Income Tax Appellate Tribunal - Mumbai
Vinay Cargo Movers Ltd, Navi Mumbai vs Dcit Cir 7(3), Mumbai on 8 August, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL
"F" Bench, Mumbai
Before Shri P K Bansal, Vice President
and Shri D.T. Garasia, Judicial Member
ITA No.1529 /Mum/2015
(Assessment Year: 2011-12)
M/s. Vinay Cargo Movers Ltd. DCIT, Circle 7(3)
Plot No. 33, Vinay House Aayakar Bhavan, M.K. Marg
Vs.
Sector 19-C, Vashi Mumbai 400020
Navi Mumbai 400705
PAN - AABCV2487L
Appellant Respondent
Appellant by: Shri Dinkle Hariya
Respondent by: Shri T.A. Khan
Date of Hearing: 05.07.2017
Date of Pronouncement: 08.08.2017
ORDER
Per D.T. Garasia, J.M
This appeal has been filed by the assessee against the order of the CIT(A)-14, Mumbai dated 31.12.2014 for A.Y. 2011-12.
2. The only ground raised by the assessee pertains to the confirmation by the CIT(A) of the disallowance of `12,81,570/- made by the AO on account of notional interest on interest free deposits.
3. The brief facts of the case are that during the course of assessment proceedings the AO noticed from the details that the assessee has given several deposits. On asking he informed that in the regular course of business the assessee files tenders and on those tenders it has to make some deposits and the deposits named as deposits given to customers as tender deposit amounts. The AO noticed that during year under referenced the assessee has taken loan and is paying interest on such loans. However, it was noticed that the assessee has advanced deposits/loans amounting to `1,09,06,978/- (appearing as closing balance) on which no 2 ITA No. 1529/Mum/2015 M/s. Vinay Cargo Movers Ltd.
interest has been charged. Therefore, the AO asked to explain as to why interest on the above loans given to M/s. Vinay Logistics Pvt. Ltd. may not be calculated at the rate of interest paid to other loans taken and disallowed from the interest expenses claimed. Since the assessee has not proved that the assessee has given these loans for business purposes. Therefore, considering the reply the AO has disallowed the interest expenses of `12,81,570/- on advance given to M/s. Vinay Logistic Pvt. Ltd. The matter was carried to the CIT(A) and the CIT(A) dismissed the appeal of the assessee.
4. During the course of hearing the learned A.R. has drawn our attention to page 54 of the paper book and submitted that the assessee has given deposits of `73.61 lakhs in FY 2007-08 and FY 2008-09 out of which an amount of `63.61 lakhs was deposited in FY 2007-08 (total deposit of `1.10 crores minus refund amount of `46.53 lakhs) which is carried forward in the year under consideration. The learned A.R. has also drawn our attention to the total summarized major transactions of deposits with M/s. Vinay Logistic Pvt. Ltd. and immediate sources of funds. As the immediate sources of funds which are used to keep deposit with M/s. Vinay Logistic Pvt. Ltd. are from internal accruals and not from borrowed funds disallowance of interest expenses co-relating borrowed funds towards deposits with M/s. Vinay Logistic Pvt. Ltd. is uncalled for. Moreover, he has also drawn our attention to pages 57, 58 and 59 of the paper book and tried to prove that the assessee had sufficient interest free funds and when the assessee has sufficient interest funds no disallowance can be made. He also relied upon the decision of the Hon'ble Bombay High Court in the case of CIT vs. Goldern Tobacco Ltd. 82 taxmann.com 11. On being asked by the Bench whether the assessee can prove that the assessee had sufficient fund on the date of the funds given to the sister concern and whether the assessee is having bank pass book to show that the assessee had sufficient deposit in the bank account, assessee could not prove the same.
5. The learned D.R. relied upon the order of the tax authorities below.
3 ITA No. 1529/Mum/2015M/s. Vinay Cargo Movers Ltd.
6. Having heard both the parties and looking to the facts and circumstances of the case we find that the assessee has given the details of deposits given to various parties. Moreover, the assessee has also given various sources of funds and supporting evidences on pages 57, 58 and 59 of the paper book but it requires verification at the end of the AO. Therefore, in the interest of justice and fair play we restore this issue back to the file of the AO and the AO is directed to decide the matter afresh as per the flow of funds and statement given on pages 57, 58 and 59 of the paper book after giving opportunity of hearing to the assessee.
7. In the result, appeal filed by the assessee is allowed for statistical purposes.
Order pronounced in the open court on 8th August, 2017.
Sd/- Sd/-
(P.K. Bansal) (D.T. Garasia)
Vice President Judicial Member
Mumbai, Dated: 8th August, 2017
Copy to:
1. The Appellant
2. The Respondent
3. The CIT(A) -14, Mumbai
4. The CIT - 8, Mumbai
5. The DR, "F" Bench, ITAT, Mumbai
By Order
//True Copy//
Assistant Registrar
ITAT, Mumbai Benches, Mumbai
n.p.