Income Tax Appellate Tribunal - Delhi
Dhruv Choudhrie, New Delhi vs Adit, New Delhi on 22 May, 2019
IN THE INCOME TAX APPELLATE TRIBUNAL
(DELHI BENCH: 'B', NEW DELHI)
BEFORE SH. BHAVNESH SAINI, JUDICIAL MEMBER
AND
SH. N. K. BILLAIYA, JUDICIAL MEMBER
ITA No:-1841/Del/2012
(Assessment Year: 2006-07)
Dhruv Choudhrie ADIT
45-46, Vs. International Taxation,
Sunder Nagar Circle-1(1)
New Delhi New Delhi
AADPC4041Q
APPELLANT RESPONDENT
Assessee by : Sh. Tarandeep Singh, Advocate
Sh. Aditya Raj Singh, Advocate
Revenue by : Ms. Ashima Neb, Sr. DR
Date of Hearing : 21.05.2019
Date of Pronouncement : 22 .05.2019
ORDER
PER: N. K. BILLAIYA, AM This appeal by the assessee is preferred against the order of the Commissioner of Income Tax [Appeals]-XI New Delhi, dated 02.01.2012 for Assessment Year 2006-07.
2. The only grievance of the assessee is that the CIT (A) erred in confirming the addition of Rs. 36,55,900/- as interest income under 2 ITA No. 1841/Del/2012 the head income from other sources on share application money given to M/s Sweet Home Estate Pvt. Ltd.
3. Facts on record shows that the original return of income was filed on 31/07/2006 declaring total income of Rs.13,82,584/-. Subsequently, information was received from office of the ITO Ward- 7(4), New Delhi, regarding the share application money given to M/s Sweet Home Estate Pvt. Ltd.
4. On the basis of this information, notice u/s 148 was issued and accordingly reassessment proceedings were initiated.
5. During the course of the reassessment proceedings, the assessee was asked to explain the transaction with M/s Sweet Home Estate Pvt. Ltd. to which it has given an amount of Rs. 3,04,65,827/-. The assessee explained that the said amount has been given as share application money and in support submitted a copy of the Board Resolution dated 21/11/2003. The assessee also contended that no interest should be charged on share application money given to said M/s Sweet Home Estate Pvt. Ltd. Since, it is not given as loan but represents share application money. 3 ITA No. 1841/Del/2012
6. The contention of the assessee did not find any favour with the A.O who was of the firm belief that no unrelated party would give an amount of Rs.3.04 crores without charging any interest. Accordingly, the A.O computed the interest at Rs.36.55 lacs and added the same to the income of the assessee.
7. The assessee carried the matter before the CIT (A) and once again strongly contended that the said amount has been given as share application money and not as loan. The assessee pointed out that the shares have been allotted in subsequent year. The contention of the assessee did not find any favour with the CIT (A), who was of the firm belief that the assessee should have received interest income and estimated interest @ 12% per annum and confirmed the additions made by the A.O.
8. Before me, the Counsel reiterated what has been stated before the Lower Authorities and the DR strongly relied on the findings of the CIT(A).
4 ITA No. 1841/Del/2012
9. We have carefully considered the orders of the authorities below. A perusal of the assessment orders show that the A.O made the addition as a transfer pricing adjustment being transactions entered into between associated enterprises. It seems that the A.O has re-characterized the transaction of share application money as loan. Though, this issue was not agitated before the CIT (A) as ultimately the additions were made on the assumption that no unrelated party would advance money without charging interest and since in the present case, the money was advanced to a related party, the notional interest was estimated at 12% per annum. In our considered opinion, the quarrel is now restricted to the addition of Rs.36,55,900/- only in respect of the addition on account of notional interest. In our considered view, the transaction has to be looked as it is. The facts on record show that the transaction is of share application money given by the assessee to M/s Sweet Home Estate Pvt. Ltd. It is also not in dispute that the shares have been subsequently allotted. It is not the case of the Revenue that the assessee has used borrowed funds in making such investment and it is also not the case of the Revenue that the assessee has paid substantial interest on borrowings. 5 ITA No. 1841/Del/2012
10. Considering the facts of the case in totality, we do not find any merit in the addition sustained by the CIT (A). The A.O is accordingly directed to delete the addition of Rs. 36,55,900/-. Since, the assessee did not press the ground challenging the reopening of the assessment, the same is dismissed as not pressed. Ground No. 2 is allowed.
11. In result, the appeal filed by the assessee is partly allowed.
Order pronounced in the open court on 22.05.2019.
Sd/- Sd/-
(BHAVNESH SAINI) (N.K.BILLAIYA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated: 22 .05.2019
*R. N*
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5. DR: ITAT
ASSISTANT REGISTRAR
ITAT NEW DELHI
6 ITA No. 1841/Del/2012
Date of dictation 21.05.2019
Date on which the typed draft is placed 21.05.2019
before the dictating Member
Date on which the typed draft is placed before the Other Member Date on which the approved draft comes to the Sr. PS/PS Date on which the fair order is placed before the Dictating Member for pronouncement Date on which the fair order comes back 22.05.2019 to the Sr. PS/PS Date on which the final order is uploaded 22.05.2019 on the website of ITAT Date on which the file goes to the Bench 22.05.2019 Clerk Date on which the file goes to the Head Clerk The date on which the file goes to the Assistant Registrar for signature on the order Date of dispatch of the Order