Tax Tribunal Grants Appeals for 2014-15 and 2015-16, Overturning Disallowances

The Tribunal allowed both appeals for the assessment years 2014-15 and 2015-16, directing the deletion of disallowances and condoning the delay in filing the appeals.

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Issues Involved:
1. Condonation of delay in filing the appeal.
2. Disallowance of interest expenditure on borrowed funds for purchasing shares.
3. Disallowance of excess interest paid on borrowings used for advances to sister concerns and working capital in partnership firms.

Detailed Analysis:

1. Condonation of Delay in Filing the Appeal:
The assessee filed an application for condonation of delay of 78 days in filing the appeal, explaining that the delay was due to personal and professional circumstances, including heavy losses in the companies and relocation for business purposes. The Tribunal considered the rival submissions and relevant material on record, applying the principles laid down by the Hon’ble Supreme Court in *Collector, Land Acquisition Vs. Mst. Katiji (1987) 167 ITR 471*. The Tribunal emphasized a liberal approach in interpreting "sufficient cause" for condonation of delay to ensure substantial justice. The Tribunal found the reasons for the delay to be bona fide and not a device to cover ulterior purposes. Consequently, the delay was condoned, and the appeal was admitted for hearing.

2. Disallowance of Interest Expenditure on Borrowed Funds for Purchasing Shares:
The assessee contested the disallowance of Rs. 7,55,837/- as interest expenditure on borrowed funds used for purchasing shares in Natani Rolling Mills Pvt. Ltd. and Neelkanth Industries Pvt. Ltd. The Tribunal noted that the shares were purchased before the assessment year 2009-10, and no shares were purchased during the period under consideration. The assessee argued that the loan was taken for business purposes and that directorship in companies constitutes a profession under Section 2(36) of the Income Tax Act, 1961. The Tribunal referred to judgments in *Nabadwip Chandra Roy vs Commissioner Of Income-Tax (1962) 44 ITR 591 Gauhati* and *Commissioner of Income Tax Vs Rajeev Lochan Kanoria (1994) 208 ITR 616 (Cal)*, which recognized directorship as a vocation. The Tribunal concluded that the interest paid was for business and commercial expediency, fulfilling the conditions under Section 36(1)(iii) of the Act. Therefore, the disallowance was deleted.

3. Disallowance of Excess Interest Paid on Borrowings:
The assessee also challenged the disallowance of Rs. 2,46,132/- as excess interest paid on borrowings used for advances to sister concerns and as working capital in partnership firms. The Tribunal observed that the assessee, as a working partner, invested in the partnership firm Oliya Import and Export, but due to Section 40(b)(iv) of the Act, could not obtain interest exceeding 12%. The Tribunal noted that advances to Giriraj Buildcon, a sister concern, were made for commercial expediency. Citing the principles from *S.A. Builders Ltd. Vs Commissioner of Income Tax (Appeals), Chandigarh and Others (2007) 1 SCC 781*, the Tribunal emphasized that the borrowed funds' use should be viewed from the perspective of commercial expediency. The Tribunal found merit in the assessee's contentions and directed the deletion of the disallowance.

4. Condonation of Delay (Ground No. 4):
The Tribunal reiterated that the delay in filing the appeal had already been condoned, and there was no need to adjudicate this ground afresh.

Conclusion:
Both appeals for the assessment years 2014-15 and 2015-16 were allowed, with the Tribunal directing the deletion of the disallowances and condoning the delay in filing the appeals. The orders were pronounced in the open court on 23rd November 2021.

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