Income Tax Appellate Tribunal - Ahmedabad
Acit, Circle-5,, Ahmedabad vs Rjp Infrastructure Pvt. Ltd.,, ... on 6 December, 2016
IN THE INCOME TAX APPELLATE TRIBUNAL
AHMEDABAD "D" BENCH
(BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER
& SHRI MAHAVIR PRASAD, JUDICIAL MEMBER)
ITA. No: 1914/AHD/2013
(Assessment Year: 2009-10)
ACIT, Circle-5, V/S M/s. RJP Infrastructure
Ahmedabad Pvt. Ltd. 206, Shefali
Centre, Paldi, Ahmedabad-
380007
(Appellant) (Respondent)
PAN: AACCR9599J
Appellant by : Shri Roop Chand, Sr. D.R.
Respondent by : Shri Anuj Shah, A.R.
(आदे श)/ORDER
Date of hearing : 05 -12-2016
Date of Pronouncement : 06 -12-2016
PER N.K. BILLAIYA, ACCOUNTANT MEMBER:
1. This appeal by the Revenue is preferred against the order of Ld. CIT(A)-XI, Ahmedabad dated 26.104.2013 pertaining to A.Y. 2009-10.
2 ITA No. 1914/Ahd/2013. A.Y. 2009-10
2. The only grievance of the revenue is that the ld. CIT(A) erred in deleting the addition of Rs. 37,11,298/- on account of disallowance of interest made u/s.36(1)(iii) of the Act.
3. The assessee company is engaged in construction of various industrial & Government projects as contractor. The return for the year under consideration was filed on 30.09.2009. The return was selected for scrutiny assessment and accordingly statutory notices were issued and served upon the assessee.
4. During the course of the scrutiny assessment proceedings, the A.O. noticed that the assessee has advanced Rs. 3,09,27,482/- to M/s. Jarcy Builders, a related concern of the assessee. The A.O. further found that the assessee has not charged interest on the said advance. The A.O. further found that the assessee has paid interest @ 12% to various parties. Since the assessee had borrowed funds on which interest has been paid, the assessee was asked to show cause why interest @ 12% on advance to M/s. Jarcy Builders should not be disallowed u/s. 36(1)(iii) of the Act.
5. In its reply, the assessee stated that during the year under consideration there was an opening balance of Rs. 40,81,350/- in the account of M/s. Jarcy Builders. It was further brought to the notice of the A.O. that the assessee company has also received an amount of Rs. 2,19,98,000/- from M/s. Jarcy Builders. It was claimed that the assessee was having sufficient 3 ITA No. 1914/Ahd/2013 . A.Y. 2009-10 own funds to make the advance, therefore, there is no question for any disallowance.
6. The submissions of the assessee did not find any favour with the A.O. who proceeded by computing the disallowance at Rs. 37,11,298/-.
7. Assessee carried the matter before the ld. CIT(A) and reiterated its contention. The First Appellate Authority was convinced with the assessee and deleted the disallowance of Rs. 37,11,298/-.
8. Aggrieved by this, the revenue is before us. The ld. D.R. strongly supported the findings of the A.O. Per contra, the ld. counsel for the assessee reiterated what has been stated before the lower authorities.
9. We have given a thoughtful consideration to the orders of the authorities below. The undisputed fact is that the assessee has made advances to its sister concern M/s. Jarcy Builders from its bank account maintained with Canara Bank. The First Appellate Authority found that this account had always a debit balance when the advances were made to sister concern. Therefore, it can be safely concluded that the A.O. failed to demonstrate that interest bearing funds were diverted towards interest free advances. We further find that the assessee was having capital and reserves of Rs. 1,71,81,166/- and the maximum interest free advances to its sister concern was Rs. 1,06,44,482/-.
4 ITA No. 1914/Ahd/2013. A.Y. 2009-10
10. The Hon'ble High Court of Bombay in the case of Reliance Utilities & Power Ltd 313 ITR 340 which was followed in the case of HDFC Ltd. 366 ITR 505. It was held that "if there are mixed funds available with the assessee then the presumption would be that interest free funds have been utilized for making interest free advances. Therefore, no part of interest on borrowings can be disallowed on the basis of that investments were made out of interest bearing funds."
11.Considering the facts in hand, in the light of the ratio laid down by the Hon'ble Bombay High Court (supra), we decline to interfere with the findings of the ld. CIT(A).
12.Appeal filed by the Revenue is accordingly dismissed.
Order pronounced in Open Court on 06 - 12- 2016.
Sd/- Sd/-
(MAHAVIR PRASAD) (N. K. BILLAIYA)
JUDICIAL MEMBER True Copy ACCOUNTANT MEMBER
Ahmedabad: Dated 06 /12/2016
Rajesh
Copy of the Order forwarded to:-
1. The Appellant.
2. The Respondent.
3. The CIT (Appeals) -
4. The CIT concerned.
5. The DR., ITAT, Ahmedabad.
6. Guard File.
By ORDER
Deputy/Asstt.Registrar
ITAT,Ahmedabad