I.T.A. No. 3481(Del)/2008 (Assessment Year 2004-05). Case: Deputy Commissioner of Income-tax Vs J.H. Finvest Pvt. Ltd.. ITAT (Income Tax Appellate Tribunal)
| Case Number | I.T.A. No. 3481(Del)/2008 (Assessment Year 2004-05) |
| Counsel | For Appellant: B.K. Gupta and For Respondent: Rajiv Saxena |
| Judges | A.D. Jain, J.M. and K.G. Bansal, A.M. |
| Issue | Income Tax Act - Sections 36(l), 36(1), 37(1), 40A(2), 68 and 133(6) |
| Citation | 2010 (2) ITR 620 (Trib) (Del) |
| Judgement Date | December 09, 2009 |
| Court | ITAT (Income Tax Appellate Tribunal) |
Order:
A.D. Jain, J.M., (ITAT Delhi 'D' Bench)
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This is the Department's appeal for the assessment year 2004-05 taking the following grounds:
(i) The order of the learned Commissioner of Income-tax (Appeals) is not correct in law.
(ii) Whether the Commissioner of Income-tax (Appeals) is correct in law and facts in deleting the disallowance of Rs. 5,02,890 towards excess interest paid by the assessee.
(iii) Whether the Commissioner of Income-tax (Appeals) is correct in law and facts in concluding that the entire borrowed capital has been used for the purpose of business.
(iv) Whether the Commissioner of Income-tax (Appeals) is correct in law and facts in concluding that there was no nexus between the interest bearing loans taken and given in the case in the face of the evidence on record that the entire non-interest bearing and interest bearing funds of the company such as share capital loans and reserves was fully advance/deployed as loans given.
(v) Whether the Commissioner of Income-tax (Appeals) is correct in law and facts in concluding that interest paid by the assessee was wholly and exclusively for the purpose of business under Section 37(1) when interest bearing funds have been diverted for certain loans, the business expediency of which was not satisfactorily explained by the assessee.
(vi) Whether the Commissioner of Income-tax (Appeals) is correct in law and facts in deleting the addition of Rs. 92,60,000 towards share capital under Section 68 of the Income-tax Act.
(vii) Whether the Commissioner of Income-tax (Appeals) is correct in law and facts in holding that the addition under Section 68 cannot be made in the hands of the assessee when the assessee has failed to establish the credit worthiness of the creditor.
(viii) Whether the Commissioner of Income-tax (Appeals) is correct in law and facts in accepting that the identity of these creditor companies have been established when the facts on record proved that they were mere paper entities whose principal officers were either petty businessmen or low level employees working elsewhere and who admitted that these companies had no business activity and existed merely for giving accommodation entries.
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Ground Nos. 1 to 5 concern deletion of the addition of Rs. 5,02,890 towards excess interest paid by the assessee. The facts are that the Assessing Officer noticed that the assessee-company had obtained unsecured loans from various persons. It had also given loans to certain concerns. Interest on the loans given was charged at 12 per cent. On the other hand, on the loans taken, the assessee-company had paid interest in excess of 12 per cent, in the cases of Shri Kailash Nath Chaturvedi, Shri Anil Jain and M/s. Surya Kiran Corporation. The Assessing Officer quantified the excess interest beyond 12 per cent. given to the said three persons at Rs. 5,02,890. On query, the assessee submitted that the fluctuation in the rate of interest paid was determined by the availability of funds and all loans raised were utilised for the business purpose. The Assessing Officer, however, rejected the assessee's contention, observing that no adequate justification had been provided by the assessee concerning payment of interest at a rate higher than 12 per cent, when it was receiving interest at a maximum rate of 12 per cent.; that there was no evidence regarding any business expediency supporting payment of interest at the rates higher than 12...
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