TaxTMI 
TaxTMI 
2022 (7) TMI 1076
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....n allowing interest u/s 36(i)(iii) despite the fact that no interest free funds were available to the assessee. The assessee was under obligation not to deviate the funds raised from its customer in one project to some other project, but still assessee unethically diverted these funds for no business expediency. 3. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in allowing the deposit of employee's contribution towards Provident Funds of Rs. 10,840/- even when the appellant deposited the said amount beyond the due date u/s 36(1) (va) which is an contrast to the CBDT Circular No.22/2015 dated 17.12.2015 wherein the Board has clarified the employees contribution deposited after the due date as per PF.ESI and LWF rules has to be seen within the provisions of section 36(1)(va) of the Income Tax Act,?" 3. The assessee is a company engaged in the business of real estate development. For the AY 2015-16 the assessee filed its return of income on 30.09.2015 declaring total income of Rs. 26,27,15,888/-. The Ld. Assessing Officer ("AO") completed the assessment on 29.12.2017 under section 143(3) of the Income Tax Act, 1961 (the "Act") wherein h....
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.... to be used for the purposes of residential cum commercial construction. The above plot of land, which was to be leased by the above party to the assessee, was free from all the charges and possession of the plot was to be given only after receipt of 100% consideration by the above party from assessee. The assessee has paid Rs. 79.65 cores as advance to the above party and same was shown as advance against plots and classified under Note No. 19 titled as "short term loans and advances" in the annual accounts. The total consideration was of Rs. 159.30 crores as per clause NO. 13 of the above agreement and out of which 50% payment was made by the assessee. The detail of the payments was directly made by the assessee to M/s. JP Infratech Ltd as an advance for land on behalf of Gaursons Realtech Pvt. Ltd. Due to the business circumstances, which resulted into dispute with the farmers , the JP Infratech Ltd could not purchase the above plot and also could not be sold to Gaursons Realtech Ltd and consequently lease of the land in favour of the assessee also could not be fructified. Therefore immediately, subsequently, in the next year as the transaction of land could not be fructified, t....
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....ly shows that the source of money invested in the above company is from various bank accounts as shown by the Assessing Officer. However, it cannot be said that the assessee has used money for non-business purposes because as both the companies were in the real estate business it cannot be said that investment made by the assessee in the above company is not for the purpose of the business. Moreover, the assessee has also shown this sum as advance against plot of land in its balance sheet and share application money. Hence, we are of the opinion that sum of Rs. 79.65 crores given as advance to Gaursons Realtech Pvt Ltd for the purpose of the acquisition of the land and sum of Rs. 53.22 crores deposited as share application with Gaursons Realtech Pvt. Ltd is for the purpose of the business of the company and interest applicable to these advances cannot be disallowed in the hands of the assessee. ii. Advance of Rs. 85944137/- to M/s. Gaursons Realtech Pvt. Ltd. The assessee has submitted that the above amount was given by the assessee as a mere loan without any 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 ....
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....rwise as per the balance sheet of the company the assessee was having Rs. 16.70 crores of the share holders fund, Rs. 11.11 crores of share application money, Rs. 108.68 crores of the advances received from the customers. This gives the assessee interest free funds available with it of Rs. 136.49 crores. Therefore, as assessee is having mixed funds with it their part of the funds are interest bearing and part of the funds is noninterest bearing. The only presumption that arises in favour of the assessee is that the amount of advances given is out of non-interest bearing funds. Further, the Hon'ble Bombay High Court in 85 Taxmann. Com 88 in Pr CIT VS. Sesa Resources Ltd on identical facts and circumstances wherein the assessee borrowed funds and provided interest free funds to its sister concern where it cannot be shown that the advances was for the personal purposes then only possible other purposes as oppose to that it can be said that it is for business purposes or commercial expediency can be expected. The Hon'ble High Court in para No. 12 of that judgment has held so. Furthermore, Hon'ble Delhi High Court in CIT Vs. DD Industries Ltd 57 Taxmann.com 310 has held that....
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....ss expediency in view of the undertaking given to the financial institutions by the assessee to the effect that it would provide additional margin to subsidiary company to meet the working capital for meeting any cash loses. It is further required to be noted that the above decision relied up on by the ld AO has also been impliedly overruled by Hon Supreme court in case of Munjal Sales Coproration V CIT 2008] 168 Taxman 43 (SC)/[2008] 298 ITR 298 (SC)/[2008] 215 CTR 105 (SC). 18. Therefore, on the basis of our above finding we hold that investment made by the assessee in Gaursons Realtech Pvt Ltd of Rs. 53.22 crores and advance of Rs. 79.65 crores totaling to Rs. 132.87 crores is given by the assessee for the purpose of the business of the assessee and no disallowance of interest on these advances can be made. Further, the advance of Rs. 85944137/- is interest-bearing advance on which interest has been charged and therefore, it cannot be included in the interest free advances given by the assessee. Furthermore, a sum of Rs. 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 ....
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....ication money and had also advanced a loan of Rs. 79.65 crores in Gaursons Realtech Pvt. Ltd. The submission of learned counsel for the Appellant is that the Assessing Officer had undertaken a forensic examination of the money trail and found that the loans received from the two Banks namely, Bank of Baroda and Andhra Bank aggregating to Rs. 158.50 crores, had been channeled by the assessee inter alia to Gaursons Realtech Pvt. Ltd. The Tribunal has found that, as a matter of fact, the assessee had paid the amount of Rs. 79.85 crores on behalf of Gaursons Realtech Pvt. Ltd. to JP Infrastructure Ltd in respect of an agreement whereunder Gaursons Realtech Pvt. Ltd. had agreed to purchase land ad measuring 300 acres from JP Infrastructure Ltd. At the same time, there was an underlying transaction between the assessee and Gaursons Realtech Pvt. Ltd. by way of a Memorandum of Understanding dated 30.03.2013, whereunder the assessee was to get land ad measuring 88,500 sq. mtrs. (which translates to about 22 acres). That apart, 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 contr....
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....eholders fund, Rs. 11.11 crores as share application money and Rs. 108.68 crores as advances received from the customers. Thus, the assessee had interest-free funds available with it to the tune of Rs. 136.49 crores. The interest-free loan granted by the assessee to M/s Gaursons India Ltd. was only Rs. 52.36 crores. In Commissioner of Income Tax (Large Taxpayer Unit) v Reliance Industries Ltd. [2019] 410 ITR 466 (SC), the Supreme Court upheld the view of the Tribunal that where the interest-free fund is available to the assessee which is sufficient to meet its investment, it can be presumed that investments were made from interest-free funds available with the assessee. Similarly, this Court in Commissioner of Income Tax v DD industries [2015] 57 taxmann.com 310 (Delhi) observed that where adequate funds were available during the assessment years and, since in the past the Revenue had accepted the assessee's plea in this regard and not brought the amounts to tax under Section 36 (1)(iii), the Revenue could not have taken a different view for three years in question, particularly, without any conclusion that, in fact, general reserves, surpluses and other funds were not available. R....
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.... (i) Briefly the facts are that in respect of employees' contribution the PF & ESI in certain months, the appellant has deposited the amounts beyond the due dates prescribed in the respective Acts. The deposits have been mace the due date of filing of Income Tax Return. (ii) The appellant has claimed that after deletion of second proviso n section 43B by Finance Act, 2003, w.e.f. 01.04.2004, payments d employees contribution to PF and ESI are allowable as deduction if the same is paid before the due date for filing of Income Tax Return, as per section 43B, even if the amounts were not deposited before the due dates prescribed in the respective Acts (PF & ESI Act). (iii) On the other hand, the Assessing Officer has not found the expenditure allowable u/s 43B of the I.T. Act. Employees contribution to PF and ESI is deemed as income of the employer u/s 2(24)(x), and the same is allowable as deduction u/s 36(1)(va) of the I. T. Act. Section 36(1)(va) stipulates that such payment by employer is allowed 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 th....