"" Û
IN THE INCOME TAX APPELLATE TRIBUNAL,
MUMBAI BENCH "D", MUMBAI
^ .. , ^ [, Û ¢
BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND
SHRI SANJAY GARG, JUDICIAL MEMBER
/.ITA No. 212/Mum/2011
[ [/Assessment Year: 2007-08
DCIT 13(2) Shri Rajendra B. Mehta
R.No.421, 4th Floor, 12, C.L. Shah Family Trust
/
Aayakar Bhavan, Behind Sant Tukaram Mandir
Vs.
Mumbai-400 020 Mumbai. 400 009
(/ Appellant) (× / Respondent)
Permanent Account No. :-AAHPM 0155 B
Appellant by : Shri Om Prakash Meena
Respondent by : Shri M.P. Makhija & S.M. Makhija
/ Date of hearing : 13.05.2014
/ Date of Pronouncement : 16.07.2014
/ O R D E R
PER SANJAY GARG, JUDICIAL MEMBER:
The revenue has taken the following grounds of appeal:
"1.(i) On the facts and in the circumstances of the case and in law, the Ld.
CIT(A) has erred in deleting the disallowance/addition of Rs.14,05,028/-.
(ii) While doing so, the Ld. CIT(A) has failed to consider the fact that vide
order sheet entry dt.26.08.2009, the assessee had agreed to the
addition/disallowance and offered this amount for taxation."
2.(i) On the fact and in the circumstances of the case in law, the Ld. CIT(A) has
erred in restricting the disallowance of Rs.2,59,920/- out of the Traveling
expenses to Rs.1,03,968/-
(ii) While doing so, the Ld. CIT(A) has failed to appreciated that the traveling
expenses included those relating to his family members and not assessee's wife
alone and that the assessee failed to prove that the said expenses were incurred
ITA No. 212/Mum/2011
2 Shri Rajendra B.Mehta
Assessment Year: 2007-08
wholly and exclusively for the business purpose and thus allowable u/s.37 of
the I.T.Act,1961."
2. The appellant prays that the order of CIT(A) on the above ground(s) be set
aside and that of the Assessment Officer be restored."
Ground No.1:
2. The revenue vide ground No. 1 has agitated the deletion of the interest
disallowance of Rs.14,05,028/-/- by the CIT(A), which addition was made by
the Assessing Officer u/s 36(1) (iii) on the ground that borrowed funds were
used by the assessee for advancement of interest free loan of Rs.7138842/-to
his brother Bhupinder B. Mehta.
3. Before us, the contention of the ld. D.R. has been that the assessee had
debited interest expenditure of Rs.1,24,07,353/- in his P&L Account. He has
stressed that proportional disallowance of interest expenditure on account of
interest free advances made by the assessee to his brother was rightly made by
the A.O. His further contention has been that the assessee himself offered
Rs.14,05,028/- as notional interest, which was added back by the A.O. into the
income of the assessee.
4. The ld. A.R. of the assessee, on the other hand, has relied upon an
authority of the Hon'ble Bombay High Court styled as 'CIT vs. Reliance
Utilities and Power Ltd.' [2009] 313 ITR 340 (Bom.) wherein the Hon'ble
Bombay High Court has held that if there are funds available, both interest free
and overdraft/loans taken, then presumption would arise that investments would
be out of the interest free fund generated or available with the company if the
interest free funds were sufficient to meet the investments. The ld. A.R. has
further submitted that the loan was advanced by the Assessee to his brother out
of own funds. Moreover it was up to assessee to decide as how to conduct his
business and the revenue cannot dictate terms to the assessee for the conduct of
the business. He has further stresses that the assessee did not offer any interest
expenditure as notional interest as observed by the AO and that the said
observation of the AO was wrong.
5. We have heard the ld. Representatives of the parties and have also gone
through the record. We may observe that the Hon'ble Bombay High Court in
the case of 'CIT vs. Reliance Utilities and Power Ltd.' has observed that if
there are funds available, both interest free and overdraft/loans taken, then
ITA No. 212/Mum/2011
3 Shri Rajendra B.Mehta
Assessment Year: 2007-08
presumption would arise that investments would be out of the interest free fund
generated or available with the assessee.
6. There is a force in the contention of the ld. AR that in day to day
business, it is for the assessee to see how to manage its business. Even though
the assessee may not show in the absence of separate fund flow statement or
separate accounts relating to business loans and transactions and investments
made from own funds, but if the assessee is able to show the near proximity of
availability of own funds may be exactly not on the date of investment or
advancement of loan but in a very near future date or within a reasonable short
period of time, even then the presumption will be that the advancement of loan/
investment was made by the assessee from his own funds or in anticipation of
availability of its own funds within a short period of time. The principle
underlying this proposition is that a businessman has to circulate his money
according to the day to day requirements and the likely inflow and outflow of
money in the near future is taken into consideration while making
advancement/expenditure. Even if on the date of investment/expenditure, own
funds may not be available with the assessee but if the advancement /
expenditure is made in anticipation of availability of own funds and the own
funds are available to the assessee within a very short period of time, then under
such circumstances disallowance can not be made on the entire loan amount but
a very reasonable proportionate disallowance can be made and even in certain
cases can be ignored due to the shortness of the period between the date of
advancement/expenditure and date of availability of own funds. It can be
observed by the Assessing Officer from the Balance Sheet as to whether
sufficient own funds were available to the assessee during the financial year or
the the interest free funds were generated during the course of the year even if
the assesse could not prove the availability of own funds of the particular date
of investment/advancement/expenditure.
7. In the instant case, the contention of the assessee has been that the
assessee's own capital as on 31.3.2007 was Rs.81,64,872/- which was more
than the amount of interest free advance of Rs.71,38,842/- to his brother
Bhupinder B. Mehta. The ld. CIT(A) after going through the accounts of the
assessee has found the contention of the assessee to be correct and therefore
deleted the disallowance so made by the A.O. So far so the contention the ld.
DR that the assessee himself offered Rs.14,05,028/- as notional interest is
ITA No. 212/Mum/2011
4 Shri Rajendra B.Mehta
Assessment Year: 2007-08
concerned, The ld. AR has brought our attention to the letter dated 30.11.2009
of the assessee addressed to the AO vide which the assessee has agitated the
above disallowance proposed by the AO. He has further submitted that the
notional interest was worked out on the asking of the AO but without admitting
the liability. The perusal of the letter dated 30.11.2009 reveals that the assessee
did not admit its liability of disallowance of notional interest before the AO. In
view of the above discussion, we do not find any infirmity in the order of the
CIT(A) while deleting the disallowance on the above issue. Hence Ground No.1
of the appeal is decided against the revenue and in favour of the assessee.
Ground No.2
8. The revenue vide this ground of appeal has agitated the action of the
CIT(A) in restricting the disallowance out of travelling expenses to Rs.103968/-
as against the disallowance of Rs.2,59,920/- made by the AO.
9. The AO observed that there were included bills of the family members
also relating to the foreign travel made by the assessee for business purposes.
He therefore disallowed 50% out of the travelling expenses claimed by the
assessee. The ld. CIT(A) after consideration of overall facts and circumstances
of the case, restricted the disallowance to 20% i.e. at Rs.103968/-. We do not
find any justification to interfere with the reasoned order of the CIT(A) on this
issue also.
10. Ground No.3 of the appeal is general in nature and does not need any
adjudication.
11. In the result, the appeal of the revenue is hereby dismissed.
Û 16.07. 2014
Order pronounced in the open court on this 16th day of July, 2014.
Sd/- Sd/-
( P.M. JAGTAP) (SANJAY GARG)
/ ACCOUNTANT MEMBER Û / JUDICIAL MEMBER
/Mumbai, /Dated: 16.07.2014.
../P.S. *A.K.Patel
ITA No. 212/Mum/2011
5 Shri Rajendra B.Mehta
Assessment Year: 2007-08
Copy to: /The Appellant
× / The Respondent
/The CIT, Concerned, Mumbai
/ The CIT(A) Concerned, Mumbai
/The DR "D" Bench
[ / Guard file.
× //True Copy//
/ By Order
/ Dy/Asstt. Registrar,
, /ITAT, Mumbai.
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