The Commissioner Of Income Tax 1, Nagpur v. Shri Rajeev Kamalkishore Biyani, Akola)Andincome Tax Appeal

IN THE HIGH COURT OF JUDICATURE AT BOMBAYNAGPUR BENCH : NAGPUR INCOME TAX APPEAL NO. 97 OF 2013 -(The Commissioner of Income Tax 1, Nagpur vs. Shri Rajeev Kamalkishore Biyani, Akola)ANDINCOME TAX APPEAL NO. 103 OF 2013 -(The Commissioner of Income Tax 1, Nagpur vs. Shri Rajeev Kamalkishore Biyani, Akola) Office Notes, Office Memoranda ofCoram, appearances, Court's orders or directions and Registrar's orders. Court's or Judge's orders CORAM : B.P. DHARMADHIKARI &V.M. DESHPANDE, JJ.JANUARY 04, 2016. Heard Shri Mohata, learned counsel for theappellant - revenue and Shri Dewani, learned counselfor the respondent – assessee. Shri Dewani, learned counsel, at thethreshold drawn our attention to circular dated10.12.2015 and the orders of this Court at Bombaydated 17.12.2015 in Income Tax Appeal No. 240 of2001 (The Commissioner of Income-Tax, Nashik vs. M/s.Shivshakti Construction, Bhusawal). Without prejudice, he submits that the issueis covered by the orders of this Court dated 11.06.2014in ITL No. 221 of 2012, which have been maintained bythe Hon'ble Apex Court while dismissing SLP (C) No.20334 of 2014 on 12.12.2014. Shri Mohata, learned counsel, however,states that as there are two appeals and the ITAT haspassed the common order for two assessment years, interms of paragraph 2 of the above circular, theseappeals are maintainable. On merits, he points out that though the assessee operates under three differentpropriety concerns, after borrowing a loan from theNationalized Bank, he has advanced it to number ofother concerns. The other concerns have not paidinterest to him. The assessee has shown even recoveryof principal amount as doubtful and few debts havebeen written off as bad debts. As the assessee wasmaintaining mercantile system of accounts, interestbecoming due ought to have been reflected andthereafter appropriate treatment should have beenextended to it. In this situation, as the assessee has notshown the interest due in his accounts, the AssessmentOfficer has found that the amounts taken on loan bythe assessee were not used for business purposes andhence the claim for deducting interest paid by theassessee to the Nationalized Bank on that loan has beendisallowed. He contends that this fact is lost sight of bythe CIT as also by ITAT. He seeks support from thejudgment of the Delhi High Court in the case of-Commissioner of Incometax, Delhi vs. Mission Viejo Agro(P.) Ltd., reported at (2007) 163 Taxman 178 (Delhi),to urge that when there is a finding that loan has notbeen used by the assessee for his business, thededuction under Section 36(1)(iii) of the Income TaxAct, 1961, is not available. Shri Dewani, learned counsel submits thatbooks of accounts maintained by the assessee are not indispute. The names of assessees to whom loan amounthas been advanced are recorded therein. The fact thatloans were advanced to those assessees in the course ofbusiness is borne out from the books of accounts. The opening balance, the amounts paid back and closingbalance are are all noted by the Assessing Officer. Heargues that in this situation, had those assessees whocould not pay back the amount, succeeded in payingback the interest amount, the Assessment Officer wouldhave accepted the advance as business advance. He,therefore, states that merely because the otherconcerns/ assessees to whom the assessee advancedloan, could not pay back either principal amount orinterest amount, that does not change the nature ofadvance. He places emphasis on the fact that theAssessment Officer does not record a finding that theamount advanced by the assessee to those concernswere not used for business purpose. opening balance, the amounts paid back and closingbalance are are all noted by the Assessing Officer. Heargues that in this situation, had those assessees whocould not pay back the amount, succeeded in payingback the interest amount, the Assessment Officer wouldhave accepted the advance as business advance. He,therefore, states that merely because the otherconcerns/ assessees to whom the assessee advancedloan, could not pay back either principal amount orinterest amount, that does not change the nature ofadvance. He places emphasis on the fact that theAssessment Officer does not record a finding that theamount advanced by the assessee to those concernswere not used for business purpose. We have perused the affidavit. Theassessment order does not show that the amountadvanced by the assessee to other concerns was not infurtherance of his business. The books of accounts havebeen accepted and the opening balance against thoseconcerns in the relevant assessment years, paymentsmade, are all mentioned in the assessment order itself.It is not the case of the appellant – department thatthere were no other concerns and advances were madeto only concerns, who later on expressed their inabilityto pay and, therefore, loan was required to be writtenoff. In fact, we find that the bonafides of action inwriting off of irrevocable loans is not disputed beforeus. In this situation, as there is nothing onrecord to indicate that loans were not advanced for thebusiness purposes, we are not in a position to co-relate the advance by the assessee to those concerns and notearning of interest upon it with the obligation to payinterest to Nationalized Bank, cast upon the assessee ashe borrowed loan from that bank. The assessmentorder also does not contain any reasons to establish anysuch relation. In view of these findings, the abovementioned judgment of Delhi High Court has noapplication in present facts. There are two appeals before this Court. InITL No. 97 of 2013, the assessment year involved is2007-08 and even if case of revenue is accepted, the taxdemand works out to Rs.15,59,749/-. In ITL No. 103 of2013, the assessment year involved is 2006-07 and taxdemand is Rs.17,42,871/-. The circular dated 10.12.2015 mentionedsupra vide its clause 5 contemplates need of filing anappeal against composite adjudication, if in any one ofthe assessment years involved therein, the tax effect isin excess of Rs.20 lakh. We are, therefore, not in aposition to accept the submission of Shri Mohata,learned counsel that in case of composite order, theappeal can be filed ignoring the monetary limitmentioned in the said circular. In the light of discussion above, as we do notfind that any substantial question of law arises, boththe Income Tax Appeals are rejected. No costs. *GS. JUDGE JUDGE