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DD Township Ltd. Versus DCIT Cir. 10 (1) , New Delhi

2015 (8) TMI 1146 - ITAT DELHI

Disallowance under section 36(1)(iii) - utilisation of interest bearing funds for non-business activities - Held that:- The entire thrust of the assessee's submissions from the very beginning was that the amounts were advanced to group concerns, keeping in view the restrictions imposed by the Land Acquisition Act and this aspect we find has not at all been addressed by the lower Revenue authorities. If the advances were given out of commercial expediency then it is settled law that no disallowan .....

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s submissions are quite convincing that considering the restrictions imposed by the Land Acquisition Act, it had entered into various collaboration agreements. The Assessing Officer is required to record specific finding on these aspects before coming to the conclusion that the entire interest-free advance given to group concerns were not for business purposes. Thus restore the matter back to the file of the Assessing Officer to examine the issue de novo - Decided in favour of assessee for stati .....

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"1(a) That the learned Commissioner of Income-tax (Appeals) has gone wrong in upholding the erroneous order passed by the Assessing Officer making disallowance of ₹ 2,97,82,854 under section 36(1)(iii) of the Income-tax Act, 1961. (b) That in upholding the disallowance of ₹ 2,97,82,854, the learned Commissioner of Income-tax (Appeals) has been guided by irrelevant and erroneous considerations. The judgments relied upon both by the Assessing Officer and the learned Commissioner o .....

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ed for having regard to the facts and circumstances of the case. The submissions made on behalf of the assessee having not been properly appreciated and erroneous conclusion has been reached. The entire addition of ₹ 2,97,82,854 deserves to be deleted. That the impugned order passed by the learned Commissioner of Income-tax (Appeals) confirming the addition made to the returned income, is bad in law and against the facts of the case." 2. The assessee had filed its return of income on .....

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er companies of the group for developing of real estate projects at Faridabad. The assessee had also sold land rights during the year and had shown income on account of transfer of land rights. Besides, the assessee had earned interest income and also rental income. In the backdrop of these facts, the Assessing Officer noticed from the profit and loss account that against the income earned under the heads, house property, interest income and income on account of transfer of land rights, the asse .....

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e assessee also pointed out that it had shown interest income of ₹ 20,85,562 on account of various loans and advances. The assessee further submitted that it had made an investment of ₹ 20,05,64,120 in group companies. In addition to this investment, the company had also given interest-free advance to the group companies amounting to ₹ 1,68,43,58,666. The assessee also pointed out that apart from secured and unsecured loans, the company had on its disposal a sum of ₹ 1,02 .....

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ith the assessee 1,02,16,46,857 Balance interest-free advances (investment) 86,32,75,829 2.4. The Assessing Officer, after referring to plethora of decisions concluded that where the assessee had given interest-free advance and had also given interest-free loans to group concerns for helping them and since the assesse had not been able to establish any direct nexus between own funds vis-a- vis interest-free loans, disallowance under section 36(1)(iii) was to be made on account of utilisation of .....

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estment in group companies of ₹ 20,05,64,120 to have a controlling stake on such companies. Besides, the assessee had given interest-free advance to the group companies of ₹ 1,68,43,58,566. He further pointed out that no benefit was shown to have been derived by the assessee from these investments and interest-free loans. There was no commercial expediency found in advancing interest-free loans and investments. Therefore, the interest-free loans and investments were without any justi .....

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ring funds advanced which was actually as under: Rs. Rs. Interest-free funds available with the assessee 1,02,16,46,857 Unsecured loans (interest-free) available with the assessee 20,46,65,623 1,22,63,12,680 Less : Investments in group companies 20,05,64,120 Total 1,02,57,48,360 Interest-free loans and advances provided to concerns 1,68,43,58,567 Less : Interest bearing advances-interest received shown in profit and loss account assessment order-Page 3 2,26,50,000 17,66,17,08,567 Interest bearin .....

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ced/borrowed money for business purposes to its group concerns for purchasing the plot of land and thus the amount was advanced to group concerns not for controlling interest in the company but for commercial expediency. He submitted that the findings of the learned Commissioner of Income-tax (Appeals) that the amount was advanced for acquiring controlling interest, is not correct. Learned counsel further referred to page 16 of the paper book wherein the balance-sheet of the assessee is containe .....

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hali 6,83,52,975.00 Project Zirakpur 24,67,26,424.73 Project Sonepat 26,90,549.00 Project Amritsar 6,72,06,222.00 Project Faridabad (Farm House) 1,00,00,000.00 Project Gurgaon 76,24,370.00 Other miscellaneous advance for land 12,85,38,566.73 1,68,43,58,566.73 3.3. Learned counsel pointed out that the aforementioned balances were with respect to collaboration agreement. 3.4. In the backdrop of these facts, learned counsel submitted that the decision of the hon'ble Supreme Court in the case of .....

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