TaxTMI 
TaxTMI 
2022 (4) TMI 1683
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.... officer be restored. 3. The appellant craves leave to add, amend alter or delete any of the above grounds of appeal during the course of appellate proceedings before the Hon'ble Tribunal." 2. The Assessee is a Builder-Developer. Brief facts of the case are that, in the assessment order, it is claimed that the assessee has used interest bearing funds for giving advances to its sister concerns and related entities, therefore, the A.O. opined that the funds have been used for non-business purposes. The assessee submitted before the A.O. during the assessment proceedings that they have sufficient funds and the advances have been given out of its own excess funds. The assessee made an elaborate submission before the A.O., however, the A.O. disallowed Rs. 7,44,78,911/- out of total interest expenditure of Rs. 11,09,84,335/- claimed by assessee U/s 36(1)(iii) of the Income Tax Act, 1961 (in short, the Act). The A.O. also made disallowance U/s 14A of the Act at Rs. 31,48,123/-. 3. Being aggrieved by the order of the A.O., the assessee carried the matter before the ld. CIT(A)-4, Pune, who after considering the submissions of the parties and material placed on record, giv....
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....e Assets (fixed Assets) and Inventories for the purpose of business of the assessee. 5.3.2 While commenting on the observations of the AO that "Rather interest free advances are given to directors of Rs. 23 Crore and against land of Rs. 30 Crores. Thus, total short term loans and advances of Rs. 72 Crores are not for business purpose and not earned any revenue in this year. Similarly, inventory of Rs. 27 Crores is idle and no sale took place till end of this year AY 2013-14", the Id. AR submitted that advance given to directors is against Joint Development Agreement in respect of land owned by the director under a revenue sharing model. Assessee's housing project "Myria" is underway at the site. A.O. has verified the agreement which is on the assessment record and is satisfied with the explanation. We believe the A.O's only apprehension is that it is paid to a director. Our belief is fortified by the fact that while A.O. has reproduced part of our submission dated 18/03/2016 (refer page 4 of the Order) relating to advance for purchase of land (from other than director) Rs. 30 Crores, he has not reproduced our submission regarding advance to directors contained in t....
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....R 377] wherein it was held that once it is established that there is nexus between the expenditure and the purpose of business (which need not necessarily be the business of the assessee itself), the revenue cannot justifiably claim to put itself in the arm-chair of the businessman or in the position of the Board of Directors and assume the role to decide how much is reasonable expenditure having regard to the circumstances of the case. In the case of the appellant before me the A.O. has even ignored the investment in inventory and fixed assets. There is no justification for the approach of the A.O. in disallowing interest without bringing material on record to show that interest bearing funds have been used for giving interest free advances to sister concerns or for other advances regarded by AO as not for the purpose of business of the assessee. The AO has not shown any advance paid by the assessee which is not for the purpose of business of the assessee. The action on then part of the AO is inconsistent with the stand taken by him in all the earlier years. Rule of consistency cannot be given a complete go by without proper justification. It is well settled law that Principle of ....
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....m) and CIT Vs HDFC Bank Ltd. 366 ITR 505 (Bom). The ld. AR has vehemently supported the order of the ld. CIT(A). He also invited our attention to the tables submitted by the assessee before the A.O. vide letter dated 18/03/2016 (which are at Paper Book page No. 28 to 34). 6. We have considered the rival contentions of both the parties and perused the material placed on record. In this case, the AO, in the assessment order on page 6 has given the finding that interest expenditure is Rs.11,09,84,335/- debited to P&L account, similar finding is given by AO on page 2 of the assessment order. However, these findings are blatantly incorrect, the note A-25 of the Balance Sheet is reproduced here as under: Finance Cost Note A-25 As on 31.03.2013 As on 31.03.2012 Interest Expenses 8,93,67,226.30/- 9,64,47,098.85/- Other borrowing cost 48,21,961/- 44,33,000/- Loss on Foreign exchange transaction 1,67,95,148/- - Total 11,09,84,335.30/- 10,08,80,098.85/- Thus, the actual interest expenditure is Rs. 8,93,67,226/-. In this case, the A.O. in the assessment order has calculated the disallowance of Section 36(1)(iii) of the Act in a different ma....
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....esumed that the investments were from the interest-free funds available." Applying the said proposition of law as laid down by the Hon'ble Bombay High Court to the present case, the assessee was having own funds of Rs. 27,12,47,640/-, then it can be presumed that the advances of Rs. 8,68,18,973.07/- were given out of its own funds by the assessee. Similar question was considered by the Hon'ble ITAT Pune in assessee's own case for the A.Y. 2005-06 in ITA No. 472/Pune/2010 order dated 25/06/2013 has held as under: Quote "Such chart has been made date wise and it is seen that the peak amount of interest free funds as also the minimum amount of interest-free funds available with the assessee at any given point of time during the year is sufficient to cover the impugned interest-free advances of Rs. 9,28,96,036/- made to the sister concerns. The aforesaid position has not been controverted by the Revenue either in the course of hearing or even in the remand report furnished by the Revenue on the basis of the material on record. Therefore, in the face of the said factual matrix, which is supported by the relevant material on record, and is not controverted by the ....