9911796707
TMI Blog2011 (9) TMI 277X X X X Extracts X X X X X X X X Extracts X X X X ..... able to this amount of advance of Rs. 50.00 Lacs should be disallowed u/s. 14-A (1) of the Act. - before applying the provisions of section 14A of the IT Act the disallowance can be made only if there is actual nexus between the tax free income and expenditure. Therefore, we direct AO to apply provisions of section 14A of the IT Act after analyzing the facts of the present case. - ITA Nos.1982 & 1983/Kol/2010 - - - Dated:- 6-9-2011 - B R Mittal, C D Rao, JJ. Appellant Rep by: Shri Basudev Hazra Respondent Rep by: Shri R Salarpuria ORDER Per: C D Rao: The above two appeals filed by the Revenue and the Cross Objections filed by the assessee are against separate orders dated 10.08.2010 of the CIT(A)-I, Kolkata pertaining to A.Yrs. 200 1-02 2006-07 respectively. ITA No.1982/Kol/2010 (by the Revenue A.Yr.2001-02): 2. The sole issue raised by the Revenue in this appeal is relating to deletion of addition of Rs.39,50,000/- made by the AO as undisclosed income. 3. The brief facts of this case are that while doing the scrutiny assessment AO has made an addition of Rs.39,50,000/- by observing as under :- During the course of assessment proceedings an enquiry carr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t appears that the whole dispute between the appellant and the Department centers round the genuineness or otherwise of the two loans of Rs. 10,00,000/ each received from one M/s. Ankur Marketing Ltd. on 24.01.2001 and 01.02.2001 respectively, which were repaid on 16.02.2001. Immediately thereafter the assessee received another sum of Rs.19,50,000/ from the same party on 19.02.2001 on account of Share Application Money for allotment of 65,000 nos. Equity Shares of Rs. 10/- each at a premium of Rs.20/- per share in the assessee-company. From the record it appears that all the aforesaid transactions were by Account Payee cheques and loan confirmation and also the confirmation for payment of Share Application Money were obtained from the said Ankur Marketing Ltd. with its I. T. File No. and the same were filed with the A. O. For the Share Application Money received by the assessee, shares were allotted immediately after close of the accounting year 2000-01. For the loans received by the assessee, it paid interest after deduction of Income-tax and issued necessary T.D.S. certificate to the said lender, copy of which was filed before the A. O. The assessee also filed its bank statemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndings of the enquiry carried out by DIT(Inv.), New Delhi wherein M/s. Ankur Marketing admitted the transactions as accommodation entries in lieu of matching unaccounted cash given by the assessee. Therefore he requested to upheld the action of AO by setting aside the order of ld. CIT(A). 5. On the other hand, the ld. Counsel appearing on behalf of assessee has reiterated the submissions made before the revenue authorities and further contended that from the record it appears that all the aforesaid transactions were by Account Payee cheques and loan confirmation and also the confirmation for payment of Share Application Money were obtained from the said Ankur Marketing Ltd. with its I.T. File No. and the same were filed with the A.O. For the Share Application Money received by the assessee, shares were allotted immediately after close of the accounting year 2000-01. For the loans received by the assessee, it paid interest after deduction of Income-tax and issued necessary T.D.S. certificate to the said lender, copy of which was filed before the A.O. The assessee also filed its bank statements for proving the fact that all receipts of monies were by Account Payee Cheques. Based on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ayment of interest Rs.18,90,411/- was paid to M/s. Salarpuria Investment (P) Ltd. Consequently, the assessee in the order sheet was asked to explain the rationale and utilization of loan from M/s. Salarpuria Investment (P) LTd. After much deliberation by a letter dated 26.11.08 the assessee explained that out of the total amount received from M/s. Salarpuria Investment (P) LTd Rs.2,00,00,000/- was used up to repay loans to M/s. Mauria Co. Further sum of Rs. 1,50,00,000/- was paid to M/s. Crazy Properties Pvt. Ltd. for purchase of properties and the balance sum of Rs. 50,00,000/- was paid to M/s. Shivam Stock Broking Pvt. Ltd. for purchase of shares. Repayment of loan to M/s. Mauria Co. : In this respect the assessee was asked to submit a copy of the ledger of Ms. Mauria Co. Examination of the ledger revealed that the impugned sum of Rs.2 Crs. Were not utilized for repayment of loan, but actually by that sum, an interest free loan was given to M/s. Mauria Co. Further enquiry also revealed that M/s. Mauria Co. was a sister concern of the assesse, with whom it was having an interest free current account transaction. Clearly, no commercial expediency of impugned interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncluded that interest bearing funds were utilized for non-commercial purposes. Advance to M/s. Shivam Stock Broking Pvt. Ltd. From the accounts of the assessee it was crystal clear that share dealing was not the business of the assessee. Consequently, investment of interest bearing fund of Rs.50,00,000/- for purchase of shares through M/s. Shivam Stock Broking Pvt. Ltd. directly attracted provisions of section 14A of the Act. Hence, interest attributable to such sum can never be claimed as business expenditure by the assessee. Evidently like in the earlier case it may be concluded that interest bearing funds were utilized for non-commercial purposes. Considering all these the impugned claim of interest of Rs.18,90,411/- is disallowed. 10.1. On appeal ld. CIT(A) has deleted the same by observing as under :- 1.9. After hearing the assessee and going through the explanations and/or and/or materials brought on record, I am of the opinion that after noticing the fact that both the assessee and the said Mauria Udyog were the business entities and that the assessee had current account transactions with the said party, it was not open to the A. O. to allege that the advance of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -free funds to a sister concern by way of mutual advances between the assessee and such sister concern, no corresponding expenditure on interest on borrowed capital was to be disallowed. In view of what has been sated above and relying on the aforesaid Hon ble Apex Court decision and the Hon ble Delhi H.C. decision, I hold that advancing monies to Mauria Udyog was not for non-commercial puroses. 1.10 In so far as the advance of Rs. 150.00 Lacs to MIs. Crazy Properties is concerned, I am of the opinion that in view of the fact that the assessee was engaged in the business of Non-Banking Financial Company, it was not unusual for it to make advance for purchase of land in course of it\s business. This explanation was offered by the assessee before the A.O. vide assessee s written explanation dated 05.11.2008, copy of which was given in the paper book. It has been argued by the appellant before me that as I/the Lawyer s written opinion could not be readily traced at the material time of hearing before the A. O., the same could not be filed before the A.O. However, the said written opinion dated 05.10.2005 has been filed before me. Considering the appellant s arguments and having re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te these observations made by ld. CIT(A). 12. On the other hand, the ld. DR appearing on behalf of the revenue submitted that since ld. CIT(A) has deleted the disallowance made by AO u/s 14A to the extent of Rs.18,02,450/-. The ld. CIT(A) is justified in directing AO to disallow the proportionate expenses of Rs.50,00,000/-. He requested to uphold the decision of ld. CIT(A). 13. After hearing the rival submissions and on careful perusal of the materials available on record, as regarding revenue s appeal, keeping in view of the following categorical observations of ld. CIT(A) in the case of Maruti Udyog it is pointed out by ld. CIT(A) that I find that the A.O. has not repudiated this contentions of the assessee. On these facts it cannot be alleged that the said current account transactions with Mauria Udyog were not based on any commercial expediency whatsoever. 13.1. In respect of M/s. Crazy Properties the assessee could prove the fact of giving advance towards purchase of landed properties. As the title to the said properties were found to be defective on search, such advances were returned in the subsequent year, which will not, in my opinion, prejudice the assessee s case i ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
