TMI Blog2017 (3) TMI 1903X X X X Extracts X X X X X X X X Extracts X X X X ..... ox Kind India Ltd during the relevant period - HELD THAT:- We have noticed that the Revenue has not placed on record any material or findings of the AO under the identical facts and circumstances that the rate of interest paid as claimed by the assessee is either excessive or unreasonable as laid out in section 40A(2)(b) of the Act, we therefore, respectfully follow the order of Coordinate bench of Hon ble ITAT, Jaipur bench [ 2016 (7) TMI 1657 - ITAT JAIPUR] - Keeping in view the above facts and while considering the facts that the AO has not recorded any finding or collected any material to show that the interest paid by the assessee was in excess of the fair market rate of interest. In the circumstances of the present case, we are of the considered view that the claim of interest to the assessee be allowed and delete the disallowance u/s 40A(2). Disallowance of proportionate of interest u/s. 36(1)(iii) - interest free loans advanced to various parties - HELD THAT:- We find that interest free funds available with the assessee were more than the interest free loans given by the assessee. Further, even the Assessing Officer has not proved any nexus between the borrowed fund ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to allow the claim of interest of Rs. 1,60,22,465. Ground No. 4: On the facts and in the circumstances of the case and in law, the Hon'ble CIT(A) erred in confirming the action of the A.D. in disallowing proportionate disallowance u/s. 36(1)(iii) of the Act amounting to Rs. 93,35,011 in respect of the interest free loans advanced to various parties. It is prayed that the A.D. may be directed to delete the said disallowance. 2. The brief facts of the case are that the assessee company claimed to have been into Hoteliering Business, and has also shown income by shooting and rentals and other income. The assessee filed the return of income for AY 2010-11 by way of e-filing declaring current year s loss at Rs. 31,88,44,909 on 14.10.2010. The return of income was processed u/s 143(1) of the Act 1961 and later on the case of the assessee was selected for scrutiny and after serving statutory notice and seeking reply of the assessee, the total income of assessee was computed by the Assessing Officer while making additions vide order dated 30.01.13. 3 Aggrieved by the order of the AO, the assessee filed appeal before CIT(A) and the CIT(A) after considering th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asset. The Ld. AR also reiterated the same arguments as were raised before the Ld. CIT(A). Our attention was also drawn to the decision in assessee s own case in ITA No. 3189/Mum/2011 which is at page No. 76 to 118 of paper book filed by the assessee. The operative portion is reproduced below at para 18 of the case:- Now, coming to the rate of depreciation, whether it has to be allowed @ 10% or 25%, we do not find any merits in the contention of the assessee that the additional FSI is a business or commercial rights falling within the realm and scope of 'intangible asset' within the scope of section 32(1)(ii). The FSI only relates to giving of the right to construct additional floor to the assessee which only goes to enhance the value or cost of the existing asset j building. It strictly pertains to the addition in the building only and, therefore, depreciation allowable would be at the rates applicable to the buildings only and for not some kind of intangible right u/s 32(1)(ii). Accordingly, we uphold the observation and order of the Ld. CIT(A) to the extent that the depreciation allowable would be on rates applicable to the building only that is, @10% and not @ 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in respect of the running business which. was acquired slump sale basis There is no dispute about the computation of depreciation at RS.11,50,94,7371-. The claim of depreciation or assessment year under consideration is the first year of such a claim. The A. O. has also accepted that intangible assets were part of slump sale. The A. O. h t however, relied mainly on. three propositions for the purpose of denying the depreciation. Briefly stated, they are: (i) The appellant had not bifurcated the amount to different assets (ii) The appellant had not proved that the, intangible assets were used for the purposes of its business; and (iii) The appellant failed to prove that the condition precedent referred to in Section 32 have not been fulfilled. 10.5 The Assessing Officer is contention that the appellant has not bifurcated the amount different assets is not based on the 'facts Of the case as the appellant had purchased all the intangible assets on slump sale basis' and had not paid. separate price for each of such intangible assets. Further, all the intangible assets .fall under block of assets' on which depreciation is' allowable '@2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contemplated in section 47(xiii); (2) Transfer of capital assets by a sole proprietary concern to a company in terms of section 47(ivx); (3) Succession of business, referred to, in section 170; (4) Transfer of assets by a amalgamating company to the amalgamated company and; (5) Transfer of assets in a demerger by the demerged company to the resulting company. Firstly, it is submitted that it is not a case of succession. The assessee had purchased the said hotel in an open bid from the Government owned Corporation i.e. Hotel Corporation of India, and by purchasing, the assessee has become owner of the said hotel. The purchase of Hotel by the assessee from Hotel. Corporation of India does not amount to succession in as in much as that the said companywasin6t only running the said Single hotel sold to assessee. Thus, by effecting the sale of single hotel ddesllOt tantamount to. succession of the whole business. In this regard, the reliance is placed on the decision of Gujarat High Court in the case of PremjiKhimraj Shah vs. ITO.(118 ITR 216) .. The said provision to section 32 is applicable only in those cases which are covered by subclause (xiii) an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d reasonable manner as permitted by law had to be accepted. Further, the CIT(A) observed that even the Assessing Officer has not denied that the hotel business could not be carried out without the sale licenses and permits. The CIT(A) further stated that 5th proviso to Section 32 of the Act would not be attracted to the case of the assessee. We, therefore, do not find any reason to interfere in the order of CIT(A) in this regard. We have considered the aforementioned order in ITA No. 4783 5517/Mum/2011 in assessee s own case wherein we found similar ground raised in the aforementioned appeals and identical question involved in the present case has already been decided by the coordinate bench of ITAT Mumbai in assessee s own case. We have also noticed that the AO in the assessment order himself has admitted that the facts are similar to that of earlier years and now in earlier years the decision has come in favour of assesse in ITA No 4783 5517/Mum/2011. Therefore respectfully following the decision of the coordinate bench and in order to maintain judicial consistency which is applicable mutatis mutandis in the case of the assessee. Therefore, we delete the disallowance of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... further submitted that the AO has compared two transactions of the appellant with M/s. Cox Kings Ltd i.e payment of interest on debentures and payment. of interest on loans. Both these transactions are independent to each other and dependent on various factors such as availability of funds, period of loan etc. It was further submitted that the payment of interest @ 24% on debentures has been fully disclosed and offered to tax by M/s.Cox Kings India Ltd and there is no loss to the Revenue. Reliance was placed by him 01} the decision in the case of Indian Steel Wire Products Ltd v. CIT (1968) 69 ITR 379, Calcutta Landing Shipping Co. Ltd. v.CIT (1967) 65 ITR 1 Calcutta, CIT v. Dhanrajgirji Raja Narasingirji (1973) 91 ITR 544 (sq, CIT v. Wal Chand Co (1967) 65 ITR 381, Aruna Mills (31 ITR 153), G.J. Patel , co.o.ctt [1986] 159 ITR 486 (Guj), Siddho Mal Sons v. ITO [1980] 122 ITR 839 (Del.HC), Mysore Kirloskar Ltd v. CIT [1987] 166 ITR 836 (Kar), CIT v. TS. Hajee Moosa And Company [1985] 153 ITR 422 (Mad), Haji Aziz Abdul Shakoor Bros.[1961 (41) ITR 350 (SC) R.B. Bansilal Abir Chand Spg Wvg Mills v.CIT [1971] 81 ITR 34 (Bom) CIT, Panipat Woollen General Mills ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fession of the assessee or any director, partner or member of such company, firm, association or family, or any relative of such director, partner or member; (v) a company, firm, association of persons or Hindu undivided family of which a director, partner or member, as the case may be, has a substantial interest in the business or profession of the assessee; or any director, partner or member of such company, firm, association or family or any relative of such director, partner or member; (vi) any person who carries on a business or profession,- (A) where the assessee being an individual, or any relative of such assessee, has a substantial interest in the business or profession of that person; or (B) where the assessee being a company, firm, association of persons or Hindu undivided family, or any director of such company, partner of such firm or member of the association or family, or any relative of such director, partner or member, has a substantial interest in the business or profession of that person. Explanation. For the purposes of this sub-section, a person shall be deemed to have a substantial interest in a business or profession, if, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r relied upon the comments of the Auditors in the audit report that the interest claimed by the assessee company in respect of interest paid @ 24% is prejudicial to the interest of the company. On the appreciation of the facts on record, we have noticed that the Revenue has not placed on record any material or findings of the AO under the identical facts and circumstances that the rate of interest paid as claimed by the assessee is either excessive or unreasonable as laid out in section 40A(2)(b) of the Act, we therefore, respectfully follow the order of Coordinate bench of Hon ble ITAT, Jaipur bench in ITA NO. 760/JP/2015 as mentioned above. Keeping in view the above facts and while considering the facts that the AO has not recorded any finding or collected any material to show that the interest paid by the assessee was in excess of the fair market rate of interest. In the circumstances of the present case, we are of the considered view that the claim of interest of Rs. 1,60,22,465 to the assessee be allowed and delete the disallowance u/s 40A(2) of the Act. Accordingly Assessing Officer is directed to allow the claim of interest of Rs. 1,60,22,465 to the assessee. In the res ..... X X X X Extracts X X X X X X X X Extracts X X X X
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