Ita/407/2009 Of M/S Akarshan Builders v. The Income Tax Officer W 2

IN THE HIGH COURT OF KARNATAKA AT BANGALORE DATEBD THIS THR [nd]DAY OF DECEMBER, 2014. PRESENT THR HON' BLE MR. JUSTICK N.KUMAR AND THR HON' BLE MR. JUSTICK B. MANOHAR INCOME TAX APPEAL No. 407 to 409/2009 BBRTWEHR M/s. Akarshan Builders,M.T. Road, Puttur,Represented by its PartnerMr. K.P. Ahmed, —Aged about 49 years,Son of Sri S. Mohideen. _. APPEKELLANT (By Sri Jinita Chatterjie, advocate for Sri 8S. Parthasarathi) AND: The Income Tax Officer W 2,R.No.19/20,Central Revenue Building,|Attavara, Mangalore-575 OOO1... RESPONDENT (By Sri K.V. Aravind, advocate) These Income Tax Appeals are filed under Section260-A of the Income Tax Act, 1961 arising out of Orderdated 31.3.2009 passed in ITA No.437, 438 and.439/BNG/99 for the assessment years 1994-95, 1995-96 and 1996-97 praying that this Hon’ble Court may >be pleased to formulate the substantial questions of lawstated therein and allow the appeal and set aside the order passed by the ITAT Bangalore in ITA No.437, 438.and 439/BNG/99 dated 31.38.2009 in the interest ofjustice and equity. These Income Tax Appeals coming on for Hearingthis day, N. Kumar J., delivered the following: JUDGMENT These appeals are preferred by the assesseeagainst the order passed by the Tribunal holding thatthe funds are given by the assessee without interest andfor non business purposes and therefore, the saidamounts cannot be deducted out of the total income. 2. The assessee iS a partnership firm mainlycarrying on real estate business and building contract. —The assessing authority noticed that an amount ofRs.3,96,000/- and Rs.1,07,000/- was paid to Mrs.Zubida and Mrs. Rukiya during the assessment year1993-94. The assessee had claimed the interest.expenditure on borrowings in the returns furnished forthe assessment years 1993-94, 1995-96 and 1996-97. ©When explanation was sought for, the assessee replied by saying that the said payments were made to acquireproperties to the firm in the course of business. |However,noevidence WaSproducedbeforethe|assessing authority to justify the said stand. Therefore,the assessing authority held that, the amountsadvanced to ladies out of the interest bearing funds was.not for business purpose and hence, the claim wasrejected. Aggrieved by the said order, the assesseepreferred an appeal to the Commissioner of Income Tax(Appeals). 3. The Appellate Commissioner accepted the caseof the assessee and allowed the appeal. The said orderwas Challenged before the Tribunal. | 4. The Tribunal allowed the appeals and set asidethe order passed by the First Appellate Authorityagainst which, the assessee had preferred appeals tothis Court. This Court after hearing the parties, was ofthe view that, the Tribunal had not at all considered the|availability or otherwise of interest bearing funds withthe assessee for advancing the alleged amounts and therefore, remanded the matter to the Tribunal for fresh|consideration. After such remand, the Tribunal went,into the case over again and by the impugned order hasheld that the advances are made to the ladies without|interest from the interest bearing funds and theassessee has failed to establish its case that the said|loans were advanced for the purpose of business andtherefore, the appeals preferred by the revenue wereallowed. Aggrieved by the said order, the assessee isbefore this Court. Oo. The substantial question of law which isframed at the time of admission is as under: “Whether Tribunal was justified in|disallowance of interest when _ thalleged advances made by Appellant|was in the course of and for thepurpose of business especially when|Appellant had adequate non-interest|bearing funds during the relevant|assessment years?|disallowance of interest when _ thalleged advances made by Appellant|was in the course of and for thepurpose of business especially when|Appellant had adequate non-interest|bearing funds during the relevant|assessment years?| 6. We have heard the learned Counsel for theparties. Oo. The substantial question of law which isframed at the time of admission is as under: “Whether Tribunal was justified in|disallowance of interest when _ thalleged advances made by Appellant|was in the course of and for thepurpose of business especially when|Appellant had adequate non-interest|bearing funds during the relevant|assessment years?|disallowance of interest when _ thalleged advances made by Appellant|was in the course of and for thepurpose of business especially when|Appellant had adequate non-interest|bearing funds during the relevant|assessment years?| 6. We have heard the learned Counsel for theparties. 7. From the material placed on record, it is not indispute that the assessee advanced money to the ladiesout of interest bearing funds. The case of the assesseeis that those ladies were expected to enter into anagreement to purchase the land properties for thebenefit of it. In fact that has been done, but no materialis placed on record to show that the ladies entered intoan agreement to purchase the lands as mentioned inthe letter which they have given in those circumstances. —The case oft the assessee is not established and once theamounts were advanced to these ladies not in the!course of business, the assessee was not entitled toclaim any deduction of interest paid on the amountborrowed. That is precisely what the Tribunal has heldand what the authorities have upheld.| 8. In that view, we do not see any merit in theseappeals and the substantial question of law is answeredin favour of the revenue and against the assessee. —Hence, we pass the following: ����� �!�40+.#����.(4.((0�����%=��������-�50��������������������%=��������-�50 �(-%=�