Ltd., Kolkata
Respondent ACIT, Central Circle - XI, Kolkata, Kolkata
Appeal Type Income Tax Appeal
Pronouncement Date 09-07-2010
Appeal Filed By Assessee
Bench Allotted SMC
Tribunal Order Date 09-07-2010
Assessment Year 2006-2007
Appeal Filed On 26-04-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH SMC KOLKATA (BEFORE HONBLE SMT.DIVA SINGH JM ) ITA NO. 822/KOL/2010 : ASSESSMENT YEAR 2006-07 SOMANI SERVICES (P) LTD. -VS- A.C.I.T. CENTRAL C IRCLE-XI KOLKATA PAN : AAICS 2046 K KOLKATA (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI RAKESH JAIN RESPONDENT BY : SHRI R .K.PAL SR.DR : O R D E R : THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF THE LD. CIT(A)- CENTRAL-I KOLKATA DATED 22.02.2010 PERTAINING TO 2006-07 ASSESSMENT YEAR. 2. THE SOLE GROUND AGITATED BY THE ASSESSEE IN THIS APPEAL IS AS UNDER :- THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE T HE LD. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF RS.49 114/- MADE BY THE LD. AO ON ACCOUNT OF INTEREST PAID ON OVERDRAFT. 3. THE RELEVANT FACTS AS DEMONSTRATED BY THE CIT(A) READ AS UNDER :- 2. THE FACTS AND CIRCUMSTANCES OF THE CASE WERE TH AT THE APPELLANT HAD MONEY LYING IN THE FIXED DEPOSIT WITH THE BANKERS. THE AM OUNT OF THE FD COULD HAVE BEEN ENCASHED PRIOR TO MATURITY BUT ONLY ON BEARING THE COST OF PREMATURE WITHDRAWAL. THE COST OF PREMATURE WITHDRAWAL WOULD HAVE BEEN MORE THAN THE INTEREST PAID ON OVERDRAFT. THEREFORE IN ITS BUSINE SS PRUDENCE THE APPELLANT DID NOT ENCASH THE FD PRE-MATURE AND IT WAS HYPOTHECATE D AS PLEDGE/GUARANTEE TO AVAIL THE OVERDRAFT FACILITY FOR THE PURPOSE OF THE BUSINESS OF THE ASSESSEE. 3. THE ASSESSEE HAS ACCOUNTED FOR THE WHOLE INTERES T ACCRUED ON FDR AMOUNTING TO RS.179239/- (LEDGER COPY ENCLOSED) UPT O THE DATE OF MATURITY. THE LD. AO HAS MISINTERPRETED THAT THE ASSESSEE HAD CLAIMED THE FDR INTEREST IN THE DEBIT SIDE. IT IS SUBMITTED THAT THE PROFIT AND LOSS A/C SHOWS THAT THE INTEREST ON FDR HAS BEEN PAID OF RS.49 114/- BUT AS A MATTER OF ACCOUNT ING THE INTEREST PAID ON O/D AGAINST FD WAS MAINTAINED UNDER THE SAME LEDGER AS INTEREST ON PD AND AS SUCH THE INTEREST ON FDR CREDIT WAS CREDITED IN THE PROF IT AND LOSS A/C AND INTEREST ON FDR DEBIT WAS DEBITED IN THE PROFIT AND LOSS A/C . LEDGER COPY OF THE SAME ENCLOSED. 3.1. CONSIDERING WHICH THE ACTION OF THE AO WAS UPH ELD BY THE FIRST APPELLATE AUTHORITY HOLDING AS UNDER :- 2 3.1. I HAVE CAREFULLY CONSIDERED THE SUBMISSION OF THE LD. AR. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAS DECLARED ONLY INTEREST AND RENTAL INCOME AND AGAINST THESE RECEIPTS EXPENDITURE OF RS.49 114 /- PAID TO THE BANK ON A/C OF O/D TAKEN AGAINST THE FDRS. HENCE THE ONLY ISSUE TO BE DECIDED IS WHETHER THE AMOUNT OF INTEREST PAID WAS IN RESPECT OF THE CAPIT AL BORROWED FOR THE PURPOSES OF THE BUSINESS OR PROFESSION. IT HAS BEEN SUBMITTE D BY THE ASSESEE THAT THE LOAN TAKEN FROM THE BANK WAS UTILIZED FOR THE PURCHASE A CAPITAL ASSET LAND AT BANKRA. THE ASSET IN QUESTION HAS BEEN SHOWN AS FIX ED ASSET IN THE BALANCE SHEET. MOREOVER THE ASSESSEE IS HAVING A MIXED FUND AND INTEREST FREE LOAN OF MORE THAN 1.41 CRORE HAS BEEN GIVEN TO DIFFERENT CO NCERNS. CONSIDERING ABOVE IT IS HELD THAT THE INTEREST IN QUESTION WAS NOT IN CURRED FOR THE BUSINESS AND OR PROFESSION OF THE ASSESSEE. HENCE THE DISALLOWANCE MADE BY THE AO IS CONFIRMED AND THE GROUND NO.1 AND 2 TAKEN BY THE AP PELLANT IS DISMISSED. 4. STILL AGGRIEVED BY THIS THE ASSESSEE IS IN APP EAL BEFORE THE TRIBUNAL. 5. THE LD. AR INVITING ATTENTION TO VARIOUS PAGES O F THE PAPER BOOK CONTENDED THAT THE LD. CIT(A) HAS ERRED IN CONFIRMING ACTION OF TH E AO DISREGARDING THE FACT THAT THE ASSESSEEE HAS SCRUPULOUSLY ACCOUNTED FOR THE WHOLE INTEREST ACCRUED ON FDR AMOUNTING TO RS.1 70 239/- AND HAS ONLY CLAIMED AN EXPENDITURE AMOUNT OF RS.49 114/- WHICH IS THE INTEREST PAID ON OVER DRAF T AGAINST THE SAID FD AS SUCH THE ASSESSEE HAS RETURNED THE INTEREST INCOME OF RS.1 3 0 000/- ODD. IT WAS HIS SUBMISSION THAT THE ASSESSEE ENCASHED THE SAID FD PRE-MATURELY THE COST OF PRE-MATURE WITHDRAWAL WOULD HAVE BEEN MUCH MORE THAN THE COST OF THE INTE REST PAID ON OVER DRAFT AS SUCH THIS WAS A PRUDENT BUSINESS DECISION OF THE ASSESSE E AND THE DEPARTMENT CAN NOT SIT ON THE JUDGEMENT OVER THIS DECISION OF THE ASSESSEE. I T IS ALSO HIS SUBMISSION THAT THE LAND HAS BEEN PURCHASED FOR BUSINESS PURPOSES. ADDRESSIN G THE ARGUMENT THAT THE ASSESSEE HAS ADVANCED INTEREST FREE LOAN TO OTHER CONCERNS I T WAS HIS SUBMISSION THAT AT THE RELEVANT POINT OF TIME THE SAID FUNDS WERE NOT AVAI LABLE TO THE ASSESSEE AS THEY STOOD ADVANCED ON EARLIER DATES AND WERE NOT RECOVERABLE WHEN THE LAND HAD TO BE PURCHASED FOR BUSINESS PURPOSES. ACCORDINGLY IT WAS PRAYED TH AT THE CLAIM OF THE ASSESSEE DESERVES TO BE ALLOWED. 5. ON THE OTHER HAND THE LD. DR RELYING ON THE ORD ERS OF THE AUTHORITIES BELOW CONTENDED THAT SUFFICIENT FUNDS WERE AVAILABLE TO T HE ASSESSEE AS SUCH THERE WAS NO NECESSITY TO OBTAIN AN OVERDRAFT. 3 6. HAVING HEARD THE SUBMISSIONS AND PERUSED THE MAT ERIALS AVAILABLE ON RECORD IT IS SEEN THAT AS PER PAGE 6 OF THE PAPER BOOK FD OF RS.65 00 000/- (RS.65 LACS) WAS MADE IN APRIL 2005 ON THE VERY SAME PAGE ATTENTION HAS ALSO BEEN INVITED TO THE ENTRY MADE IN AUGUST 2005 SO AS TO CONTEND THAT LOAN ON THE SAID FD WAS TAKEN TO THE TUNE OF RS.40 00 000/-. ATTENTION OF THE BENCH HAS ALSO BEEN INVITED TO THE PAPER BOOK PAGE NOS. 2 AND 3 SO AS TO CONTEND THAT THE ASSESSEE HAD MADE TRADE ADVANCES. IT HAS BEEN ARGUED THAT THE SAME WERE NOT RECOVERABLE AT THE RE LEVANT POINT OF TIME. THE LD. AR HAD FILED A COPY OF THE MEMORANDUM OF ASSOCIATION W HICH HAD BEEN SOUGHT BY THE BENCH ON AN EARLIER DATE. IN THE LIGHT OF THE ABOVE FACTS AND CIRCUMSTANCES IT IS CONSIDERED APPROPRIATE TO RESTORE THE ISSUE BACK TO THE FILE OF THE AO FOR VERIFICATION AND ADJUDICATION. THE AO SHALL EXAMINE DATA WISE FU ND AVAILABILITY OF THE ASSESSEE AS ONLY AFTER ASCERTAINING THIS FACT CAN THE ASSESSEE S CLAIM OF OBTAINING LOAN BY WAY OF AN OVERDRAFT AGAINST THE FD WILL BE ESTABLISHED. F ROM THE MATERIAL AVAILABLE ON RECORD THAT FACTS CANNOT BE ASCERTAINED. THE FACT THAT THE ASSESSEE PURCHASED LAND AT BANKRA FOR BUSINESS PURPOSES HAS NOT BEEN DISPUTED BY THE REVENUE. IN THE AFOREMENTIONED FACTS AND CIRCUMSTANCES THE ISSUE IS RESTORED BACK TO THE FILE OF THE AO WITH THE ABOVE DIRECTION. THE AO SHALL DECIDE THE ISSUE BY A SPEAK ING ORDER IN ACCORDANCE WITH LAW AFTER GIVING THE ASSESSEE REASONABLE OPPORTUNITY OF BEING HEARD. 7. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLO WED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT ON 09.07.2010. SD/- (DIVA SINGH) JUDICIAL MEMBER DATED : 09.07.2010. RG(P.S.) 4 COPY TO : 1. SOMANI SERVICES (P) LTD. 18 RABINDRA SARANI 5 TH FLOOR PODDAR COURT KOLKATA-700001. 2. A.C.I.T.-CENTRAL CIRCLE-XI KOLKATA 3. CIT(A)CENTRAL-I KOLKATA 4. CIT KOLKATA 5. D. R. ITAT KOLKATA TRUE COPY BY ORDER ASSTT. REGISTRAR I.T.A.T. KOLKATA