Ita/831/2016 Of The Pr. Commissioner Of Income Tax -6 v. Versus Nanak Ram Jaisinghani

$~4 & 5 CORAM: HON'BLE MR. JUSTICE S. RAVINDRA BHATHON'BLE MR. JUSTICE NAJMI WAZIRI O R D E R %20.12.2016 1.Two questions have been urged by the Revenue in theseappeals filed under Section 260A of the Income Tax Act, 1961 (inshort the Act): (i) Whether the setting aside of the disallowance under Section 43B of the Act by the Income Tax AppellateTribunal (in short the Tribunal) was warranted? (ii) Whether the disallowance on account of the loans/advances made to the assessee’s sister concern werecorrectly set aside?advances made to the assessee’s sister concern werecorrectly set aside? 2.Question no. (i) arises only for Assessment Year (AY) 2007-08in ITA No. 831/2016. 3.The assessee for the AY 2007-08 could not claim or was notpermitted to claim expenditure by way of interest payments to thePunjab & Sind Bank. This was because even though the liability topay such interests amounting to ` 6,29,46,195/-, but such paymentswere not made.At the same time it was noticed that between01.04.2007 and 01.06.2007 an amount in excess of Rs. 11.61 crores,which included the principal liability, had been deposited with thebank. The AO applied Section 43B and held that since the amountswere not paid during the relevant Assessment Year (AY), theprovision was applied, disentitling the assessee to claim it as a lawfulexpense. 4.TheCommissionerofIncomeTax(Appeals)[CIT(A)],however, differed from the order of the AO and set aside theobservations in this regard. The Tribunal affirmed the order of theCIT(A). 5.The learned counsel for the Revenue urges that as a matter offact no amounts were paid to escape the disallowance under Section 43B during the relevant period i.e. the subsistence of the AY. In thecircumstances, the Revenue was correct in contending that theamounts should not have been claimed as expenditure for the period. 6.The Tribunal’s findings are premised upon its analysis of thefacts. The relevant discussion in the impugned order is as follows: “.... 2.9 The crux of above is that the assessee hasundisputedly paid a sum of Rs.12.64 crores to the bank.As per Ld. A.R., Rs.12.64 crores constitutes the interestpayment to the extent of Rs.7,15,52,676/- for the interestrelating up to 31.03.2007, which has been paid duringthe relevant financial year. The account with the bankwas finally settled by making complete payment ofinterest, principal and reimbursement to the bank forlitigation charges on 15.06.2007 i.e. much prior to thedate of filing of return for the year under consideration,which is 31.10.2007. The working of interest payment asclaimed by the assessee is as under: Total payment made (O1.04.2006 to 15.06.2007)Rs. 12,64,00,000/-Less: Litigation charges recoveredBy the bank from assesseeRs. 5,36,264/-Interest relating to period01.04.2007 to 15.06.2007(i.e. Assessment Year 2008-09.Therefore not relating uptoAssessment Year 2007-08)Rs. 43,11,060/--Repayment of principal loanRs. 5,00,00,000/ Rs. 43,11,060/--Rs. 5,00,00,000/Rs. 5,48,47,324/--Rs. 7,15,52,676/ Net interest payment 2.10. It is further observed that the assessee hassubmitted all the necessary supporting documents like bank certificate / bank statement as called for by theAssessing Officer. Merely because these documents /evidences were hand written, cannot be a reason to-reject, which can prove the claim raised by the assessee.For allowing the claim of assessee u/s 43B(e),therequirement under law is that the assessee should havemade actual payment of interest during the year underconsideration.The assessee has filed the details ofpayments made to the bank during the year as well asbank certificate shows the payments received by thebank which are as under. From 01.04.2006 to 31.03.2007Rs. 1,03,00,000/-From 01.04.2007 to 16.06.2007Rs. 11,61,00,000/-TotalRs. 12,64,00,000/- Now, the constituents of payment of Rs. 12,64,00,000/-are as under: Repayment of principalLitigation charges recovered by bankInterest relating to the period01.04.2007 to 15.06.2007 Balance amount of interestTotal Rs. 5,00,00,000/-Rs. 5,36,264/- From 01.04.2006 to 31.03.2007Rs. 1,03,00,000/-From 01.04.2007 to 16.06.2007Rs. 11,61,00,000/-TotalRs. 12,64,00,000/- Now, the constituents of payment of Rs. 12,64,00,000/-are as under: Repayment of principalLitigation charges recovered by bankInterest relating to the period01.04.2007 to 15.06.2007 Balance amount of interestTotal Rs. 5,00,00,000/-Rs. 5,36,264/- -Rs. 43,11,060/Rs. 5,48,47,324/--Rs. 7,15,52,676/Rs. 12,64,00,000/-” 7.It is quite evident that the facts here are undisputed. Althoughthe assessee did not pay the concerned amount which it was bound toduring the year or when the instalments fell due, it belatedly chose tosatisfy its liability with the consequential payments and alsoliquidated his principal liability in the succeeding year before the duedate of the filing of the return. In these circumstances, the findings ofthe Tribunal, in our opinion, cannot be faulted.The findings are purely factual. No substantial question of law arises. 8.So far as the second question goes, the loans to the sisterconcern, we notice, from the assessee’s own surplus funds as isevident from the following observations of the CIT(A): “.....5.3. I have carefully considered the whole issue.In this case, bank term loan of Rs. 5 Cr was taken in1999. Interest has always been allowed in the past onthis term loan accepting the same as being used forbusiness purposes. There are no other interest bearingfunds availed by the appellant. Thus, it is a case whereno interest bearing funds have been diverted as interestfree loans and advances. There is absolutely no nexusof interest bearing funds being utilized for givinginterest free loans and advances. For disallowing anyclaim of interest, it is necessary that the nexus betweeninterest bearing funds being utilized for interest freeloans and advances stands established. Hence, for thissole reason, I am of the considered opinion that nopart of interest on bank loan can be considered formaking any addition on account of interest free loansgiven and the addition for interest needs to be deletedfor this reason itself. However, in this case, I find otherfacts also which do not justify this addition. Theappellant was having interest free advances of Rs. 3.47Cr as on 31.03.2007 while the interest free loans andadvances given were only of Rs. 3.25 Cr i.e. muchlesser than interest free advances available.It is asettled law that where interest free funds available atthe disposal are far in excess of interest free loans andadvances given by the appellant, no disallowance canbe made.....” 9.The above factual findings have neither been contested nor hasany other fact been shown to arrive at a contrary view. Consequently, the impugned order cannot be faulted. No substantial question of lawarises. The appeals are, therefore, dismissed. S. RAVINDRA BHAT, J DECEMBER 20, 2016/kk NAJMI WAZIRI, J