KALAVATI PROUCTS P. LTD, MUMBAI V. ACIT 10(3), MUMBAI

ITA 1153/MUM/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 70761 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-08-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2005-2006
• Appeal Filed On: 20-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R M MAHAVI

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUM BAI . , !'# $ $ $ $ %& ' , () %*+ ( %# BEFORE SHRI D. MANMOHAN, VP AND SHRI SANJAY ARORA, AM %./ I.T.A. NOS.1153 & 1154/MUM/2012 ( - $.- - $.- - $.- - $.- / / / / ASSESSMENT YEAR: 2005-06 & 2006-07) KALAVATI PRODUCTS P. LTD. 3-K, VIJAY CHAMBERS, TRIBHUVAN ROAD, OPP. DREAMLAND CINEMA, MUMBAI-400 004 / VS. ASST. CIT-10(3) AAYKAR BHAVAN, MUMBAI +/ () % ./ &0 % ./ PAN/GIR NO. AABCK 6982 F ( /1 / APPELLANT ) : ( 23/1 / RESPONDENT ) /1 4 %( / APPELLANT BY : SHRI NISHIT GANDHI 23/1 5 4 %( / RESPONDENT BY : MS. R. M. MAHAVI %$ 5 6) / // / DATE OF HEARING : 05.08.2013 7. 5 6) / DATE OF PRONOUNCEMENT : 16.08.2013 *(8 / O R D E R PER SANJAY ARORA, A. M.: THESE ARE A SET OF TWO APPEALS BY THE ASSESSEE, I.E ., FOR TWO CONSECUTIVE ASSESSMENT YEARS (A.YS.), BEING 2005-06 & 2006-07, ARISING OUT OF SEPARATE ORDERS OF EVEN DATE, I.E., 12.12.2011, BY THE COMMISSIONER OF INCOME TAX (APPEALS)-22, MUMBAI (CIT(A) FOR SHORT), PARTLY ALLOWING THE ASSESSEE S APPEALS CONTESTING ITS ASSESSMENTS U/S.143(3) R.W.S. 254 OF THE INCOME TAX ACT, 1961 ( THE ACT HEREINAFTER) FOR THE RELEVANT YEARS VIDE ORDERS DATED 24.06.2011. 2 ITA NOS.1153 & 1154/M/12 (A.YS. 05-06 & 06-07) KALAVATI PRODUCTS P. LTD. VS. ASST. CIT 2.1 OPENING THE ARGUMENTS FOR AND ON BEHALF OF THE ASSESSEE, IT WAS EXPLAINED BY THE LD. AR, THE ASSESSEES COUNSEL, THAT THE ONLY ISSUE ARISING IN THE INSTANT APPEALS BY THE ASSESSEE IS THE RESTRICTION OF THE TOTAL INCOME BY THE ASSESSING OFFICER (A.O.) TO THAT AS RETURNED BY THE ASSESSEE FOR THE RELEVANT YEARS ON THE GROUND THAT THE SAME COULD NOT BE ASSESSED AT AN AMOUNT/S BELOW THAT RETURNED. PLACIN G THE ASSESSMENT ORDERS FOR A.Y. 1999-2000 & 2000-01 AND THAT BY THE TRIBUNAL FOR A. Y. 2001-02 (IN ITA NO.7679/MUM/2004 DATED 19.01.2009) ON RECORD, IT WA S FURTHER SUBMITTED BY HIM THAT THE DIFFERENCE TO THE RETURNED INCOME ARISES ON ACC OUNT OF ALLOWANCE OF INTEREST FOR THE PRECONSTRUCTION PERIOD, WHICH STOOD COMPLETED EARLI ER. AS FOR EXAMPLE, DURING THE PREVIOUS YEAR RELEVANT TO A.Y. 2001-02, IN THE CASE BEFORE THE TRIBUNAL, WHICH IS TO BE ALLOWED IN EQUAL FIVE INSTALLMENTS, I.E., @ 1/5 TH EACH, FOR EACH OF THE FOLLOWING FIVE YEARS, BEING A.YS. 2002-03 TO 2006-07. THAT IN FACT IS THE ADMITTED POSITION, AS WOULD BE EVIDENT FROM THE ASSESSMENT ORDERS FOR AY 1999-2000 & 2000-01, WITH THE ORDER OF THE TRIBUNAL ALSO HAVING NOT BEEN CHALLENGED. SO, HOWEV ER, EVEN AS HE COMPUTES THE ASSESSED INCOME IN TERMS OF HIS OWN DIRECTION FOR A.Y. 1999- 2000 AND 2000-01, AS WELL AS THAT BY THE TRIBUNAL FOR A.Y. 2001-02, THE AO IN EFFECT WIT HDRAWS THE SAME BY INSISTING ON ASSESSING THE INCOME AT THE RETURNED INCOME. THERE IS NO MANDATE IN LAW FOR THE SAME, FURTHER PLACING RELIANCE ON THE DECISION IN THE CAS E OF GUJARAT GAS CO. LTD. VS. JT. CIT [2000] 245 ITR 84 (GUJ). 2.2 THE LD. DR, ON THE OTHER HAND, WOULD RELY ON TH E ORDERS BY THE AUTHORITIES BELOW. 3. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATE RIAL ON RECORD. THE ASSESSEE IS A COMPANY DEALING IN FOOD GRAINS A ND OILS. APART THERE-FROM, IT IS ALSO IN THE BUSINESS OF LEASING, RECEIVING LEASE RE NT SINCE 1998. THE SAID RENTAL INCOME IS BEING ASSESSED UNDER THE HEAD OF INCOME INCOME FRO M HOUSE PROPERTY FOR EACH OF THE SUBSEQUENT YEARS. THE ASSESSEE HAVING CLAIMED THE I NTEREST FOR THE PRECONSTRUCTION PERIOD IN THE YEAR/S OF COMPLETION OF CONSTRUCTION, THE SA ME CAME TO BE DISALLOWED, WHILE AT THE SAME TIME ADMITTING THE ASSESSEES CLAIM FOR BEING ALLOWED THE SAME IN FIVE EQUAL 3 ITA NOS.1153 & 1154/M/12 (A.YS. 05-06 & 06-07) KALAVATI PRODUCTS P. LTD. VS. ASST. CIT INSTALLMENTS BEGINNING WITH THE YEAR OF COMPLETION OF THE CONSTRUCTION OF THE RELEVANT HOUSE PROPERTY, IN TERMS OF EXPLANATION TO SECTION 24(B) OF THE ACT. THIS POSITION IS UNDISPUTED, AND TOWARD WHICH THE ASSESSEE HAS PLACE D ON RECORD THE ASSESSMENT ORDERS FOR A.YS. 1999-2000 AND 2000-01 IN RESPECT OF ONE COMPO NENT OF INTEREST, I.E., RS.2,11,320/-, AND THE ORDER BY THE TRIBUNAL FOR A.Y. 2001-02 FOR THE OTHER LIMB OF SUCH INTEREST, I.E., QUA A SEPARATE CONSTRUCTION (AT RS.1,23,625/-). ACCORDI NGLY, FOR BOTH THE YEARS UNDER REFERENCE, WHILE THE INCOME STOOD INITIALLY REDUCED BY AN AMOUNT OF RS.3,34,945/- (RS.2,11,320 + RS.1,23,625), THE SAME STOOD ASSESSE D AT THE RETURNED INCOME, ON THE GROUND THAT THE ASSESSED INCOME COULD NOT FALL BELO W THE RETURNED INCOME. THERE IS NO CAVEAT IN LAW TOWARD THE SAME, AND FOR WHICH THE AS SESSEE RELIES ON THE DECISION IN THE CASE OF GUJARAT GAS CO. LTD. (SUPRA). THE DECISION IN THE CASE OF CIT VS. SHELLY PRODUCTS 2003] 261 ITR 367 (SC) WOULD ALSO NOT APPLY INASMUC H AS IT IS ONLY UNDER THE CIRCUMSTANCES WHERE THE INCOME COULD NOT BE ASSESSE D, IN VIEW OF THE ASSESSMENT BEING SET ASIDE OR CANCELLED, ETC., THAT IT STOOD HELD B Y THE HONBLE APEX COURT THAT THE INCOME IN SUCH A CASE COULD NOT BE ASSESSED AT AN AMOUNT LOWE R THAN THAT RETURNED AND, CONSEQUENTLY, THE ASSESSEE WOULD NOT BE ENTITLED TO A REFUND OF THE AMOUNT PAID AS ADVANCE-TAX/SELF ASSESSMENT TAX. IN THE INSTANT CASE, ON THE OTHER HAND, THE INCOME AS ASSESSED IS UNDISPUTEDLY IN TERMS OF AND IN ACCORDANCE WITH THE LAW AND, THEREF ORE, THERE IS NO BASIS FOR RESTRICTING THE INCOME TO THAT RETURNED; THE ASSESSEE HAVING CLAIME D THE ENTIRE INTEREST FOR THE PRECONSTRUCTION PERIOD IN THE YEAR OF COMPLETION OF THE RELEVANT CONSTRUCTION. DOING SO WOULD BE IN EFFECT DENYING IT THE DEDUCTION U/S. 24 (B) FOR THE RELEVANT YEARS, TO WHICH IT IS ENTITLED IN LAW. AS SUCH, THE ASSESSMENT FOR BOTH T HE YEARS OUGHT TO BE FINALIZED WITHOUT THE RESTRICTION AFORESAID, I.E., AT RS.30,42,560/- AND RS.5,02,099/- FOR A.YS. 2005-06 AND 2006-07 RESPECTIVELY. THE REVENUES GROUND IS WITHOUT MERIT . CONTINUING FURTHER, WE FIND THAT EVEN THE ASSESSEE S CLAIM IS NOT WITHOUT BLEMISH, AND NOT SUSTAINABLE, AT LEAST WHOLLY. THE LAW, VIDE EXPLANATION TO SECTION 24(B), READING AS UNDER, IS PLAIN AND UNAMBIGUOUS: 4 ITA NOS.1153 & 1154/M/12 (A.YS. 05-06 & 06-07) KALAVATI PRODUCTS P. LTD. VS. ASST. CIT DEDUCTIONS FROM INCOME FROM HOUSE PROPERTY . 24. INCOME CHARGEABLE UNDER THE HEAD 'INCOME FROM HOUSE PROPERTY' SHALL BE COMPUTED AFTER MAKING THE FOLLOWING DEDUCTIONS, NAMELY: ( A ) A SUM EQUAL TO THIRTY PER CENT OF THE ANNUAL VALU E; ( B ) WHERE THE PROPERTY HAS BEEN ACQUIRED, CONSTRUCTED , REPAIRED, RENEWED OR RECONSTRUCTED WITH BORROWED CAPITAL, THE AMOUNT OF ANY INTEREST PAYABLE ON SUCH CAPITAL: PROVIDED THAT PROVIDED FURTHER 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 PROPERTY HAS BEEN ACQUIRED OR CONSTRUCTED, AS REDUCED BY ANY PART THE REOF ALLOWED AS DEDUCTION UNDER ANY OTHER PROVISION OF THIS ACT, SH ALL BE DEDUCTED UNDER THIS CLAUSE IN EQUAL INSTALMENTS FOR THE SAID PREVI OUS YEAR AND FOR EACH OF THE FOUR IMMEDIATELY SUCCEEDING PREVIOUS YEARS . [EMPHASI S OURS] THE INTEREST ON THE BORROWED CAPITAL UTILIZED FOR, AMONG OTHERS, CONSTRUCTION, FOR THE PRECONSTRUCTION PERIOD IS TO BE ALLOWED IN FIVE EQU AL INSTALLMENTS BEGINNING THE YEAR OF THE COMPLETION OF CONSTRUCTION, I.E., IN THAT YEAR AND THE FOLLOWING FOUR ASSESSMENT YEARS. THE CONSTRUCTION QUA THE SECOND LIMB OF THE INTEREST, AS FOUND BY THE T RIBUNAL VIDE ITS ORDER FOR A.Y. 2001-02 (SUPRA) STANDS COMPLETED DUR ING THE PREVIOUS YEAR RELATING TO A.Y. 2001-02 (PER PARA 9 OF ITS ORDER). ACCORDINGLY , THE INTEREST IS ALLOWABLE @ 1/5 TH FROM A.Y. 2001-02 TO A.Y. 2005-06 AS PER THE CLEAR MANDA TE OF LAW. THE ASSESSEES CLAIM FOR A.Y. 2006-07 IN ITS RESPECT IS THUS NOT MAINTAINABL E IN LAW . AS REGARDS THE FIRST LIMB OF INTEREST, I.E., FOR RS.2,11,320/-; AGAIN, THE VERY FACT OF DISALLOWANCE FOR A.YS. 1999-00 AND 2000-01 IMPLIES COMPLETION OF THE RELEVANT CONS TRUCTION AT LEAST DURING THE PREVIOUS YEAR RELEVANT TO A.Y. 1999-00, IF NOT EARLIER. AS S UCH, WE ARE UNABLE TO SEE AS TO HOW ANY PART OF THE SAID INTEREST, I.E., ON THE RELEVANT HO USE PROPERTY, COULD BE ALLOWED AS DEDUCTION FOR THE YEARS UNDER REFERENCE, I.E., A.YS . 2005-06 AND 2006-07. THE ASSESSEES 5 ITA NOS.1153 & 1154/M/12 (A.YS. 05-06 & 06-07) KALAVATI PRODUCTS P. LTD. VS. ASST. CIT CLAIM IN ITS RESPECT IS, THEREFORE, INCONSISTENT WI TH AND, ACCORDINGLY, NOT MAINTAINABLE IN LAW . TO BE FAIR THOUGH; THE MATTER HAVING NOT BEEN RAI SED DURING HEARING, WE CONFIRM THE DISALLOWANCE OF THIS INTEREST SUBJECT TO THE NECESS ARY CONFIRMATION BY THE AO WHILE GIVING EFFECT TO THIS ORDER. ACCORDINGLY, THE DISAL LOWANCE WOULD NOT SURVIVE ONLY IF FOUND TO BE FALLING WITHIN THE PARAMETERS OF S. 24(B), IN WHICH CASE THE AO SHALL ALSO CLARIFY PER HIS CONSEQUENTIAL ORDER AS TO HOW THE ASSESSMENTS F OR ASSTT. YEARS 1999-00 & 2000-01 ARE LINKED WITH THAT FOR THE CURRENT YEARS, BEING APART BY OVER FIVE YEARS, QUA INTEREST FALLING UNDER EXPLANATION TO S. 24(B), AS ADMITTED TO BY THE ASSESSEE. WE DE CIDE ACCORDINGLY. BEFORE PARTING, WE MAY CLARIFY THAT OUR REASON/S FO R UPHOLDING OF THE ASSESSMENT/S (WHERE AND TO THE EXTENT WE HAVE) MAY BE DIFFERENT FROM THAT WHICH PREVAILED WITH THE REVENUE. HOWEVER, THAT WOULD BE TO NO MOMENT. IT IS TRITE A LAW THAT IT IS THE CORRECT LEGAL POSITION THAT IS RELEVANT AND IS TO BE APPLIED, AND NOT THE VIEW THAT THE PARTIES MAY TAKE OF THEIR RIGHTS IN THE MATTER (REFER: KEDARNATH JUTE MFG. CO. LTD. V. CIT [1971] 82 ITR 363 (SC); CIT V. C. PARAKH & CO. (INDIA) LTD . [1956] 29 ITR 661 (SC)). AGAIN, WE ARE ALSO CONSCIOUS OF THE TRIBUNAL HAVING MENTIONED THE YEAR S OF ALLOWANCE OF INTEREST (FOR RS.1,23,625/-) AS FROM AYS 2002-03 TO 2006-07. THE MATTER WITH REGARD TO THE YEARS FOR WHICH THE INTEREST FOR THE PRECONSTRUCTION PERIOD I S TO BE ALLOWED U/S. 24(B), GIVEN THE FINDING/ACCEPTANCE OF FACT OF THE COMPLETION OF THE RELEVANT CONSTRUCTION DURING THE PREVIOUS YEAR RELEVANT TO AY 2001-02 BY THE TRIBUNA L, WHICH HAS ATTAINED FINALITY ON IT BEING NOT CHALLENGED, IS PURELY A LEGAL MATTER, WIT H THE LAW BEING UNAMBIGUOUSLY CLEAR. AS SUCH, WE FIND NO BAR IN LAW IN DIRECTING FOR ITS ALLOWANCE IN ACCORDANCE WITH THE CLEAR PROVISION OF LAW . AS CLARIFIED BY THE HONBLE APEX COURT IN ESCORTS LTD. V. UNION OF INDIA [1993] 199 ITR 43 (SC), THAT WHERE A PROVISION IS CLEAR AS TO ITS SCOPE, T HAT INTERPRETATION IS TO BE ADOPTED, IRRESPECTIVE OF THE ACCEPTANCE OF A CONTRARY VIEW BY SOME AUTHORITY AND RAISED BY THE ASSESSEE. IT IS EVEN OTHERWISE TRITE THAT THERE IS NO ESTOPPEL AGAINST THE LAW. 6 ITA NOS.1153 & 1154/M/12 (A.YS. 05-06 & 06-07) KALAVATI PRODUCTS P. LTD. VS. ASST. CIT 4. IN THE RESULT, THE ASSESSEES APPEALS FOR BOTH T HE YEARS ARE DISPOSED OF IN THE AFORESAID TERMS. ORDER PRONOUNCED IN THE OPEN COURT ON AUGUST 16, 20 13 SD/- SD/- (D. MANMOHAN) (SANJAY ARORA) !'# / VICE PRESIDENT () %*+ / ACCOUNTANT MEMBER MUMBAI; 9* DATED : 16.08.2013 $..%./ ROSHANI , SR. PS *(8 5 26: ;(:.6 *(8 5 26: ;(:.6 *(8 5 26: ;(:.6 *(8 5 26: ;(:.6/ COPY OF THE ORDER FORWARDED TO : 1. /1 / THE APPELLANT 2. 23/1 / THE RESPONDENT 3. < ( ) / THE CIT(A) 4. < / CIT CONCERNED 5. :$?@ 26 , , / DR, ITAT, MUMBAI 6. @- A / GUARD FILE *(8% *(8% *(8% *(8% / BY ORDER, ! !! !/ // /% & % & % & % & (DY./ASSTT. REGISTRAR) , , , , / ITAT, MUMBAI