DCIT Vs Om Land Reality P. Ltd (ITAT Ahmedabad)
ITAT Ahmedabad held that disallowance of interest under section 36(1)(iii) unsustainable as interest bearing funds were not utilized for non-business purpose and interest free advances were made in the course of business.
Facts- Only two issues are the addition made related to advances received from prospective buyers treated as unexplained credits and added to the income of the assessee under section 68 of the Act and of interest paid by the assessee disallowed in terms of provisions of section 36(1)(iii) of the Act. It was pointed out that the ld.CIT(A) had granted substantial relief to the assessee on both the issues, aggrieved by which, the Revenue has come up in appeal before us.
Conclusion- Held that we see no reason to interfere in the order of the ld. CIT(A) who has deleted the disallowance of interest under section 36(1)(iii) of the Act giving factual finding, which have remained uncontroverted by the Revenue before us i.e. Interest bearing funds were not found by the AO to be utilized for non-business purpose and Interest free advances given by the assessee were made in the course of business of the assessee. In view of the above, order of the ld. CIT(A) deleting the addition of interest under section 36(1)(iii) of the Act is upheld.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
Present appealshave been filed by the Revenue against separate orders passed by the ld.Commissioner of Income Tax(Appeals)-9, Ahmedabad [hereinafter referred to as “Ld.CIT(A)”] under section 250(6) of the Income Tax Act, 1961 (“the Act” for short) for the assessment years mentioned in the cause title. The impugned orders of the ld.CIT(A) are dated 6.8.2019, 7.8.2019, 8.8.2019 and 9.8.2019 respectively.
2. At the outset itself, it was pointed out that there are only two issues arising ineach year in the backdrop of identical facts of the case. It was pointed out that in all the years impugned before us, the addition made related to advances received from prospective buyers treated as unexplained credits and added to the income of the assessee under section 68 of the Act and of interest paid by the assessee disallowed in terms of provisions of section 36(1)(iii) of the Act. It was pointed out that the ld.CIT(A) had granted substantial relief to the assessee on both the issues, aggrieved by which, the Revenue has come up in appeal before us.
The assessee has filed cross-objections. At the outset, the ld.counsel for the assessee stated that he was not pressing the COs filed by the assessee in the Revenue’s appeals. In view of this submission of the ld.counsel for the assessee, all the COs. filed by the assessee are dismissed as not pressed.
3. Adverting now to the Department’s appeal, the facts as emerge from orders of the authorities below and as also pointed out during the course of hearing before us, was that assessee is a private limited company primarily engaged in the business of development of land and residential plots. That the assessee had commenced scheme of development of plots in two projects, known as “Nalsarovar City” (“NSC”), Nr. Nalsarovar, Sanand-Nalsarovar Road, Ahmedabad and “Ahmedabad Film City” (“AFC”), Nr. NDK Show Pan, Balva Bagodara Highway, Ahmedabad.
4. First issue, which arises in all the appeals before us and which we shall deal with together for all the years before us is with regard to advance received by the assessee from alleged prospective buyers of plots in both these projects of the assessee, which were treated by the Assessing Officer (AO) as unexplained and added to the income of the assessee under section 68 of the Act.
5. The facts leading to the addition being that on being asked to prove genuineness of all the advances received by the assessee during various years impugned before us, the assessee had explained that these advances had been received from prospective allottees of land which were being developed by the assessee in two schemes as mentioned above i.e. NSC and AFC. The assessee had explained that the schemes were spread over five to six years and the prospective allottees were paying instalments monthly as per the scheme of payment opted by them. These amounts were, therefore, shown as instalments given by the assessee and were transferred to income account as and when entire amount of sale consideration was received and sale deed was made along with handing over of the possession of the booked plots to the prospective buyers. In all the years involved, the AO asked the assessee to file details of all advances received. With respect to advances where no PAN details of the investor was provided, he added the same as unexplained credits u/s 68 of the Act.
6. The matter was carried in appeal before the ld.CIT(A). In A.Y 2010-11, it was brought to his notice that identical issue had arisen in Asst. Year 2008-09 in the case of the assessee and the matter had travelled upto ITAT, who had given certain directions, according to which, the additions were to made in the facts of the case. The ld.CIT(A) directed the AO to determine the amount of addition sustainable in terms of direction of the ITAT in the preceding year i.e.Asst.Year2008-09. The AO in his remand report noted that the ITAT had directed the entire advances to be classified in three categories i.e. (i) those advances in which sale deed were executed during the year, (ii) advances whose bookings were cancelled and the amounts refunded, and (iii) simple advance received during the year. All these categories of advances received from the buyers were further directed to be sub-categorised into with PAN and without PAN details, and further, the ITAT directed, addition to be confined to only the category of simple advance where no PAN details were furnished, directing deletion in the other categories of advances. The AO, thereafter, worked out the disallowance to be sustained in all the years asper the direction of the ITAT. Subsequently, report of the AO in this regard was forwarded to the assessee, who with respect to the additions stated by the AO to be sustainable in terms of the direction of the ITAT in the preceding year on account of advances received during the year without PAN; furnished further details of PAN with respect to those advances where available with him. Taking note of the same, and also noting the fact that the ITAT decision in A.Y 2008-09 was upheld by the Hon’ble High court dismissing the appeal filed by the Revenue against the same, the ld.CIT(A) further reduced the quantum of disallowance sustainable restricting it to the advances with respect to which, he noted that the PAN details were not available. This decision for A.Y 2010-11,was applied by him in the subsequent years also, wherein based on the PAN details submitted by the assessee with respect to the category of advances relating to simple advances received during the year, he deleted the disallowance made by the AO. The entire sequence of events, right from addition made by the AO in A.Y 201011, to the amounts quantified by the AO as sustainable in view of the order of the ITAT in Asst.Year 2008-09 to ultimately the amount confirmed by the ld.CIT(A) taking note of the submissions of the assessee and following which order additions were deleted in subsequent years is tabulated as under:
