Case Law Details

Case Name : Dheeraj Consultancy P. Ltd. Vs. ACIT (ITAT Mumbai)
Appeal Number : I.T.A. No. 3377/Mum/2017
Date of Judgement/Order : 20/12/2017
Related Assessment Year : 2012-13
Courts : All ITAT (4788) ITAT Mumbai (1547)

Dheeraj Consultancy P. Ltd. Vs. ACIT (ITAT Mumbai)

The only revenue earned by the assessee is from dividend income to the tune of Rs. 4.50 lacs. The other expenses apart from finance costs also reveal that there is no business activity of advertising agency / real estate business which was carried on by the assessee as there are negligible expenses such as audit fee, filing fee etc paid by the assesseee during the previous year to keep company afloat and to do statutory compliances. The assessee has claimed that over a period of time it has advanced substantial amount of Rs. 26.49 crore to M/s. Sapphire Land & Development Pvt. Ltd out of total stated consideration of Rs. 30 crores stated to be for purchase of Land viz. Manvelpada situated at Vasai (West), Mumbai, which advances were made out of overdraft/loan of Rs. 30.38 crores obtained from Punjab and Maharashtra co-op Bank Limited . The said amount was stated to have been received back by the assessee on 18-11- 2011 from Emarald Realtors Private Limited. The assessee has failed to bring on record MOU/agreement stated to be entered into with Sapphire Land & Development Private Limited to substantiate its contention that the advances made to M/s. Sapphire Land & Development Pvt. Ltd are towards purchase/acquisition of the said property. All the three companies namely assessee, Sapphire Land & Development Private Limited and Emarald Realtors Private Limited from whom the assessee received back the said amounts, are sister/associated concerns . It was also not brought on record whether the said MOU was registered with registering authority as is required under amended law as contained in The Registration Act, 1908. The cancellation agreement stated to be entered in July 2011 for cancelling MOU is also not on record and hence it could not be seen as to the terms and reasons for the cancellation of the said MOU. Now it is claimed for the first time before the tribunal that there was a fire in the office of the assessee on 18-1 1-20 10 and all the records were destroyed . In any case cancellation deed was alleged to be entered on 18-07-2011 which in any case cannot be part of records alleged to be destroyed in fire which took place on 18-11- 2010 and the assessee could have produced cancellation deed for cancellation of MOU. No such contention of fire taking place in office on 18- 11-2010 was raised before the authority below wherein the A.O framed assessment in the year 2015 and learned CIT-A adjudicated appellate order in 2017. It is pertinent to mention the advances were paid by assessee to M/s. Sapphire Land Development Pvt. Ltd and the refund has been received from Emerald Realtors Pvt. Ltd while there is no such reasons furnished by the assessee as to why Emarald Realtors Private Limited refunded the money on alleged cancellation of MOU , while it is admitted position that all the three companies mainly assessee, M/s. Sapphire Land Development Pvt. Ltd and Emerald Realtors Pvt. Ltd are associated/sister concerns. It becomes all the more important for the assessee to have brought on record cogent evidences to substantiate its contention as all the three parties are related parties/sister concerns. No such evidences are brought on record to prove the genuineness of the transaction for entering into an MOU for purchase of land as well to prove genuineness of the transaction for cancellation of MOU. It is also pertinent to mention there is no income earned by the assessee as per audited financial statements from advertising business as well from real estate business apart from dividend income of Rs. 4.50 lacs . It is also not on record backed with evidences as to what was the purpose of acquiring said land for which the assessee paid substantial advances of more than Rs. 26 crores out of the total stated consideration of Rs. 30 crores. Was it do develop real estate or was it to construct an office for its own use is not known as the same is not brought on record. In the absence of any evidence on records it cannot be concluded whether expenses towards interest costs on bank overdraft were revenue in nature or capital in nature. It is also not on record as to what steps the assessee took post entering into alleged MOU as to getting building plans approved etc. w.r.t. said land proposed to be acquired by the assessee. These are the facts which are especially within the knowledge of the assessee and onus is on the assessee to bring on record cogent evidences to substantiate that interest has been paid for the purposes of business of the assessee and the conditions as stipulated u/s. 36(1)(iii) are duly complied with which in the instant case has not been done by the assessee. Merely because the revenue has accepted the said claim of interest as business expenses in the earlier years in the summary proceedings u/s. 143(1) does not create res-judicata as revenue has never gone into the details of the said claim as the return of income was accepted in summary manner u/s 143(1) without scrutiny being conducted u/s. 143(3) r.w.s. 143(2). Thus, mere acceptance of the claim in earlier years in proceedings u/s 143(1) does not debar Revenue from examining the claim on merits in subsequent years and does not create a bar of res-judicata . We are fully aware that consistency is to be maintained but the claim of interest expenses was never examined by the revenue in any of the earlier years as scrutiny proceedings were not initiated in any of the earlier years since said loans were raised by the assessee. Thus only bald statements are made by the assessee for claiming that the interest has been paid for the business purposes while no such evidences are brought on record by the assessee to prove its contention that the said loans were used for business purposes by the assessee and mandate of Section 36(1)(iii) was complied with. The payments and the return thereof of the said advances are from the sister concerns and in the absence thereof of the evidences on record to substantiate that these were business expenses, we are afraid claim of the assessee to allow interest expenses on bank overdraft to the tune of Rs. 1,37,08,749/- as business expenses cannot be accepted and hence the appeal of the assessee is dismissed. Thus, keeping in view entire factual matrix of the case, the claim of the assessee is rejected.

FULL TEXT OF THE ITAT ORDER IS AS FOLLOWS:-

This appeal, filed by the assessee, being ITA No. 3377/Mum/2017 for assessment year 2012-13, is directed against the appellate order dated 31- 01-2017 passed by learned Commissioner of Income-tax (Appeals)-53, Mumbai (hereinafter called “the CIT(A)”) for assessment year 2012-13, appellate proceedings had arisen before learned CIT(A) from the assessment order dated 26.03.2015 passed by learned Assessing Officer (hereinafter called “the AO”) u/s 143(3)of the Income-tax Act, 1961 (hereinafter called “the Act”).

2. The grounds of appeal raised by the Assessee in the memo of appeal filed with the Income-Tax Appellate Tribunal, Mumbai (hereinafter called “the tribunal”) read as under:-

1) The Learned CIT (A) has erred in law & on facts in upholding dis allowances made of Finance Cost incurred during the year under the consideration u/s 36(1)(iii) of the IT Act, 1961 to the tune of Rs. 1,37,08,749/-.

2. The Learned CIT (A) has erred in law & on facts in upholding imposition/re- computation of interest under section 234B of the Act in the order of-Income Tax passed by the Assessing Officer u/s. 143 (3) of the Income Tax Act, 1961 which is bad in law.”

3. The brief facts of the case are that assessee has claimed to be in the business of Advertising Agency. During course of assessment proceedings u/s 143(3) r.w.s. 143(2), it was observed by the A.O that assessee has debited/incurred finance cost amounting to Rs. 1,37,08,749/- as interest on Bank Overdraft. The assessee was asked by the AO to explain why such finance cost should be allowed as business expenses, if there is no business carried on by the assessee during the assessment year . The assessee submitted as under:-

During A.Y. 2010-11 the Assessee Company has entered in to Memorandum of Understanding (MOU) with M/s. Sapphire Land Development Pvt. Ltd. for purchase of Land viz. Manvelpada situated at Vasai (West), Mumbai for a consideration of Rs. 30,00,00,000/- and as a part of advance payment the company has paid Rs. 26,49,62,262/- to M/s. Sapphire Land Development Pvt. Ltd. on 10/04/2010 by obtaining overdraft facility from Punjab and Maharashtra co-op Bank Limited. However the deal could not be materialized. over price issues and the Assessee Company had received back the advance amount from M/s. Sapphire Land Development Pvt. Ltd. (through Emerald Realtors Pvt. Ltd) and closed the overdraft facility by repaying the amount due to the Punjab and Maharashtra co-op Bank Limited on 18/07/2011. The interest claim of Rs. 1,37,08,749/- paid to Punjab and Maharashtra Co-op Bank Limited during the year under consideration pertains to the overdraft amount outstanding during A. Y. 2011-12 and is solely for the purpose of business of the Assessee Company as the Assessee Company has used the overdraft facility for making advance payment for purchase of business assets and hence the same should be allowed as deduction”.

The A.O observed that the finance cost cannot be allowed as business expenses as there is no business activity during the year under consideration, vide assessment order dated 26-03-2015 passed by the AO u/s 143(3).

4. Aggrieved by the assessment order dated 26-03-2105 passed by the AO, the assessee filed an appeal before learned CIT(A). It was explained by the assessee before learned CIT(A) that the assessee has entered into MOU with M/s. Sapphire Land Development Pvt. Ltd. for purchase of land viz. Manvelpada situated at Vasai (West), Mumbai for a consideration of Rs. 30,00,00,000/- and as a part of advance payment , the assessee has paid Rs. 26.49 crore to M/s. Sapphire Land Development Pvt. Ltd. on 10.04.20 10 by obtaining overdraft facility from Punjab and Maharashtra co-op Bank Limited. It was also explained by the assessee that the deal could not materialise over the price issue and appellant has received back the advanced amount from M/s. Sapphire Land Development Pvt. Ltd through Emerald Realtors Pvt. Ltd and closed the overdraft facility from the bank by repaying the amount due to the bank on 18.07.2011 . It was claimed that the said expenses were for the purposes of the business of the assessee for making advance payment for purchase of business assets and hence the same is deductible as business expense under the provisions of Section 36(1)(iii) . The assessee relied upon decision of Hon’ble Supreme Court in the case of Madhav Prasad Jatia v. CIT 118 ITR 200(SC) , S A Builders Limited v. CIT 288 ITR 1 (SC) and decision of Hon’ble Delhi High Court in the case of Punjab Stainless Steel Industries v. CIT 324 ITR 396(Del. HC) to contend that interest paid by the assessee on overdraft be allowed u/s 36(1)(iii) as the overdraft from bank was used for business purposes and hence should be allowed as business expenses. The learned CIT-A rejected the contentions of the assessee by holding as under, vide appellate order dated 31-01-2017 passed by learned CIT(A) :-

“5.3.1 I have considered the submissions of the appellant and perused the materials available on record. The point for adjudication is whether the A.O was justified in disallowing the finance cost of Rs. 1,37,08,749/- on the ground that there was no business activity during the relevant period. In this connection, the appellant has rightly drawn attention to the meaning of the phrase “for the purpose of business” occurring in section 36(l)(iii) of the Act. It is well-established that where the assessee makes a claim for deduction in terms of section 36(1)(iii), he has to place materials in support of his claim of entitlement to the deduction and that the assessee has to satisfy the assessing authority that he is entitled to obtain deduction in accordance with the taxing statute [155 ITR 262 (Cal.), 185 ITR 324 (Mad.), 193 ITR 344 (Ori.) and 222 ITR 163 (Mad.)]. It is well-settled that while claiming deduction of interest paid u/s. 36(1)(iii) of the Act, the onus is on the assessee to show that borrowed funds had been utilized by way of commercial expediency. It is also well-established that the question whether the interest-free advances to some sister concern etc. were extended for commercial expediency or not is a question of fact. For this purpose, as held in the case of S.A. Builders Ltd. (supra), what needs to be examined is the purpose for which the assessee advanced the money to its sister concern and what the sister concern did with this money.

5.3.2 Let us now examine whether the appellant in the present case has been able to discharge the onus cast upon it in this regard. In the first place, it is found that the A.O. is correct in observing that there was no business activity carried on by the appellant during the relevant period. It is noticed from the record that the appellant does not have an office either of its own or a rented one. There is no office premises appearing in the Schedule of Fixed Assets attached with the Balance Sheet as on 31.03.2012 nor has any office rent expenditure been debited to the P&L Account. The appellant has also not debited any salaries to the P&L account which shows that it has not employees or staff either. The appellant is found to be having only investments to the tune of Rs. 10.73 crores in shares of HDIL and group companies. In other words, the appellant seems to be engaged in managing the said investments and earning dividend there on which cannot be regarded as a business activity within the meaning of section 2(13) of the Act. The position is found to be no different even in the immediately preceding A.Y.201 1-12. In these circumstances, there are strong reasons to believe that the appellant had discontinued the business of advertising agency. The appellant has not placed on record cogent and credible materials in order to demonstrate that it not only had positive intention but had also taken necessary steps to resume business’ in subsequent years. In view of this position, no fault can be found with the action of the A. O. is disallowing the appellant’s claim of deduction of aforesaid finance cost of Rs. 1,37,08, 749/- u/s. 28(i) of the, Act.

5.3.3 Secondly; it deserves to be noted that the appellant company was incorporated to carry on the business of advertising agency and had nothing to do with the business of land dealings. It is observed from the record that the appellant was having investments in quoted and unquoted shares of HDIL and its group companies only and that it had not made any investment in acquiring land in the preceding A.Y. 2011- 12 (except the transaction in question). Likewise, the appellant was having neither any opening stock nor any closing stock of land. during F. Y. 2011-12 relevant to the A. Y. under consideration. Although the appellant has not placed on record copy of its Memorandum of Association, it can safely be assumed that the activity of purchase and sale of lands is not among the main objects for which the appellant company was set up. Therefore, it can by no stretch of imagination be said that the aforesaid bank overdraft for alleged purchase of land from SLDPL had been obtained and the corresponding finance cost had been incurred for the purpose of business of the appellant so as to be deductible u/s. 36(1)(iii) of the Act and the dis allowance of finance cost of Rs. 1,37,08,749/- made by the A.O. deserves to be upheld on this ground also.

5.3.4 Thirdly, the appellant has shown to have earned dividend of Rs. 4,50,000/- from a co-operative bank which has been offered to tax under the head “Income from Other Sources”. Since the aforesaid finance cost on bank overdraft had not been incurred .wholly and exclusively for the purpose of earning (taxable) dividend income, it is held that the same cannot be allowed to be deducted even u/s. 57(iii) of the Act.

5.3.5 And finally, it deserves to be noted that the appellant, SLDPL and Emerald Realtors Pvt. Ltd. are associated entities forming part of HDIL Group. In view of the close relationship among these parties, it is difficult to accept the contention that some deal for alleged purchase of land between the appellant and SLDPL could not materialize “over price issues”. The appellant has not placed on record copy of the MOU executed with SLDPL for alleged purchase of land and, therefore, it is not possible to ascertain the terms and conditions of the same. Be that as it may, the whole arrangement in substance appears to. be a case of diversion of interest-bearing funds to sister concerns for extra-commercial consideration, although it has been clothed in the form of an advance against purchase of business asset. Since the aforesaid companies are closely connected, it is not uncommon for them to provide financial accommodation to each other depending on the capacity of one entity to raise funds and fund requirements of the other associate entity. The factum of diversion of interest-bearing funds to associate concerns is also proved by the fact that while money was advanced by the appellant to SLDPL, the repayment has been received from Emerald Realtors Pvt. Ltd. Moreover, a perusal of the audited accounts of the appellant reveals that the appellant had raised overdraft facility from the bank which was secured by equitable mortgage of the land at Cochin, as mentioned in Schedule 6 to the Balance Sheet. Since the appellant does not. own any land at Cochin, it is evident that the said land belongs to some other associate concern of the appellant. It is noticed from the record that the appellant advanced money to SLDPL on 10.04.2010 and received it back from Emerald Realtors Pvt. Ltd. on 18.07.2011. In this regard, the appellant has not placed any material on record any cogent materials to show what its sister concern, SLDPL did with the money advanced and how it served to advance the business interest of the appellant. The burden of proof u/s.36(l)(iii) on the appellant cannot be said to have been discharged merely by citing some case laws or elaborating the meaning of the words “commercial expediency”.

5.3.6 In view of the above discussion, there is no hesitation in holding that the appellant had failed to discharge the onus of proving that that the borrowed funds on which interest is claimed as deduction had been utilized for the purpose of business and. that the aforesaid interest expenditure of Rs. 1,37,08,749/- had been incurred out of commercial expediency. The’ dis allowance of interest of Rs. 1,37,08,749/- made by the A.O is accordingly upheld even u/s. 36(1)(iii) of the Act. Ground no. 2 of the present appeal is hence dismissed.”

5. Aggrieved by the appellate order dated 31-01-2017 passed by learned CIT(A), the asses see has come in an appeal before the tribunal.

At outset Ld. Counsel for the assessee submitted that the dis allowance of interest has been made u/s. 36(1)(iii) by the authorities below as the assessee could not prove that the said interest expenses were incurred for the purpose of business of the assessee. The assessee placed on record Memorandum of Association(MOA) to justify that the real estate business is part of the business activities of the assessee by referring to sub-clause 5 of clause B of the objects incidental or ancillary to the attainment of the main objects which is reproduced as under:

“B. THE OBJECTS INCIDENTAL OR ANCILLARY TO THE ATTAINMENT OF THE MAIN OBJECTS:

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5. To purchase or otherwise acquire, erect, maintain, reconstruct and adopt any buildings, offices, workshops, showrooms, warehouses, factories, mills, plants, machineries, accessories and other things found necessary or convenient for the purposes of the Company and also enlarging or pulling down, removing or placing all or any of the buildings, mill premises and machinery for the time being the property in possession of the Company, and by expending from time to time such sums of money as may be necessary or expedient for the purpose of improving, adding to, altering, repairing and maintaining the buildings, machineries and properties for the time being of the Company.

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Thus, it was submitted that real estate business activity although did not found mentioned in the main object clause in MOA but the same is part of the objects incidental or ancillary to the attainment of the main objects of the assessee. It was submitted that the MOU entered into by the assessee with the M/s. Sapphire Land Development Pvt. Ltd. is not available as there was a fire in the office of the assessee on 18.11.2010 and all the documents were destroyed in the fire. He placed on record intimation sent to the Senior Inspector of Police, Nirmal Nagar Police Station, Bandra (East), Mumbai vide letter dated 20.11.2010 and it was pointed out that the name of the assessee found mentioned in said letter sent to Police along with the name of Sapphire Land Development Private Limited , wherein documents of the companies mentioned in the said letter were destroyed in the fire. Thus it was submitted that it is now not possible to produce any record with respect to the MOU’s and cancellation thereof. It was submitted that the assessee advanced money to Sapphire Land Development Private Limited on 10-04- 2010 for purchase of land while the refund of money was made by Emarald Realtor Private Limited on 18-07-2011. It was submitted that all the three parties mainly assessee, M/s. Sapphire Land Development Pvt. Ltd. and Emerald Realtors Pvt. Ltd are associated/sister concern . Thus it is claimed that the business of real estate is within the object clause of the assessee which was incidental or ancillary to the attainment of the main objects of the assessee . The learned counsel for the assessee also relied upon the decision of Hon’ble Karnataka High Court in the case of CIT v. Sridev Enterprises (1991) 59 Taxman 439 (Kar HC). It was also submitted that the loans were obtained in earlier years and no disallowance were made in earlier years as the interest was allowed in earlier years and hence the same was to be allowed in this year also keeping in view principles of consistency . It was submitted that this is the first year when the interest on said loans were disallowed. On being asked by the Bench , the Ld. Counsel for the assessee submitted that in the earlier years Revenue has not framed assessment u/s. 143(3) r.w.s. 143(2) and only intimation u/s. 143(1) were sent . Thus it was submitted that the interest should be allowed as business expenses while at the same time it is submitted that MOU’s and cancellation of the said MOU is not available.

Ld. DR on the other hand submitted that this is first time that the assessee has taken the plea that there was a fire in the office of the assessee in 2010 wherein the records were destroyed . It was submitted that no such plea was ever taken before the authorities below. It was submitted that the A.O framed the assessment in the year 2015 while the learned CIT-A adjudicated the first appeal in year 2017 while the fire as now claimed by the assesssee which allegedly destroyed records of the assessee took place on 18.11.2010 while the assessment year under consideration is AY 2012-13 . It is submitted that the assessee has no business during the impugned assessment year which is evident from audited financial statements as only Revenue is dividend income. The learned DR would reply on the orders of the authorities below.

6. We have considered rival contentions and perused the material on record including cited case laws and orders of authorities below. We have observed that the assessee has claimed to be engaged in the business of Advertising Agency . The assessee has filed copy of Memorandum and Articles of Association wherein the main object clause are relating to the advertisements and other consultancies . The assessee has claimed by virtue of clause B (5) which are objects incidental and ancillary to the main object clause that the assessee is entitled to carry out real estate business . The said incidental or ancillary objects to attainment of main objects as per clause B(5) are reproduced here under:

“B. THE OBJECTS INCIDENTAL OR ANCILLARY TO THE ATTAINMENT OF THE MAIN OBJECTS:

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5. To purchase or otherwise acquire, erect, maintain, reconstruct and adopt any buildings, offices, workshops, showrooms, warehouses, factories, mills, plants, machineries, accessories and other things found necessary or convenient for the purposes of the Company and also enlarging or pulling down, removing or placing all or any of the buildings, mill premises and machinery for the time being the property in possession of the Company, and by expending from time to time such sums of money as may be necessary or expedient for the purpose of improving, adding to, altering, repairing and maintaining the buildings, machineries and properties for the time being of the Company.

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We are afraid that clause B(5) as reproduced above is merely an incidental or ancillary objects to the achievements of the main objects while the main objects as per MOA of the assessee is to pursue advertising agency business and consultancy business related thereto . No Resolution passed by Board of Directors/shareholders is placed on record to substantiate that the assessee has adopted to carry out business of real estate as are contained in other objects clause. On perusal of the audited financial statements of the assessee which are placed in paper book filed with the tribunal, it is observed that there has been no revenue from activities of advertising agency or real estate business during the previous year relevant to the impugned assessment year. The only revenue earned by the assessee is from dividend income to the tune of Rs. 4.50 lacs. The other expenses apart from finance costs also reveal that there is no business activity of advertising agency / real estate business which was carried on by the assessee as there are negligible expenses such as audit fee, filing fee etc paid by the assesseee during the previous year to keep company afloat and to do statutory compliances. The assessee has claimed that over a period of time it has advanced substantial amount of Rs. 26.49 crore to M/s. Sapphire Land & Development Pvt. Ltd out of total stated consideration of Rs. 30 crores stated to be for purchase of Land viz. Manvelpada situated at Vasai (West), Mumbai, which advances were made out of overdraft/loan of Rs. 30.38 crores obtained from Punjab and Maharashtra co-op Bank Limited . The said amount was stated to have been received back by the assessee on 18-11- 2011 from Emarald Realtors Private Limited. The assessee has failed to bring on record MOU/agreement stated to be entered into with Sapphire Land & Development Private Limited to substantiate its contention that the advances made to M/s. Sapphire Land & Development Pvt. Ltd are towards purchase/acquisition of the said property. All the three companies namely assessee, Sapphire Land & Development Private Limited and Emarald Realtors Private Limited from whom the assessee received back the said amounts, are sister/associated concerns . It was also not brought on record whether the said MOU was registered with registering authority as is required under amended law as contained in The Registration Act, 1908. The cancellation agreement stated to be entered in July 2011 for cancelling MOU is also not on record and hence it could not be seen as to the terms and reasons for the cancellation of the said MOU. Now it is claimed for the first time before the tribunal that there was a fire in the office of the assessee on 18-1 1-20 10 and all the records were destroyed . In any case cancellation deed was alleged to be entered on 18-07-2011 which in any case cannot be part of records alleged to be destroyed in fire which took place on 18-11- 2010 and the assessee could have produced cancellation deed for cancellation of MOU. No such contention of fire taking place in office on 18- 11-2010 was raised before the authority below wherein the A.O framed assessment in the year 2015 and learned CIT-A adjudicated appellate order in 2017. It is pertinent to mention the advances were paid by assessee to M/s. Sapphire Land Development Pvt. Ltd and the refund has been received from Emerald Realtors Pvt. Ltd while there is no such reasons furnished by the assessee as to why Emarald Realtors Private Limited refunded the money on alleged cancellation of MOU , while it is admitted position that all the three companies mainly assessee, M/s. Sapphire Land Development Pvt. Ltd and Emerald Realtors Pvt. Ltd are associated/sister concerns. It becomes all the more important for the assessee to have brought on record cogent evidences to substantiate its contention as all the three parties are related parties/sister concerns. No such evidences are brought on record to prove the genuineness of the transaction for entering into an MOU for purchase of land as well to prove genuineness of the transaction for cancellation of MOU. It is also pertinent to mention there is no income earned by the assessee as per audited financial statements from advertising business as well from real estate business apart from dividend income of Rs. 4.50 lacs . It is also not on record backed with evidences as to what was the purpose of acquiring said land for which the assessee paid substantial advances of more than Rs. 26 crores out of the total stated consideration of Rs. 30 crores. Was it do develop real estate or was it to construct an office for its own use is not known as the same is not brought on record. In the absence of any evidence on records it cannot be concluded whether expenses towards interest costs on bank overdraft were revenue in nature or capital in nature. It is also not on record as to what steps the assessee took post entering into alleged MOU as to getting building plans approved etc. w.r.t. said land proposed to be acquired by the assessee. These are the facts which are especially within the knowledge of the assessee and onus is on the assessee to bring on record cogent evidences to substantiate that interest has been paid for the purposes of business of the assessee and the conditions as stipulated u/s. 36(1)(iii) are duly complied with which in the instant case has not been done by the assessee. Merely because the revenue has accepted the said claim of interest as business expenses in the earlier years in the summary proceedings u/s. 143(1) does not create res-judicata as revenue has never gone into the details of the said claim as the return of income was accepted in summary manner u/s 143(1) without scrutiny being conducted u/s. 143(3) r.w.s. 143(2). Thus, mere acceptance of the claim in earlier years in proceedings u/s 143(1) does not debar Revenue from examining the claim on merits in subsequent years and does not create a bar of res-judicata . We are fully aware that consistency is to be maintained but the claim of interest expenses was never examined by the revenue in any of the earlier years as scrutiny proceedings were not initiated in any of the earlier years since said loans were raised by the assessee. Thus only bald statements are made by the assessee for claiming that the interest has been paid for the business purposes while no such evidences are brought on record by the assessee to prove its contention that the said loans were used for business purposes by the assessee and mandate of Section 36(1)(iii) was complied with. The payments and the return thereof of the said advances are from the sister concerns and in the absence thereof of the evidences on record to substantiate that these were business expenses, we are afraid claim of the assessee to allow interest expenses on bank overdraft to the tune of Rs. 1,37,08,749/- as business expenses cannot be accepted and hence the appeal of the assessee is dismissed. Thus, keeping in view entire factual matrix of the case, the claim of the assessee is rejected. The assessee fails in this appeal. We order accordingly.

7. In the result appeal of the Assessee in I.T.A. No. 3377/Mum/2017 for assessment year 2012-13 is dismissed.

Order pronounced in the open court on 20.12.2017

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