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TMI Blog2018 (8) TMI 1043X X X X Extracts X X X X X X X X Extracts X X X X ..... in favor of assessee. - I.T.A No.91 /Mum/2016 - - - Dated:- 3-8-2018 - Shri Mahavir Singh(JUDICIAL MEMBER) And Shri G Manjunatha (ACCOUNTANT MEMBER) For The Appellant : Shri Vijay Mehta For The Respondent : Shri V Vidhyadhar ORDER Per G Manjunatha, AM : This appeal filed by the assessee is directed against order of the CIT(A)-9, Mumbai dated 26-11-2015 and it pertains to AY 2011-12. The assessee has raised the following grounds of appeal:- Ground No. 1: On the facts and in the circumstances of the case and in law, the Ld. CIT(A), Mumbai, erred in confirming the disallowance made by the assessing officer amounting to ₹ 2, 14, 27, 061/- u/s 36(l)(iii) of the Act, treating the same as not incurred for the purpose of the business of the appellant. The appellant prays that the disallowance of ₹ 2, 14, 27, 0617- under section 36(l)(iii) of the Act may kindly be deleted. ** Ground No. 2: On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in not adjudicating on merit the A. O. 's contention that interest expenditure amounting to ₹ 2, 14, 27, 0617- is hit by the provisions of se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. The AO further noticed that the assessee has shown advances against shares of ₹ 26, 69, 92, 586, therefore, called upon the assessee to explain as to why interest paid on loans shall not be disallowed u/s 36(1)(iii) for diversion of interest bearing funds for non business purposes. In response to show cause notice, the assessee submitted that the company is in the business of purchase and sale of shares and in the process, it has borrowed loan from M/s Shyam Equity Pvt Ltd and advanced the same to the director of the company, Shri Gulu Mirchandani to acquire shares of Mirc Electronics Ltd. The assessee further submitted that the director of the company has acquired the shares of Mirc Electronics Ltd at a price of ₹ 33 per equity share, whereas the prevailing market price of the share as on the date of acquisition was ₹ 17 per share which is much lesser than the price at which the director has purchased shares. Therefore, owing to difference in price of shares, the company has not accepted the offer to buy shares and accordingly, whatever amount was given to the director for purchase of shares has been shown under the head advance for shares in the balance-sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earlier year and the department has accepted, therefore, without there being any change in facts, there is no reason for the AO to disallow interest paid on loan during the impugned assessment year. Once interest is allowed in previous year and if there is no change in the circumstances, then, it cannot be disallowed in the current assessment years. In this regard relied upon the following case laws:- 1. CIT vs Sridev Enterprises [192 ITR 165 (Kar)] 2. CIT vs Industrial Cables (India) Ltd [209 CTR 167 (P H)] 3. Escorts Ltd vs ACIT [204 ITD 427 (Del)] 4. Malwa Cotton Spg. Mills vs ACIT [89 ITD 65 (TM)(Chd)] 5. ITO vs J. M. P. Enterprises [101 ITD 324 (SMC)(Asr)] 6. Sushee Hi Tech Construction Pvt Ltd vs DCIT [ 33 taxman. com 236(Hyd)] 7. Virendra R Gandhi vs ACIT (Tax Appeal No. 20 of 2004 with Tax Appeal No. 124 of 2005 dated 27. 11. 20`14 (Gujarat High Court). 6. The Ld. DR, on the other hand, strongly supporting the order of the Ld. CIT(A) submitted that there is no res judicata in income-tax proceedings and hence, the question of following consistency in assessment proceedings is not relevant and what is relevant is whether the impugned expenditure is al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d if there is no change in the facts for the impugned year, then interest paid on said loan cannot be disallowed for the current year. In this regard, the assessee has relied upon the decision of Hon ble Gujarat High Court in the case of CIT vs Virendra R Gandhi (Guj) where the Hon ble High Court, after considering the decision of the Apex Court in the case of CIT vs Excel Industries Ltd reported in 358 ITR 295 (SC) and also the decision of Hon ble Karnataka High Court in the case of CIT vs Sridev Enterprises (supra) observed that once, the interest is allowed in the previous year and if there is no change in the condition, then it cannot be disallowed in the current assessment year. The relevant part of the order is extracted below:- 6. We have neard learned advocates for the parties and perused the material on record. In our view, the decision of the Karnataka High Court in the case of Sridev Enterprises(supra) is directly on the issue posed in this appeal. It is necessary to reproduce relevant paragraph of the above decision, which reads as under:- We are in agreement with the view expressed by the Appellate Tribunal. The status of b the amount outstanding from Nalan ..... X X X X Extracts X X X X X X X X Extracts X X X X
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