ITA No. 223/Bang/2014, (Assessment Year: 2010-2011). Case: Krishi Technologies Pvt. Ltd. Vs Dy. Commissioner of Income Tax. ITAT (Income Tax Appellate Tribunal)

Case NumberITA No. 223/Bang/2014, (Assessment Year: 2010-2011)
CounselFor Appellant: V. Chandrasekhar, Advocate and For Respondents: K. Shankar Prasad, DR
JudgesRajpal Yadav, Member (J) and Jason P. Boaz, Member (A)
IssueIncome Tax Act, 1961 - Sections 143(2), 234B, 3, 37, 37(1), 57(iii)
Judgement DateOctober 31, 2014
CourtITAT (Income Tax Appellate Tribunal)

Order:

Rajpal Yadav, Member (J), (ITAT Bangalore 'C' Bench)

  1. The assessee is in appeal before us against the order of the learned CIT (A) dated 29.10.2013 passed for assessment year 2010-11. The assessee has taken 11 grounds of appeal which are not in consonance with Rule 8 of the ITAT Rules, they are descriptive and argumentative in nature. In brief, its grievance revolves around a single issue, namely that the learned CIT (A) was not justified in law in confirming the addition of Rs. 1,11,21,527/- made u/s. 37(1) of the Income Tax Act, 1961.

  2. The brief facts of the case are that the assessee is a company engaged in I.T. enabled BPO services and Real Estate Development. It has filed its return of income on 28.09.2010 declaring an income of Rs. 7,36,21,700/-. The case of the assessee was selected for scrutiny assessment and a notice u/s. 143(2) of the I.T. Act was issued on 27.08.2011. On scrutiny of the accounts, it revealed to the Assessing Officer that the assessee had debited a sum of Rs. 1,43,56,156/- under the head "interest expenditure". According to the Assessing Officer the assessee had not shown any business income and the whole income of Rs. 9,47,78,619/- is earned in the form of interest. He directed the assessee to submit the details of interest expenditure and also gave explanation as to how its claim is admissible in law. In response to the query of the Assessing Officer, assessee filed its reply vide letter dated 4.12.2012. It was pleaded by the assessee that it had paid interest of Rs. 1,43,45,999/- during the accounting year to SBI, Main Branch, St. Marx Road, Bangalore. The company had made a fixed deposit of Rs. 12.23 crores. The assessee further contended that it has made advances to the subsidiary company to facilitate the purchase of real estate property. The subsidiary company has paid interest also on the amount advanced by the company during the previous assessment year. However, in the current assessment year, the transactions relating to real estate entered by the subsidiary company was delayed due to certain statutory clearance and therefore, no interest is being provided to the assessee by the subsidiary company. The advances were given to the subsidiary company on account of commercial exigencies. The stand alone subsidiary company was created to attract investment from third parties once the intended property is being acquired assessee would earn profit. With regard to the nexus between the interest expenditure and the interest income, it was contended by the assessee that to the extent of Rs. 32,24,472/- direct nexus is available. The assessee had claimed interest expenditure of Rs. 1,43,56,156/-. It has interest income of Rs. 9,47,78,619/-. The Assessing Officer accepted the nexus to the extend of expenditure of Rs. 32,24,472/-. After allowing these expenditures from the total interest expenditure, he made an addition of Rs. 1,11,21,527/- (Rs. 1,43,42,999-Rs. 32,24,472). The explanation of the assessee that it advanced sum to its subsidiary company in order to facilitate the subsidiary to purchase real estate property was rejected by the Assessing Officer by observing as under:

    "The assessee has submitted that the loans taken by it are used for the purpose of business and in the course of business, as advance made to its sister concern was in the course of business and for the purpose of business. But it has to be noted that the business of company is not to make investment or lending money. The advances extended by the assessee to its sister concern is not related to any business transaction and not in the nature of business advance. Therefore, it is clear that the advances made to sister concern is not for the purpose of assessee's business".

  3. Appeal to the CIT (A) did not bring any relief to the assessee.

  4. Before us the learned Counsel for the assessee at the very outset submitted that an identical issue arose in assessment years 2007-08 and 2008-09 and the Tribunal has remitted the issue to the Assessing Officer for re-examination. He pointed out...

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