ACIT CIR 5(3), MUMBAI V. XTP DESIGN FURNITURE LTD, MUMBAI

ITA 1106/MUM/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 83559 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-08-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 31-07-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 07-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PARMINDER
• Keywords: Capital expenditure
• Section: 37(1)

Judgement Text

G IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI BEFORE S/SHRI H.L. KARWA, HONBLE PRESIDENT AND N.K . BILLAIYA, AM .. , . . , ./ I.T.A. NO.1106 /MUM/2013 ( / ASSESSMENT YEAR : 2009-2010 DY . COMMISSIONER OF INCOME TAX 5(3), 573, AAYAKAR BHAVAN, 5 TH FLOOR, MUMBAI - 20. / VS. M/S XTP DESIGN FURNITURE LTD., 203, HYDE PARK, ANDHERI SAKI NAKA ROAD, SAKIVIHAR ROAD, ANDHERI (E), MUMBAI. ' ./ PAN : AAACX 0160 B ( '# / APPELLANT ) .. ( $%'# / RESPONDENT ) ./ I.T.A. NO.1184 /MUM/2013 ( / ASSESSMENT YEAR : 2009-2010 M/S XTP DESIGN FURNITURE LTD., 203, HYDE PARK, ANDHERI SAKI NAKA ROAD, SAKIVIHAR ROAD, ANDHERI (E), MUMBAI. / VS. DY. COMMISSIONER OF INCOME TAX 5(3), 573, AAYAKAR BHAVAN, 5 TH FLOOR, MUMBAI - 20. ' ./ PAN : AAACX 0160 B ( '# / APPELLANT ) .. ( $%'# / RESPONDENT ) REVENUE BY SMT. PARMINDER ASSESSEE BY SHRI PRAKASH JOTWANI & ' ( )* / DATE OF HEARING : 20-08-2014 +,-. ( )* / DATE OF PRONOUNCEMENT : 20-08-2014 [ ITA 1106/M/13 & 1184/M/13 2 / / O R D E R PER N.K. BILLAIYA, A.M . : . . , THESE CROSS APPEALS BY THE ASSESSEE AND THE REVENUE ARE PREFERRED AGAINST THE ORDER OF THE LD. CIT(A) -9, MUMBAI DATE D 23-11-2012 PERTAINING TO A.Y. 2009-10. THESE APPEALS ARE HEARD TOGETHER AND DISPOSE OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE AND BREVIT Y. 2. THE SOLE GRIEVANCE OF THE ASSESSEE IS THAT THE L D. CIT(A) ERRED IN CONFIRMING THE ACTION OF THE A.O. AND NOT ALLOWING INTEREST EXPENDITURE U/S 57(III) OR 36(1)(III) OR 37(1) OF THE INCOME TAX AC T, 1961 AMOUNTING TO RS. 3,40,59,571/-. 3. DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEED INGS, THE A.O. NOTICED THAT THE ASSESSEE HAS CLAIMED AN AMOUNT OF RS. 3,40 ,59,571/- AS INTEREST PAID ON BORROWED MONEY FOR INVESTMENT IN FOREIGN SU BSIDIARY COMPANY. THE INTEREST WAS CLAIMED AS A DEDUCTION FROM INCOME FR OM HOUSE PROPERTY. THE LD. CIT(A) HAS CONSIDERED THIS ISSUE VIDE PARA 8 ON PAGE 16 OF HIS ORDER . THE LD. CIT(A) OBSERVED THAT THE ASSESSEE HAS ACQUIRED A TERM LOAN OF RS. 42.50 CRORES @ 13% INTEREST PER ANNUM AND A SUM OF RS. 30 CRORES OF SUCH INTEREST BEARING LOAN WAS INVESTED IN A FOREIGN COMPANY IE. M/S GREAT CATCH GROUP LTD. THE LD. CIT(A) FURTHER OBSERVED THAT THE ASSE SSEE IS NOT ENGAGED IN ANY BUSINESS WHATSOEVER IN THE YEAR UNDER CONSIDERATION , THEREFORE, THERE IS NO QUESTION OF ALLOWING ANY INTEREST EXPENDITURE. THE LD. CIT(A) ACCORDINGLY HELD THAT THE INTEREST EXPENSES CANNOT BE ALLOWED AS DED UCTION. HOWEVER, ON FINDING THAT THE ASSESSEE HAS DISCLOSED INVESTMENT IN FOREIGN COMPANY UNDER THE HEAD CAPITAL ACCOUNT, THE LD. CIT(A) DIRECTED THE A.O. TO TREAT THE INTEREST EXPENDITURE AS CAPITAL EXPENDITURE FOR ACQUIRING TH E SHARES OF FOREIGN COMPANY. AGGRIEVED BY THE DISALLOWANCE OF INTEREST, THE ASSESSEE IS IN APPEAL ITA 1106/M/13 & 1184/M/13 3 BEFORE US AND THE REVENUE IS IN APPEAL VIDE GROUND NO. 2 FOR THE DIRECTION THAT THE INTEREST SHOULD BE CAPITALIZED. 4. THE UNDISPUTED FACT IS THAT THE BORROWED CAPITAL WAS INVESTED IN THE SHARES OF A FOREIGN COMPANY. IT IS ALSO AN UNDISPUT ED FACT THAT THE ASSESSEE IS NOT CARRIED ON ANY BUSINESS DURING THE YEAR UNDER C ONSIDERATION. SINCE THE MONEY WAS BORROWED FOR CAPITAL INVESTMENT, THE INTE REST ON THE BORROWING NEED TO BE CAPITALIZED AS RIGHTLY HELD BY THE LD. C IT(A). WE, THEREFORE, DISMISS THE APPEAL OF THE ASSESSEE AND SIMULTANEOUSLY GROUN D NO. 2 OF THE REVENUES APPEAL. 5. THE ONLY OTHER GROUND IN REVENUES APPEAL RELATE S TO THE TREATMENT OF RS. 4,74,64,848/- AS INCOME FROM HOUSE PROPERTY A S AGAINST INCOME FROM OTHER SOURCES TREATED BY THE A.O. 6. THE UNDISPUTED FACT IS THAT THE ASSESSEE IS AN O WNER OF OFFICES AT UNIT NO. 201, 301 AND 401 IN PENINSULA CHAMBERS, LOWER P AREL, MUMBAI AND THE PREMISES WAS LEASED OUT TO GROUPM MEDIA PVT. LTD. A ND HINDUSTAN THOMPSON ASSOCIATES PVT. LTD. IT IS ALSO A FACT TH AT THE ASSESSEE HAS GIVEN THE LESSEES ADDITIONAL COMMON FACILITIES LIKE LIFT, SECURITY, FIRE FIGHTING SYSTEM, COMMON AREA FACILITIES, CAR PARKING, TERRACE USE, W ATER SUPPLY ETC. WE FIND THAT THE A.O. HAS TAXED LICENSE FEES OF RS. 4,38,13 ,370/- UNDER THE HEAD INCOME FROM HOUSE PROPERTY AND AMENITIES FEE OF R S. 4,74,64,484/- UNDER THE HEAD INCOME FROM OTHER SOURCES. WE FIND THAT THE NATURE OF SERVICES PROVIDED BY THE ASSESSEE TO THE TENANTS/LESSEES WER E LINKED TO THE PREMISES AND WERE IN THE NATURE OF AUXILIARY SERVICES WHICH WERE DIRECTLY LINKED TO THE LEASING OF THE PROPERTY. SINCE THERE A DIRECT NEXU S BETWEEN THE AMENITIES AND LEASED PREMISES, THE LD. CIT(A) HAS RIGHTLY DIRECTE D THE A.O. TO TREAT THE INCOME FROM AMENITIES UNDER THE HEAD INCOME FROM H OUSE PROPERTY. WE DO NOT FIND ANY INFIRMITY OR ERROR IN THE FINDINGS OF THE LD. CIT(A). GROUND NO. 1 OF THE REVENUES APPEAL IS ACCORDINGLY DISMISSED. ITA 1106/M/13 & 1184/M/13 4 7. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS D ISMISSED AND THE APPEAL FILED BY THE REVENUE IS ALSO DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 20 TH AUGUST, 2014. / ( +,-. & 0 1 2 3 20 -8-2014 , ( 4' SD/- SD/- (H.L. KARWA) (N.K. BILLAIYA ) /PRESIDENT ACCOUNTANT MEMBER & ' MUMBAI ; 2 DATED 20-8-2014 [ .C../ R.K. , SR. PS ! ' #$%& ' &$ / COPY OF THE ORDER FORWARDED TO : 1. '# / THE APPELLANT 2. $%'# / THE RESPONDENT. 3. & D) ( ) / THE CIT(A) 9, MUMBAI 4. & D) / CIT- 5, MUMBAI 5. GH4 $C)CIJ , * IJ. , & ' / DR, ITAT, MUMBAI G BENCH 6. 4K L' / GUARD FILE. ! ( / BY ORDER, %G) $C) //TRUE COPY// )/(* + ( DY./ASSTT. REGISTRAR) , & ' / ITAT, MUMBAI