Judgment:
ORDER
SHEET IN THE HIGH COURT AT CALCUTTA Special Jurisdiction [Income Tax].ORIGINAL SIDE GA2348of 2015 ITAT99of 2015 COMMISSIONER OF INCOME TAX, KOL-2, KOLKATA VERSUS SUNNY TREXIM PVT.LTD.BEFORE: The Hon'ble JUSTICE SOUMITRA PAL The Hon'ble JUSTICE MIR DARA SHEKO Date : 30th September, 2015.
Mr.S.Bhattacharyya, Adv.Mr.J.P.
Khaitan, Sr.Adv.Mr.Ananda Sen, Adv.Mr.Biswajit Mal, Adv.The Court : The application, being GA2348of 2015, has been preferred by the appellant/revenue to file Memorandum of Appeal from the order dated 29th January, 2015 passed by the Income Tax Appellate Tribunal, Kolkata in ITA No.544/Kol/2012 and ITA No.881/Kol/2012 relating to the assessment year 2008-09.
Mr.Bhattacharyya, learned advocate appearing for the appellant, referring to the assessment order, submits that since the substantial questions of law have arisen, the appeal may be directed to be admitted.
Mr.Khaitan, learned senior advocate appearing for the assessee, submits that since the Tribunal has gone in detail with regard to the fact as to whether the assessee was having sufficient own funds for making investment in the purchase of office space and godown and as it is a question of fact, the appeal on the question of law as framed may not admitted.
The appellant/revenue seeks admission of the appeal on the following substantial questions of law: “(i) Whether on the facts and circumstances of the case the Learned Income Tax Appellate Tribunal was justified in law by dismissing the revenue’s appeal and allowing thereby interest amounting to Rs.33,34,700/- considering such interest out of investment to purchase office space and godown by the respondent as fully out of its own fund.
[ii].Whether on the facts and circumstances of the case the Learned Income Tax Appellate Tribunal was justified in law by deleting the balance addition of Rs.15,53,566/- confirmed by the Commissioner of Income Tax (Appeal) on account of proportionate interest expenditure incurred by the respondent/assessee for the purpose of purchase of assets by the respondent/assessee which was not utilized for the business purposes during the year.
[iii].Whether on the facts and circumstances of the case the Learned Income Tax appreciating Appellate Tribunal that respondent the was has justified debited in law interest not of Rs.2,09,74,464/- but on average no bank provides loan below 10% per annum and as such on Rs.333.47 lakhs the interest for on year comes to Rs.33,34,700/- which amount pertains to capital work in progress or otherwise non-business investment by the respondent/assessee the sale value of the property for the purpose of assessing long term capital gain was computed by the Assessing Officer according to law on the basis of actual stamp duty paid in this regard not otherwise.
[iv].Whether on the facts and circumstances of the case the Learned Income Tax Appellate Tribunal was justified in law by deleting the disallowance made by the Assessing Officer, in full which includes the portion confirmed by the Commissioner of Income Tax (Appeal) relying on the decision of the Hon’ble High Court at Bombay in the case of HDFC Bank Limited and in the case of Hero Cycle Limited.
[v].Whether on the facts and circumstances of the case the Learned Income Tax Appellate Tribunal was justified in law allowing the interest attributable to capital assets without appreciating the nexus of capital work in progress with that of borrowed funds.” We find that the Tribunal, after considering the facts of the case, has come to the following finding: “ We find from the facts before us and as available in the assessment records that the assessee has not raised any loan during the year and particularly for this advance for investment made in different assets, like office space and godown.
The assessee has a capital of Rs.32,28,800/- and reserve and surplus of Rs.2,18,02,918/- as on 31-03-2008.
As on 31-03-2007, the capital was at Rs.20,28,800/- and reserved and surplus was at Rs.1,07,50,619/-.
The CIT(A) and the AO has only averaged the investment without recording any finding that the investment is made out of loan funds or own funds.
The assessee categorically now before us contended that the entire investment in purchase of office space and godown is out of own funds and there is no element of borrowed funds invested in the same.
The CIT(A) has given a general proposition that, “The loan may be taken for a specific purpose.
But after the return of the same, it may not go in the repayment of such loans while it may be invested as an advance for purchasing of capital assets.
So, the funds have been invested from common kitty.” This general proposition of CIT(A) has nothing to do with the facts of the present case.
Unless and until is specific nexus of the investment in purchase of office space and godown is shown out of borrowed funds, no interest can be disallowed.
Even otherwise, the assessee has sufficient own capital funds and reserve & surplus, and there is clear-cut reduction in the capital and reserve and surplus from AY200708 to AY200809 (the present assessment year) for making this investment.
In view of the above facts and proposition of law laid down by Hon’ble Bombay High Court in the case of HDFC Bank LTD.supra & Hon’ble P & H High Court in the case of Hero Cycles LTD.supra, there is a clear case of the assessee that it had sufficient own funds for making investment in purchase of office space and godown.
Further, despite the fact that complete books of account and other details were produced before the AO, he could not establish nexus of interest bearing funds with that of investment in office space and godown.
In such circumstances, we delete the balance addition confirmed by CIT(A) and this issue of assessee’s appeal is allowed and the issue of revenue’s appeal is dismissed.” Since we find that the Tribunal, being the ultimate fact finding authority, has found that the assessee had sufficient own fund for making investment in the purchase of office space and godown and in spite of producing complete books of account and other details, the AO could not establish the nexus of interest bearing funds with that of investment in office space and godown, we are of the view that no substantial questions of law arises from the order of the Tribunal.
Hence, the application is dismissed.
Accordingly, the appeal is not admitted.
(SOUMITRA PAL, J.) (MIR DARA SHEKO, J.) sm