DCIT, CIR-8, KOLKATA, Kolkata V. M/s Patton Developers Pvt Ltd., Kolkata

ITA 1043/KOL/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 9328 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 9 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-03-2017
• Appeal Filed By: Department
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 16-05-2014
• Court: TRIBUNAL
• Department Lawyers: A K SINHA
• Assessee Lawyers: VINOD KR JAIN
• Keywords: Proportionate interest

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : KOLKATA [BEFORE HONBLE SRI N.V.VASUDEVAN, JM & SHRI WASE EM AHMED, AM] I.T.A NO. 1043/KOL/2014 ASSESSMENT YEAR : 2 010-11 D.C.I.T., CIRCLE-8, . -VS.- M/S. PATTON DE VELOPERS PVT.LTD. KOLKATA- KOLKATA [PAN : AABCT 0276 H] (APPELLANT) (RESPONDENT) FOR THE APPELLANT : SHRI A.K.SINHA, JC IT FOR THE RESPONDENT : SHRI VINOD KR. JAIN, FCA DATE OF HEARING : 16.02.2017. DATE OF PRONOUNCEMENT : 01.03.2017. ORDER PER N.V.VASUDEVAN, JM THIS IS AN APPEAL BY THE REVENUE AGAINST THE ORDE R DATED 27.02.2014 OF CIT(A)-VIII, KOLKATA RELATING TO A.Y.2010-11. 2. THE ONLY ISSUE RAISED BY THE REVENUE IN THIS APPEAL IS AS TO WHETHER THE CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION OF RS.1,00,1 2,365/- ON ACCOUNT OF INTEREST CLAIMED AS DEDUCTION U/S 24(B) OF THE INCOME TAX ACT, 1961 (ACT). 3. IT IS NOT IN DISPUTE THAT THE ASSESSEE DECLAR ED INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY. WHILE COMPUTING INCOME FROM HOUSE PROPERTY THE ASSESEE CLAIMED DEDUCTION OF INTEREST PAID ON LOAN BORROWED FOR THE PURPOSE OF CONSTRUCTION OF THE HOUSE PROPERTY U/S 24(B) OF THE ACT OF A SUM OF RS. 2,28,31,800/-. THERE IS NO DISPUTE THAT THE PROPERTY IN RESPECT OF WHICH INTEREST EXPE NSES WAS CLAIMED AS DEDUCTION WAS ORIGINALLY ACQUIRED BY A COMPANY BY NAME M/S. CENTR E POINT REALITY P.LTD AFTER TAKING AN ADVANCE OF RS.29.22 CRORES FROM M/S. PATTON INTE RNATIONAL LTD. SUBSEQUENTLY M/S. CENTRE POINT REALITY PVT.LTD GOT AMALGAMATED WITH T HE ASSESSEE COMPANY W.E.F. 01.04.2006. THE ASSESSEE THUS BECAME THE OWNER OF T HE HOUSE PROPERTY. IT IS NOT IN 2 ITA NO.1043/KOL/2014 M/S. PATTON DEVELOPERS PVT.LTD. A.YR..2010-11 2 DISPUTE APART FROM LOAN OF RS.29.22 CRORES AVAILED BY THE ASSESSEE FROM M/S. PATTON INTERNATIONAL LTD AND ANOTHER LOAN OF RS.17,50,00,0 00/- WAS AVAILED FORM STATE BANK OF MYSORE. THE LOAN FROM STATE BANK OF MYSORE WAS AVAI LED ON 04.01.2006. THIS LOAN STOOD REDUCED AS ON 19.08.2008 TO RS.8.37 CRORES AF TER REPAYMENT. DURING THE PREVIOUS YEAR THE ASSESSEE BORROWED A SUM OF RS.20 CRORES AN D UTILIZED THE SAME TO REPAY THE OUTSTANDING LOAN OF RS.8.37 CRORES TO STATE BANK OF MYSORE AND THE REMAINING RS.11.63 CRORES FOR REPAYING LOAN TO M/S. PATTON INTERNATION AL LTD. ON THE BORROWING OF RS.20 CRORES THE ASSESSEE PAID INTEREST AMOUNTING TO RS.1 ,72,18,169/- AND THIS WAS CLAIMED AGAINST INCOME FROM HOUSE PROPERTY AS DEDUCTION U/S 24(B) OF THE ACT. 4. THE AO WAS OF THE VIEW THAT IT WAS ONLY THE SUM OF RS.8.37 CRORES REPAID TO STATE BANK OF MYSORE THAT CAN SAID TO BE A LOAN BORROWED FOR THE PURPOSE OF ACQUIRING THE PROPERTY AND THEREFORE INTEREST PAID ON SUCH AMOUNT WAS ELIGIBLE FOR DEDUCTION U/S 24(B) OF THE ACT. WITH REGARD TO THE REMAINING LOAN OF RS.11.63 CRORES THE AO WAS OF THE VIEW THAT THIS CANNOT BE CONSIDERED AS LOAN THA T WAS UTILIZED FOR ACQUIRING THE PROPERTY AND THEREFORE INTEREST PAID ON RS.11.63 CR ORES WAS NOT AN ELIGIBLE DEDUCTION U/S 24(B) OF THE ACT. ACCORDING TO THE AO THE BORRO WING TO THE EXTENT OF RS.11.63 CRORES WAS ONLY TO REPAY THE AMOUNT BORROWED FOR AC QUIRING THE PROPERTY AND NOT FOR ACQUIRING THE PROPERTY AND THEREFORE THE REQUIREMEN T OF SEC.24(B) OF THE ACT WAS NOT SATISFIED. 5. THE AO ACCORDINGLY DISALLOWED THE PROPORTIONATE INTEREST AS FOLLOWS :- ACCORDINGLY, INTEREST OF RS.1,00,12,365/- [ RS.1,7 2,18,169 X (RS.11.63 CRORE)/(RS.20 CRORE) ] IS DISALLOWED AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. [ ADDITION : RS.1,00,12,365/-] 6. ON APPEAL BY THE ASSESSEE THE CIT(A) FOLLOWED THE DECISION OF HIS PREDECESSOR IN ASSESSEES OWN CASE FOR A.Y.2009-10 WHEREIN ON AN I DENTICAL DISALLOWANCE THE CIT(A) HELD THAT THE ASSESSEE WAS ENTITLED TO DEDUCTION U/ S 24(B) OF THE ACT ON AMOUNTS BORROWED AND UTILIZED TO REPAY A LOAN THAT WAS BORR OWED FOR THE PURPOSE OF ACQUISITION 3 ITA NO.1043/KOL/2014 M/S. PATTON DEVELOPERS PVT.LTD. A.YR..2010-11 3 OF THE PROPERTY. FOLLOWING THE AFORESAID ORDER THE CIT(A) DELETED THE ADDITION MADE BY AO. AGGRIEVED BY THE ORDER OF CIT(A) THE REVENUE HA S PREFERRED THE PRESENT APPEAL BEFORE THE TRIBUNAL. 7. AT THE TIME OF HEARING IT WAS BROUGHT TO OUR N OTICE THAT ORDER OF CIT(A) FOR A.Y.2009-10 WHICH WAS FOLLOWED BY CIT(A) IN THE IMP UGNED ORDER WAS THE SUBJECT MATTER OF THE APPEAL BEFORE THE HONBLE ITAT AND IN ITA NO.90/KOL/2013 BY ORDER DATED 24.11.2015 THE TRIBUNAL HELD THAT THE DISALLO WANCE OF INTEREST U/S 24(B) OF THE ACT CANNOT BE SUSTAINED. THE FOLLOWING WERE THE RELEVA NT OBSERVATIONS OF THE TRIBUNAL :- 7. WE HAVE HEARD RIVAL PARTIES AND PERUSED THE MAT ERIALS AVAILABLE ON RECORD. BEFORE US LD. DR SUPPORTED THE ORDER OF AO WHEREAS LD. AR SUP PORTED THE ORDER OF LD. CIT(A). THE LD. AR SUBMITTED A PAPER BOOK CONTAINING PAGES 1 TO 106 AND PLEADED THAT INTEREST PAID ON THE MONEY BORROWED FROM THE BANK WAS VERY MUCH E LIGIBLE FOR DEDUCTION U/S. 24(B) OF THE ACT AND IN SUPPORT OF HIS CONTENTION, LD. AR CI TED FOLLOWING CASE LAWS:- A) SALTEE INFOTEX (INDIA) PVT. LTD. VS. DCIT IN IT( SS) A NO. 05/KOL/2012 DATED 11.06.2013. B) ITO V. M.S FAITH REAL ESTATES P. LTD. AND OTHERS IN ITA NO. 5070 & 5181/DEL/2011 DATED 11.06.2011 C) ACIT V. SUNIL KR. AGARWAL IN ITA NO.641/LUCK/201 0 (2011) 139 TTJ (LUCK)(UO) 49 D) REALTY FINANCE & LEASING (P) LTD. V. ITO (2006) 5 SO 348 (MUMBAI) FROM THE AFORESAID DISCUSSION, WE FIND THAT THE DIS PUTE IS AS TO WHETHER THE ASSESSEE- COMPANY IS ENTITLED DEDUCTION FOR INTEREST EXPENDIT URE OF RS.2,11,44,914/- FROM THE INCOME EARNED UNDER THE HEAD HOUSE PROPERTY U/S 24(B) OF T HE ACT. THE AO FOUND THAT ASSESSEE HAS TAKEN LOAN FROM SBM DURING THE MONTH OF AUGUST, 2008 AND REPAID THE LOAN OF THE HOLDING COMPANY. THE AO CLAIMED THAT THERE IS NO P ROVISION UNDER THE ACT TO ALLOW DEDUCTION OF INTEREST ON A SUBSEQUENT LOAN TAKEN T O REPAY THE ORIGINAL LOAN. THEREFORE, HE HELD THAT ASSESSEE-COMPANY WAS NOT ENTITLED TO CLAI M DEDUCTION IN RESPECT OF INTEREST PAYABLE FOR FRESH MONEY BORROWED TO REPAY THE EARLI ER LOAN AND ACCORDINGLY, HE DISALLOWED. BEFORE LD. CIT(A) LD. AR OF ASSESSEE SU BMITTED THAT THE FRESH LOAN TAKEN TO REPAY THE ORIGINAL LOAN WAS WITHIN THE AMBIT OF LAW AND ACCORDINGLY LD. CIT(A) HAS DELETED THE ADDITION WHICH MADE BY AO. IT IS ALSO O BSERVED THAT NO MATERIAL HAS BEEN BROUGHT ON RECORD BY LD. DR TO CONTROVERT THE ABOVE FINDING OF LD. CIT(A). A PLAIN UNDERSTANDING OF SECTION 24(B) OF THE ACT READS AS UNDER:- '[DEDUCTIONS FROM INCOME FROM HOUSE PROPERTY] 24. INCOME CHARGEABLE UNDER THE HEAD 'INCOME FROM H OUSE PROPERTY' SHALL BE COMPUTED AFTER MAKING THE FOLLOWING DEDUCTIONS, NAM ELY:- (A) A SUM EQUAL TO THIRTY PER CENT OF THE ANNUAL VA LUE; 4 ITA NO.1043/KOL/2014 M/S. PATTON DEVELOPERS PVT.LTD. A.YR..2010-11 4 (B) WHERE THE PROPERTY HAS BEEN ACQUIRED, CONSTRUCT ED, REPAID, RENEWED OR RECONSTRUCTED WITH BORROWED CAPITAL, THE AMOUNT OF ANY INTEREST PAYABLE ON SUCH CAPITAL; PROVIDED THAT IN RESPECT OF PROPERTY REFERRED TO IN SUB-SEC TION (2) OF SECTION 23, THE AMOUNT OF DEDUCTION SHALL NOT EXCEED THIRTY THO USAND RUPEES: PROVIDED FURTHER THAT WHERE THE PROPERTY REFERRED TO IN THE FIRST PROVISO IS ACQUIRED OR CONSTRUCTED WITH CAPITAL BORROWED ON OR AFTER THE 1 ST DAY OF APRIL, 1999 AND SUCH ACQUISITION OR CONSTRUCTION IS COMPLE TED [WITHIN THREE YEARS FROM THE END OF THE FINANCIAL YEAR IN WHICH CAPITAL WAS BORROWED], THE AMOUNT OF DEDUCTION UNDER THIS CLAUSE SHALL NOT EXCEED [TWO L AKH RUPEES]. EXPLANATION. - WHERE THE PROPERTY HAS BEEN ACQUIRED OR CONSTRUCTED WITH BORROWED CAPITAL, THE INTEREST, IF ANY, PAYABLE ON SUCH CAPITAL BORROWED FOR THE PERIOD PRIOR TO THE PREVIOUS YEAR IN WHICH THE PROP ERTY HAS BEEN ACQUIRED OR CONSTRUCTED, AS REDUCED BY ANY PART THEREOF ALLOWED AS DEDUCTION UNDER ANY OTHER PROVISION OF THIS ACT, SHALL BE DEDUCTED UNDE R THIS CLAUSE IN EQUAL INSTALLMENTS FOR THE SAID PREVIOUS YEAR AND FOR EAC H OF THE FOUR IMMEDIATELY SUCCEEDING PREVIOUS YEARS] [PROVIDED ALSO THAT NO DEDUCTION SHALL BE MADE UNDE R THE SECOND PROVISO UNLESS THE ASSESSEE FURNISHES A CERTIFICATE, FROM THE PERS ON TO WHOM ANY INTEREST IS PAYABLE ON THE CAPITAL BORROWED, SPECIFYING THE AMO UNT OF INTEREST PAYABLE BY THE ASSESSEE FOR THE PURPOSE OF SUCH ACQUISITION OR CONSTRUCTION OF THE PROPERTY, OR, CONVERSION OF THE WHOLE OR ANY PART OF THE CAPI TAL BORROWED WHICH REMAINS TO BE REPAID AS A NEW LOAN. EXPLANATION - FOR THE PURPOSES OF THIS PROVISO, THE EXPRESSION 'NEW LOAN' MEANS THE WHOLE OR ANY PART OF A LOAN TAKEN BY THE ASSESS EE SUBSEQUENT TO THE CAPITAL BORROWED, FOR THE PURPOSE OF REPAYMENT OF SUCH CAPI TAL.]' FROM THE AFORESAID EXPLANATION, IT IS VERY MUCH CLE AR THAT THE SUBSEQUENT LOAN TAKEN BY ASSESSEE TO REPAY HIS ORIGINAL LOAN IS VERY MUCH CO VERED FOR CLAIM THE DEDUCTION U/S. 24(B) OF THE ACT. IT IS ALSO IMPORTANT TO NOTE THAT ASSES SEE HAS TAKEN A LOAN FROM SBM AND SAME LOAN FROM THE SAME BANK WAS ENHANCED AS A RESULT OF RESTRUCTURING OF THE EXISTING LOAN. THEREFORE, IN THIS CASE NO THIRD LOAN WAS OBTAINED BY ASSESSEE. THEREFORE, WE DO NOT FIND ANY GOOD AND JUSTIFIABLE REASON TO INTERFERE IN THE ORDER OF LD. CIT(A). HENCE, THIS GROUND OF REVENUE'S APPEAL IS DISMISSED. 8. IT IS CLEAR FROM THE FACTS AVAILABLE ON RECOR D THAT THE SUM OF RS.11.63 CRORES WAS UTILIZED FOR REPAYMENT OF THE ORIGINAL BORROWING FR OM M/S. PATTON INTERNATIONAL LTD IS ERRONEOUS, WHICH WAS ADMITTED A LOAN BORROWED FOR T HE PURPOSE OF ACQUISITION OF THE 5 ITA NO.1043/KOL/2014 M/S. PATTON DEVELOPERS PVT.LTD. A.YR..2010-11 5 PROPERTY. IN THE LIGHT OF THE SUCH ADMITTED FACTUA L POSITION, WE ARE OF THE VIEW THAT THE DEDUCTION CLAIMED BY THE ASSESSEE HAS TO BE ALLOWED AS LAID DOWN IN THE PROVISO TO SEC.24(B) OF THE ACT. RESPECTFULLY FOLLOWING THE D ECISION OF THE TRIBUNAL REFERRED TO ABOVE, WE UPHOLD THE ORDER OF CIT(A) AND DISMISS TH E APPEAL BY THE REVENUE. 9. IN THE RESULT THE APPEAL BY THE REVENUE IS DI SMISSED. ORDER PRONOUNCED IN THE COURT ON 01.03.2017. SD/- SD/- [WASEEM AHMED] [ N.V.VA SUDEVAN ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 01.03.2017. [RG PS] COPY OF THE ORDER FORWARDED TO: 1M/S. PATTON DEVELOPERS PVT. LTD., 3-C, CAMAC STREE T, KOLKATA-700016. 2. D.C.I.T., CIRCLE-8, KOLKATA. 3. CIT(A)-VIII, KOLKATA. 4. CIT-III, KOLKATA. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER ASSTT.REGISTRAR, ITAT, KOLKATA BENCHES 6 ITA NO.1043/KOL/2014 M/S. PATTON DEVELOPERS PVT.LTD. A.YR..2010-11 6