SHRI SHRAWAN SINGH KARSAWARA, Jaipur V. DCIT, Sikar

ITA 1063/JPR/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 82734 (ITAT-JAIPUR)
• Duration Of Justice: 2 year(s) 8 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-08-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 07-12-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: D C SHARMA
• Keywords: Capital asset; Depreciation; Business expenditure; Opportunity of being heard
• Section: 37(1)

Judgement Text

IN THE INCOMETAX APPELLATE TRIBUNAL JAIPUR BENCH: JAIPUR (BEFORE SHRI R.P. TOLANI AND SHRI T.R. MEENA) I.T.A. NO. 1063/JP/2011 ASSTT. YEAR- 2008-09 PAN NO. ADIPK 3778 J SHRI SHARWAN SINGH KARSAWARA, THE D.C.I.T., M/S CAREER LINE COACHING INSTITUTE, VRS. CIRCLE-SI KAR. PIPRALI ROAD, SIKAR. (APPELLANT) (RESPONDENT) ASSESSEE BY :- SHRI P.C. PARWAL. DEPARTMENT BY :- SHRI D.C. SHARMA. DATE OF HEARING : 23/07/2014 DATE OF PRONOUNCEMENT : 08/08/2014 O R D E R PER: T.R. MEENA, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER DATED 16/09/2011 OF THE LEARNED C.I.T.(A)-III, JAIPUR FOR THE A.Y. 2008-09. THE EFFECTIVE GROUNDS OF APPEAL ARE AS UNDER:- (1) THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL S) HAS ERRED IN FACT AND IN LAW, IN CONFIRMING DISALLOWANCE OUT OF FO LLOWING EXPENSES: PARTICULARS OF EXPENSES DISALLOWANCE (I) ADVERTISEMENT EXPENSES RS. 7,11,600/- (II) VEHICLE EXPENSES RS. 5,32,442/- (2) THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN FACT AND IN LAW, IN CONFIRMING DISALLOWANCE OF RS. 2, 63,017/- IN RESPECT OF INTEREST PAID ON LOAN TAKEN FOR PURCHASE OF LAND. 3. THE ASSESSEE CRAVES RIGHT TO ADD, ALTER OR AMEND ANY OF THE GROUNDS OF THE APPEAL. 4. THE APPROPRIATE COST BE AWARDED TO THE ASSESSEE. 2 2. THE FIRST GROUND OF APPEAL IS AGAINST PARTIAL ALL OWING THE ADVERTISEMENT EXPENSES BY THE LEARNED CIT(A). THE ASSESSING OFFIC ER OBSERVED THAT THE ASSESSEE HAS INCURRED ADVERTISEMENT EXPENDITURE AT RS. 71,16,367/-. IT WAS FOUND BY HIM THAT TWO BILLS OF RS. 5289/- AND RS. 52 90/- WERE RAISED FOR WISHING HAPPY BIRTHDAY TO THE SON OF THE ASSESSEE. TH ERE WERE SEVERAL OTHER INSTANCES WHERE THE NAME OF ANOTHER INSTITUTE B.R. S CHOOL APPEARED IN THE PUBLISHED ADVERTISEMENTS. THE ASSESSEE WAS GIVEN REA SONABLE OPPORTUNITY OF BEING HEARD ON THIS ISSUE, WHICH WAS AVAILED BY HIM A ND IT WAS ADMITTED THAT TWO BILLS RELATED TO HIS SONS BIRTH DAY WERE PERSONA L EXPENSES. THE OTHER EXPENSES WITH SCHOOL (BRC) WERE RELATED TO ASSESSEES INSTITUTION AS THIS SCHOOL PROVIDES STUDENTS FOR PRE-MEDICAL AND PRE-EN GINEERING COACHING ALONGWITH THEIR SCHOOLING. THE ASSESSEES EXPLANATION WAS CONSIDERED BY THE ASSESSING OFFICER. FINALLY IT WAS HELD THAT THE EXPE NDITURE ON ADVERTISEMENT WERE NOT INCURRED WHOLLY & EXCLUSIVELY FOR THE PURPO SE OF ASSESSEES BUSINESS. THUS, HE DISALLOWED THE EXPENSES @ 10% OF TOTAL EXPENS ES TO RS. 7,11,600/-. 3. BEING AGGRIEVED BY THE ORDER OF THE LEARNED ASSE SSING OFFICER, THE ASSESSEE CARRIED THE MATTER TO THE LEARNED CIT(A), W HO HAD CONFIRMED THE ADDITION BY OBSERVING THAT HE HAS VERIFIED THE FACT UAL POSITION ON THE BASIS OF PAPER CUTTINGS OF THE ADVERTISEMENTS, WHO HAS ALSO CONFIRMED THAT THERE WAS PERSONAL ELEMENT OR THIRD PARTY NAMES ALSO HAD INCO RPORATED IN ADVERTISEMENTS BILL NAMELY BRC & P.I.E. AFTER CON SIDERING THE APPELLANTS 3 REPLY, HE ALSO FOUND THAT THE ASSESSEE HAD NOT INCU RRED WHOLLY & EXCLUSIVELY THESE EXPENSES FOR BUSINESS PURPOSES AS PER SECTION 37(1) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). THE REASONABLENESS OF THE DISALLOWANCE ALSO FOUND BY HIM JUSTIFIABLE. NOW THE ASSESSEE IS IN APPEAL BEFORE US. 4. LEARNED A.R. FOR THE ASSESSEE CONTENDED THAT THE COMPLETE DETAILS OF ADVERTISEMENT EXPENDITURE ALONGWITH BILLS AND VOUCHE RS WERE SUBMITTED DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THE TAX HAS B EEN DEDUCTED AT SOURCE. THE DETAILS OF EXPENSES SHOWS THAT THE SAME WERE FOR PUBLICIZING THE COACHING PROVIDED BY THE ASSESSEE, JOINING OF NEWLY STARTING BATCHES, SUBSCRIBING FOR STUDY MATERIAL/TEST SERIES ETC.. THUS, IT HAS BEEN CLAIMED THAT ADVERTISEMENT EXPENDITURE INCURRED BY THE ASSESSEE IS WHOLLY AND E XCLUSIVELY FOR THE BUSINESS PURPOSES. TWO BILLS REFERRED BY THE LOWER AUTHORITIES FOR BIRTHDAY OF ASSESSEES SON DOES NOT GIVE ANY RIGHT TO DISALLOW THE EXPENSES @ 10%. THE NAME OF B.R. SHIKSHAN SANSTHAN, CHELSAI HAS ALSO BEEN INCOR PORATED IN THE VARIOUS ADVERTISEMENTS BUT IT HAS PROVIDED NUMBER OF STUDEN TS ALONGWITH THEIR SCHOOLING FOR THE COACHING OF VARIOUS FIELDS OF EDU CATION. THE ULTIMATE RESULTS IN BRINGING REVENUE TO THE ASSESSEE AND THUS ON ACC OUNT OF THIS MUTUAL BENEFIT, NAME OF BRC WAS ALSO GIVEN IN ADVERTISEMENT S RELEASED BY THE ASSESSEE. HE FURTHER RELIED THE JUDGMENT OF THE HON BLE JURISDICTIONAL HIGH COURT IN CASE OF ACIT VS. RAJASTHAN SPINNING & WEAVI NG MILLS LTD. 274 ITR 465 WHEREIN IT WAS HELD THAT WHOLLY AND EXCLUSIVELY IS NOT THAT NOBODY ELSE IS 4 TO BE BENEFITED BY MAKING LIKE EXPENSES. THERE IS NE XUS BETWEEN THE EXPENSE INCURRED AND HIS BUSINESS INTEREST, THE SAME CANNOT COME IN THE WAY OF ALLOWING THAT EXPENDITURE AS HELD BY THE HON'BLE SUP REME COURT IN THE CASE OF CIT VS. CHANDU LAL KESHAV LAL & COM. 38 ITR 601 & SA SSOON J DAVID & CO. PVT. LTD. VS. CIT 118 ITR 261. IT IS ALSO A SETTLED L AW THAT THE DEPARTMENT CANNOT DICTATE THE CIRCUMSTANCES IN WHICH EXPENDITUR E IS TO BE INCURRED AS HELD BY THE HON'BLE SUPREME COURT IN THE CASE OF CI T VS. DHANRAJGIRJI RAJA NARASINGIRJI 91 ITR 544. IT IS FURTHER ARGUED THAT T HE ASSESSEE HAS SHARED 50% EXPENDITURE WITH PIE (SOCIETY PROMOTED BY RAJASTHAN PATRIKA) IN TWO ADVERTISEMENTS PUBLISHED IN THE RAJASTHAN PATRIKA. HE FURTHER RELIED ON THE FOLLOWING CASE LAWS:- (I) CIT VS. KHAMBHATTA FAMILY TRUST (2013) 215 TAXMAN 602 (GUJ.) (HC). (II) MAHASHIAN DI HATTI LTD. VS. DCIT (2013) 21 ITR ( TRIB.) 731 (DEL.). (III) DCIT VS. SURENDRA BUILDTECH (P) LTD. (2011) 47 SOT 212 (DEL.) (TRIB.). THE LEARNED A.R. REQUESTED TO DELETE THE ADDITION CO NFIRMED BY THE LEARNED CIT(A). 5. AT THE OUTSET, THE LEARNED D.R. SUPPORTED THE OR DER OF THE LOWER AUTHORITY. 6. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. THE ASSESSEE HAD A LREADY ADMITTED TWO BILLS OF PERSONAL IN NATURE ON ACCOUNT OF BIRTH DAY OF HI S SON. THE OTHER EXPENSES SHOW THAT THE ASSESSEE INCORPORATED NAME OF THE SCH OOL B.R. SHIKSHAN 5 SANSTHAN, CHELSAI AND ALSO 50% EXPENDITURE SHARED WI TH PIE. THE TOTAL EXPENDITURE HAS BEEN DEBITED BY THE ASSESSEE ON AC COUNT OF ADVERTISEMENT AT RS. 71,16,367/- ON GROSS RECEIPTS OF RS. 2,61,97,90 5/-. THE ASSESSEE IS RUNNING A COACHING INSTITUTE IN THE NAME AND STYLE OF M/S CAREER LINE COACHING INSTITUTE FOR PRE-MEDICAL AND PRE-ENGINEER ING COURSES. THE ASSESSEE HIMSELF ADMITTED THAT HE HAS MUTUAL BENEFIT WITH BRC AS WELL AS PIE, WHICH SHOWS THAT THE ASSESSEE HAS NOT INCURRED THESE EXPEN SES WHOLLY AND EXCLUSIVELY FOR BUSINESS PURPOSES. THE ASSESSEE HAS NOT PROVED BUSINESS EXPEDIENCY FOR INCURRING THESE EXPENDITURES FOR BUS INESS PURPOSES. THE DISALLOWANCE @ 10% APPEARS TO BE HIGHER SIDE, THEREFO RE, WE CONFIRM THE DISALLOWANCE @ 5% AT RS. 3,55,800/- IN THE INTEREST O F JUSTICE. THE ASSESSEE GETS PART RELIEF. 7. THE SECOND GROUND OF APPEAL AGAINST DISALLOWANCE O F VEHICLE EXPENSES AT RS. 5,32,445/-. THE ASSESSING OFFICER OBSERVED TH AT THE ASSESSEE HAD DEBITED RS. 1,50,209/- UNDER THE HEAD OF TRAVELLING EXPENSES. THE ASSESSING OFFICER ASKED TO FURNISH THE DETAILS OF THESE EXPEN SES. AFTER VERIFICATION OF VARIOUS DETAILS, IT WAS FOUND THAT THE ASSESSEE OWNED 4 MAHINDRA MINI BUSES WITH SITTING CAPACITY OF 25 EACH, TWO VEHICLES WITH SI TTING CAPACITY OF 7 BESIDES 3 TWO WHEELERS AND 1 FOUR SEATED VEHICLE. IT WAS ADMIT TED DURING THE ASSESSMENT PROCEEDINGS THAT NO LOG BOOK HAS BEEN MA INTAINED OF ALL THESE VEHICLES. THE RUNNING EXPENSES WERE RELATED TO 4 AND 7 SEATED VEHICLES AND TWO WHEELERS ONLY. THERE WAS NO EVIDENCE WITH THE ASSESS EE TO SUBSTANTIATE 6 THE CLAIM THAT FOUR MINI BUSES WERE USED FOR THE PUR POSE OF ASSESSEES BUSINESS. HE FURTHER VERIFIED THE DRIVERS SALARY, INSURANCE, DEPRECIATION AND INTEREST ON BANK LOAN AND FINALLY CONCLUDED THAT TO TAL EXPENDITURE OF RS. 5,32,443/- HAS NOT INCURRED FOR BUSINESS PURPOSES. ACCORDINGLY HE MADE THE ADDITION OF RS. 5,32,443/-. 8. BEING AGGRIEVED BY THE ORDER OF THE LEARNED ASSE SSING OFFICER, THE ASSESSEE CARRIED THE MATTER TO THE LEARNED CIT(A), WH O HAS CONFIRMED THE ORDER OF THE LEARNED ASSESSING OFFICER BY OBSERVIN G AS UNDER:- ON THE CAREFULLY EXAMINATION OF THE IMPUGNED ORDER , IT CAN BE SEEN THAT THE A.O. HAS MADE THE ABOVE DISALLOWANCE FOR TH E REASONS THAT THE APPELLANT COULD NOT SUBSTANTIATE THE USAGE OF 4 MIN I BUSES FOR THE BUSINESS PURPOSES AS NO SUPPORTING DETAILS AND RECO RDS OF SUCH EFFECTS WERE PRODUCED IN THIS REGARD. ON THE OTHER HAND, THE LEARNED A.R. SUBMITTED THAT THESE MINI BUSES ALONGWITH OTHER VEHI CLES, WERE OWNED BY THE APPELLANT AND USED TO TRANSPORT THE STAFF ME MBERS/STUDENTS OF THE COACHING CENTER OF THE APPELLANTS. TO VERIFY THE CLAIM OF THE APPELLANT IN THIS REGARD, THE DETAILS OF VEHICLE, RELATED EXPENSES AND SUPPORTING VOUCHERS E TC. WERE CALLED FOR AND EXAMINED AT THE APPELLANT PROCEEDING ALSO. AS A LSO POINTED OUT BY THE A.O., IT IS OBSERVED THAT NO SUPPORTING VOUCHER S/RECORDS WERE FOUND/SUBMITTED, WHICH COULD SUGGEST THAT IN FACT TH ESE FOUR BUSES WERE USED FOR THE BUSINESS PROPOSED OF THE APPELLANT AT ALL. EVEN THE FUEL BILLS SUBMITTED FOR VERIFICATION WERE NOT HAVING THE REGIS TRATION NUMBERS OF THESE MINI BUSES AS SUCH. REGARDING THE OTHER ARGUM ENTS OF USING THE LOOSE DIESEL, TO RUN SUCH BUSES, IS ALSO NOT FOUND CONVINCING AS IT IS FELT THAT LOOSE DIESEL/FUEL NORMALLY MEANT FOR RUNNING T HE GENERATORS LIKE GADGETS ONLY AND THERE WERE NO REASONS/JUSTIFICATION S TO USE SUCH DIESEL FOR RUNNING THE BUSES AS SUCH. IN VIEW OF THE ABOVE FACTS, THE DISALLOWANCE OF REL ATED RUNNING EXPENSES INCURRED IN RELATION TO SUCH MINI BUSES AR E FOUND PROPER AND REASONABLE, UNDER THE GIVEN CIRCUMSTANCES. THUS, I F IND NO REASON TO 7 INTERVENE IN THE ADVERSE CONCLUSION ARRIVED AT BY T HE A.O. IN THIS REGARD. ACCORDINGLY, THE ADDITION OF RS. 5,32,443/- ON ACCO UNT OF DRIVER SALARY, INSURANCE AND DEPRECIATION OF THE MINI BUSES AND AL SO THE INTEREST PAID ON THE RELATED BANK LOAN THEREOF, IS HEREBY CONFIRM ED. 9. THE LEARNED A.R. FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE IS OWNER OF NINE VEHICLES (THREE MINI BUSES, ONE JEEP, ONE C AR, ONE TATA SAFARI AND THREE TWO WHEELERS) ONE MINI BUS WAS SOLD DURING THE YEAR ON 03/5/2007. THESE VEHICLES WERE USED BY THE STAFF FOR THE PURPOSE OF BUSINESS. THESE VEHICLES WERE USED EITHER BY STAFF, STUDENT OR TRANS PORTING THE STUDENT AT THEIR EXAMINATION CENTRE OR ON THE OCCASION OF PRIZE DIST RIBUTION FUNCTION. THE FACTS NARRATED BY THE LOWER AUTHORITIES ARE NOT CORRECT AS THE APPELLANT HAD SUBMITTED FULL DETAILS OF THE VEHICLES BEFORE THEM. NO ENQUIRY HAS BEEN CONDUCTED BY THE LOWER AUTHORITIES BEFORE DISALLOWING THE EXPENSES. THE OTHER EXPENSES RELATING TO INTEREST ON LAND AND INSURANCE OF VEHICLES ARE FIXED EXPENSES WHICH ARE REQUIRED TO BE PAID EVEN THE VE HICLES USED OR NOT USED. FURTHER DEPRECIATION IS ALSO STATUTORY DEDUCTION, C ANNOT BE DISALLOWED AS HELD IN THE CASE OF KAILASH CHANDRA GUPTA VS. DCIT 35 TAXWO RLD 36 (JPR.). 10. AT THE OUTSET, THE LEARNED D.R. SUPPORTED THE O RDER OF THE LEARNED CIT(A). 11. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THE DETAILS SUBMITTED BY THE ASS ESSEE SHOWS THAT NO LOG BOOK IS MAINTAINED BY THE ASSESSEE FOR EACH VEHICLE AS PER THEIR USE AND ALSO CAR, TATA SAFARI AND TWO WHEELERS AS WELL AS JEEP CAN BE USE FOR PERSONAL 8 PURPOSES IN ABSENCE OF PROPER RECORD OF USE. THUS, P ERSONAL ELEMENT CANNOT BE RULED OUT IN ABSENCE OF COMPLETE RECORD. WHATEVE R EXPLANATION WITH DETAILS SUBMITTED BY THE LEARNED COUNSEL, DOES NOT SUPPORT THE ASSESSEES CLAIM THAT ALL THE VEHICLES WERE USED FOR BUSINESS PURPOSES. THE DISALLOWANCE MADE BY THE ASSESSING OFFICER, CONFIRMED BY THE CIT(A) APPEA RED TO BE HIGHER SIDE. THEREFORE, WE CONFIRM DISALLOWANCE OF RS. 1,00,000/- IN THE INTEREST OF JUSTICE. THE ASSESSEE GETS PART RELIEF UNDER THIS HEAD. 12. THE THIRD GROUND OF APPEAL IS AGAINST CONFIRMING THE DISALLOWANCE OF RS. 2,63,017/- IN RESPECT OF INTEREST PAID ON LOAN TAKE N FOR THE PURPOSE OF LAND. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAD PURCHASED TWO PLOTS OF LAND AT ALWAR WITH INVESTMENT OF RS. 34,49,925/-. THER E IS NO CONSTRUCTION ON THESE LANDS. PRIMA FACIE, IT WAS FOUND THAT THESE AS SETS WERE NOT FOR THE BUSINESS PURPOSES. THE ASSESSING OFFICER GAVE REASON ABLE OPPORTUNITY OF BEING HEARD ON THIS ISSUE. THE ASSESSEE AVAILED THE OPPORTUNITY. ON VERIFICATION OF DETAILS, IT WAS FOUND BY THE ASSESSI NG OFFICER THAT PLOT NO. 966 WAS FINANCED BY ICICI BANK AND LOAN WAS GRANTED IN T HE NAME OF SHARWAN SINGH KARSAWARA (THE ASSESSEE) AND LAXMI DEVI. INTER EST OF RS. 1,16,635/- WAS PAID BY THE ASSESSEE ON LOAN ADVANCED BY THE BAN K. SIMILARLY, THE LOAN WAS TAKEN FOR PLOT NO. 964 AND 965 FROM HDFC BANK AN D PAID INTEREST @ 1,51,382/-. THESE PLOTS WERE ALSO NOT USED FOR BUSINE SS PURPOSES. THE ASSESSEE WAS RUNNING COACHING CLASSES AT ALWAR IN REN TED PREMISES. THE LAND WAS NOT USED DURING THE YEAR FOR BUSINESS PURPOSES A ND COACHING CLASSES WERE 9 RUNNING IN RENTED PREMISES. THEREFORE, HE DID NOT AL LOW INTEREST PAID ON LOAN AT RS. 2,63,017/-. 13. BEING AGGRIEVED BY THE ORDER OF THE LEARNED AS SESSING OFFICER, THE ASSESSEE CARRIED THE MATTER BEFORE THE LEARNED CIT( A), WHO HAS CONFIRMED THE DISALLOWANCE BY OBSERVING AS UNDER:- IT IS ALSO EVIDENT THAT THE LAND/PLOTS, FOR THE TI ME BEING, EVEN IF ARE CONSIDERED AS BUSINESS ASSETS, THE SAME HAVE NOT BE EN PUT INTO USE FOR BUSINESS PURPOSES IN THE CURRENT YEAR. IN SIMILAR S ITUATION THE COURTS HAVE HELD THAT THE INTEREST INCURRED TOWARDS THE LOA N UTILIZED TO ACQUIRE A CAPITAL ASSETS, CAN NOT BEEN CLAIMED AS REVENUE E XPENDITURE, TILL THE ASSETS IS PUT TO USE FOR THE BUSINESS PURPOSES. THE ABOVE RATIO HAS BEEN LAID DOWN IN THE FOLLOWING DECISIONS. I. VARADHAMAN POLYTEX LTD. 300 ITR 186 (P&H) II. J.C.T. LTD. 267 ITR 115 (CAL.) CONSIDERING THE ABOVE LEGAL AND FACTUAL POSITIONS, IT IS CONCLUDED THAT THE EXPENDITURE OF RS. 2,63,017/-, INCURRED AS INTE REST PAYMENT TOWARDS ACQUISITION OF LAND/PLOTS, IS EITHER NOT A BUSINESS EXPENDITURE AS RELATED TO PERSONAL PROPERTY OR OTHERWISE NOT A REVENUE EXPE NDITURE AS THE PROPERTY HAS NOT BEEN UTILIZED FOR BUSINESS PURPOSE S, AS SUCH. ACCORDINGLY, SUCH EXPENDITURE IS NOT FOUND AS AN AL LOWABLE EXPENDITURE U/S 37(1) OF THE ACT, THEREFORE, THE ADDITION OF RS . 263017/- IS HEREBY CONFIRMED. CONSEQUENTLY, THIS GROUND OF APPEAL IS R EJECTED. 14. THE LEARNED A.R. FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE WAS RUNNING COACHING INSTITUTE AT ALWAR FROM RENTED PREM ISES. IN ORDER TO RUN THE INSTITUTE IT IS OWN BUILDING AND TO AVOID HEAVY RENT EXPENSES, THE ASSESSEE PURCHASED THREE PLOTS OF LAND AT ALWAR, WHICH WERE FIN ANCED BY THE BANKS ON WHICH, INTEREST WAS PAID. IT IS A FACT THAT PLOT OF L ANDS WERE PURCHASED BY THE ASSESSEE IN EARLIER YEARS WITH AN INTENTION TO CONST RUCT OWN PREMISES IN THE 10 INDIVIDUAL NAME NOT IN THE NAME OF PROPRIETY CONCER N M/S CAREER LINE COACHING INSTITUTE, DOES NOT PROVE THAT PLOTS WERE N OT PURCHASED FOR BUSINESS PURPOSES. THE PREMISES, ON THESE PLOTS WERE CONSTRUC TED IN THE SUBSEQUENT YEAR. THE PLOTS TILL THE PREMISES WERE CONSTRUCTED WER E USED BY THE ASSESSED FOR PARKING AND FOR ASSEMBLING OF THE STUDENTS. SEC TION 36(3) OF THE ACT ALLOWED THE EXPENDITURE INCURRED ON PAYMENT OF INTER EST ON CAPITAL BORROWED FOR THE PURPOSE OF BUSINESS. OUT OF THREE PLOTS, ON LY ONE PLOT IS IN THE JOINT NAME OF HIS WIFE, ULTIMATELY ON WHICH BUILDING WAS CON STRUCTED FOR BUSINESS PURPOSES. HE FURTHER RELIED IN CASE OF CIT VS. H.C. SHANKARAPPA 234 ITR 15 (KAR.) (H.C.), 300 ITR 186 (P&H) AND 267 ITR 115 (CA L.) AND ARGUED THAT LOAN WAS TAKEN FOR THE BUSINESS PURPOSES ON WHICH INTEREST WAS PAID, IS ALLOWABLE U/S 36(1) OF THE ACT. 15. AT THE OUTSET, THE LEARNED D.R. SUPPORTED THE O RDER OF THE LEARNED CIT(A). 16. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. AS PER ASSESSEE, THESE PLOTS WERE PURCHASED IN EARLIER YEAR, WHICH HAVE BEEN SHOWN IN THE FIXED ASSETS. UNDISPUTEDLY, NO CONSTRUCTION WAS CARRIED OUT BY THE ASSESSEE ON THES E PLOTS. THE SCHOOL WAS RUNNING IN RENTED PREMISES. THE PLOTS WERE PURCHASED IN THE INDIVIDUAL NAME OF ASSESSEE WITH HIS WIFE. THE LOANS WERE GRANTED IN TH E INDIVIDUAL CAPACITY BY THE BANKS. THE ASSESSEE WAS IN THE BUSINESS OF COACHI NG CLASSES. THERE IS NO DIRECT NEXUS ESTABLISHED BY THE ASSESSEE THAT THESE PLOTS WERE PURCHASED AND 11 UTILIZED FOR BUSINESS PURPOSES. THESE LOANS WERE GR ANTED AGAINST PURCHASE OF PLOTS, WHICH IS BASICALLY CAPITAL ASSETS IN NATURE. EVEN, THESE PLOTS OF LAND ARE CONSIDERED AS BUSINESS ASSETS AND THE SAME HAD NOT BEEN PUT INTO USE FOR BUSINESS PURPOSE IN THE CURRENT YEAR. THE BUSINESS EXPENSE IS NOT ALLOWED UNDER THE PROVISO OF SECTION 36(III) OF THE ACT. THE LEARNED A.R. OF THE ASSESSEE HAS NOT CONTROVERTED THE FINDING GIVEN BY THE LEARNED CIT(A). THE CASE LAWS RELIED UPON BY THE ASSESSEE ARE NOT SQUARE LY APPLICABLE ON THE CASE OF THE ASSESSEE. THEREFORE, WE CONFIRM THE ORDER OF T HE LEARNED CIT(A). 17. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTL Y ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 08/08/2014. SD/- SD/- (R.P. TOLANI) (T.R. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER JAIPUR, DATED : 08 TH AUGUST, 2014 * RANJAN COPY FORWARDED TO :- 1. SHRI SHARWAN SINGH KARSAWARA, SIKAR. 2. THE DCIT, CIRCLE- SIKAR. 3. THE CIT (A) 4. THE CIT 5. THE D/R GUARD FILE (I.T.A. NO. 1063/JP/2011) BY ORDER, AR ITAT JAIPUR.