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TMI Blog2022 (7) TMI 1076X X X X Extracts X X X X X X X X Extracts X X X X ..... n ble High Court of Delhi against the order of the Tribunal for AY 2014-15 in the case of the assessee and Hon ble High Court [ 2020 (2) TMI 1099 - DELHI HIGH COURT ] upheld the order of tribunal observing there were sufficient interest- free funds available with the assessee, allowing them to advance the loans in question. Thus, the Tribunal, in our view was correct in concluding that it could not be said that it was the interest-bearing loan obtained from Bank of Baroda and Andhra Bank which had been advanced as interest-free loan to M/s Gaursons India Ltd. Thus we hold that the appeal of the Revenue on the issue is without any substance. The Ld. CIT(A) was perfectly justified in deleting the impugned disallowance. We uphold the order of the Ld. CIT(A) on the point and reject ground No. 1 and 2 of the Revenue. Delayed deposit of employee s contribution towards Provident Fund - violation of the provision of section 36(1)(va) of the Act and CBDT Circular No. 22/2015 dated 17.12.2015 - HELD THAT:- As relying on Aimil Ltd. [ 2009 (12) TMI 38 - DELHI HIGH COURT ] where the assessee company made payment of employee s contributions to Employee s Provident Fund (EPF) after due da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpleted the assessment on 29.12.2017 under section 143(3) of the Income Tax Act, 1961 (the Act ) wherein he disallowed inter alia Rs. 16,26,88,315/- being 57.38% of the interest paid to Bank of Baroda and Andhra Bank amounting to Rs. 28,35,27,910/- and Rs. 10,840/- being employee(s) contribution towards provident fund under section 36(1)(va) of the Act. On appeal the Ld. CIT(A) deleted both the disallowances made by the Ld. AO. Aggrieved, the Revenue is in appeal before the Tribunal and all the three grounds of appeal relate thereto. 4. We have heard the Ld. Representative of the parties, perused the orders of the Ld. AO/CIT(A) and the material available in the records. The Revenue has challenged the deletion of disallowance of interest of Rs. 16,26,88,315/- out of interest paid to Bank of Baroda and Andhra Bank in its ground No. 1 and 2. Our attention has been drawn to the order of the Tribunal dated 07.05.2018 in ITA No. 753/Del/2018 in the case of assessee for immediately preceding AY 2014-15 wherein the disallowance of interest expenditure of Rs. 5,68,97,378/- was made by the Ld. AO holding that the assessee has given interest free funds and advances and share capital to va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uctified. Therefore immediately, subsequently, in the next year as the transaction of land could not be fructified, total payment made by the assessee was refunded to the assessee. Therefore, it is apparent that the assessee originally made payment of Rs. 79.65 crores was for long lease of interest in land as per memorandum of understanding dated 30.03.2013. The ld Assessing Officer has not disputed the content of the memorandum of understanding for lease of land. It is not in dispute that assessee is also engaged in the real estate business and therefore, buying land or acquiring lease of the land would be the business of the company. Further the ld AO also could not show any infirmity in the facts that borrower of the funds from the assesses as to acquire the land of 300 acres from J P Infratech Ltd. It is also not denied that the whole transaction is related to the real estate business f the assessee company and the group. In view of this, it cannot be held that assessee has advanced the sum of Rs. 79.65 crores to the above company without any commercial purposes. In view it cannot be said that assessee has diverted the interest bearing funds for non-business purposes. Fur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y purpose to that company on 27.02.2014 in two tranches of Rs. 5 crores and Rs. 3.5 crores totaling of Rs. 8.5 crores. The assessee has charged interest thereon, of Rs. 944137/- thereon, and shown as income. The total of the amount outstanding as mentioned by the AO of Rs. 85944137/- is comprising of the loan of Rs. 8.5 crores and interest thereon of Rs. 9.44 lacks as the assessee has charged interest on the above sum @12% for the appropriate period it cannot be said that above amount given by the assessee is interest free advance. In view of this the ld Assessing Officer is directed to delete the disallowance of interest proportionate to the above loan. iii. Loan of Rs. 52.36 crores given to M/s. Gaursons India Ltd. The assessee has given the above sum to M/s. Gaursons India Ltd and it is shown in Note No. 19 to the balance sheet as advance against plot. The party to whom the loan is given is a holding company of the assessee and assessee is its subsidiary company. The above company was allotted a plot of land of Rs. 16320 sq meter in Indirapuram Development Plan admeasuring 16320 sq mtr at a price of Rs. 40050/- per sq meter valued at Rs. 65.36 crores. That company was to d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... judgment has held so. Furthermore, Hon'ble Delhi High Court in CIT Vs. DD Industries Ltd 57 Taxmann.com 310 has held that when assessee had sufficient adequate funds then the amount of loan given no disallowance can be made. Furthermore, as pointed out by the ld AR the assessee has also earned gross revenue from operations of Rs. 139 crores, which is also available for advance and same being interest free. In view of the above facts it cannot be said that there can be any interest disallowance on account of interest free advances provided to the holding company of the assessee of Rs. 52.36 crores. iv. Other advances The ld AO has also considered the advances made to following parties for making disallowance. i. Gaursons Infratech Pvt. Ltd Rs. 18000/- ii. Banbari Lal Gaur Rs. 1.50 crores iii. SKA Realtech Pvt. Ltd Rs. 3 crores iv. Gaursons Sports wood Pvt. Ltd RS. 2 crores v. Shyam Buildcon Pvt. Ltd Rs. 1 crore. vi. UP Township Pvt. Ltd Rs. 1 crore All the above advances even if it is presumed that they are not given by the assessee for the non-business purposes they do not exceed the funds available with the assessee withou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 52.36 crores given to holding company of the assessee M/s. Gaursons India Ltd for acquiring plot of land from Ghaziabad Development Authority cannot also be included for the purpose of interest disallowance for the reasons given by us above. Even otherwise, the above amount of advance of Rs. 52.36 crores coupled with other advances of Rs. 8.5 crores are far less than the interest free funds available with the assessee. In view of this on this sums too, as held by Hon'ble Delhi High Court and Bombay High Court no disallowance of interest can be made. 5. Perusal of the assessment order would show that while making the impugned disallowance the Ld. AO observed at page 5 of his order that the matter in this year (i.e. AY 2015-16) is also similar to the AY 2014-15, accordingly, in this year also similar conclusion is drawn. The case of the assessee is that there is no change in amount of share application money of Rs. 53.22 crores and loan of Rs. 79.65 crores given to Gaursons Realtech Pvt. Ltd. during AY 2015-16. It is same as in the AY 2014-15. The Tribunal in its order (supra) has recorded the finding that Rs. 79.65 crores given as advance to Gaursons Realtech Pvt. Ltd. w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by investing in the share capital of Gaursons Realtech Pvt. Ltd. with the deposit of share application money of Rs. 53.22 crores, the assessee was to acquire a controlling stake in Gaursons Realtech Pvt. Ltd. which was also engaged in the business of real estate development. Therefore, there is a direct nexus between the expenditure incurred and the purpose of business. It has been held in Hero Cycles (P) Ltd v Commissioner of Income Tax (Central) Ludhiana [2015] 63 taxmann.com 308 (SC), that once it is established that there is nexus between expenditure and purpose of business, revenue cannot justifiably claim to place itself in arm chair of businessman, or in the position of the Board of Directors, and to decide how much is reasonable expenditure having regard to circumstances of case. In this regard, we may also note the ratio of the decision of the Supreme Court in S.A. Builders Ltd. vs. Commissioner of Income Tax (Appeals) and Anr.(2007) 288 ITR 1 (SC), wherein the Supreme Court held that the decisions relating to Section 37 of the Act will also be applicable to Section 36 (1) (iii) because in Section 37 also, the expression used is for the purpose of business and that whil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n a different view for three years in question, particularly, without any conclusion that, in fact, general reserves, surpluses and other funds were not available. Reference may also be made to the decision of this Court in Commissioner of Income Tax v Tin Box Co. (2003) 260 ITR 637, wherein it was held that the finding of the Tribunal that the Department had not been able to controvert or disprove the fact that the assessee had substantial capital and interest-free funds available with it, not only in the preceding years but also in the years under consideration, which far exceeded the interest-free advances to the sister concern, is not without any evidence or material and therefore, disallowance of interest was deleted. Therefore, as already noted, in the present case, it is clear that there were sufficient interest- free funds available with the assessee, allowing them to advance the loans in question. Thus, the Tribunal, in our view was correct in concluding that it could not be said that it was the interest-bearing loan obtained from Bank of Baroda and Andhra Bank which had been advanced as interest-free loan to M/s Gaursons India Ltd. 5. We therefore find no infirmity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowed only if such sum is credited to the employee's account in the relevant fund or funds on or before the due date under the relevant Act. The Assessing Officer has concluded that section 36(1)(va) is applicable in respect of employee's contribution to PF and ESI, and if the same is not deposited within the due date prescribed under the respective Acts, the same does not become allowable by virtue of section 43B, even if it is deposited before the due date of filing of Income Tax Return. Accordingly, the Assessing Officer has disallowed such amounts of employee's contributions where the deposit has been made by the appellant after the due dates under the respective Acts. (iv) Aggrieved with this, the appellant has filed the appeal claiming that the amount should be allowed u/s 43B as it has been deposited before the due date of filing of return. The arguments taken before the AO have been reiterated in the appeal. (v) It is pertinent to note that contribution to PF and ESI have two different components. The employee's contribution is deducted from the salary/wages of the employees and the employer also makes contribution. PF and ESI are important legi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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