DCIT, Chandigarh V. M/s Collosal Real Estates Pvt. Ltd., Chandigarh

ITA 1187/CHANDI/2010

• Counselvise Citation: 118721514 RSA 2010
• Duration Of Justice: 2 year(s) 1 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-11-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 07-11-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 04-10-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N K SAINI
• Assessee Lawyers: HARRY RIKHY
• Keywords: Business income; Depreciation; Business expenditure; Source of fund
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH A, CHANDIGARH BEFORE MS. SUSHMA CHOWLA, JUDICIAL MEMBER AND SHRI MEHAR SINGH, ACCOUNTANT MEMBER ITA NO. 1187/CHD/2010 (ASSESSMENT YEAR : 2007-08) THE D.C.I.T., VS. M/S COLLOSAL REAL ESTATES PVT . LTD., CIRCLE-1(1), HOUSE NO.302, SECTOR 9-D, CHANDIGARH. CHANDIGARH. PAN: AABCC5771E (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI N.K.SAINI, DR RESPONDENT BY : SHRI HARRY RIKHY DATE OF HEARING : 07.11.2012 DATE OF PRONOUNCEMENT : 27.11.2012 O R D E R PER SUSHMA CHOWLA, J.M, : THE APPEAL FILED BY THE REVENUE IS AGAINST THE ORDE R OF THE COMMISSIONER OF INCOME-TAX (APPEALS), CHANDIGARH DA TED 24.06.2010 RELATING TO ASSESSMENT YEAR 2007-08 AGAINST THE ORD ER PASSED U/S 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E LEARNED CIT(A) HAS ERRED IN DELETING THE ADDITIONS OF RS. 23,67,51 6/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF DISALLOWANCE OF INTEREST PAID BY THE APPELLANT TO ING VYSYA BANK . 2. IT IS PRAYED THAT THE ORDER OF THE ID. CIT(A) BE CANCELLED AND THAT OF THE ASSESSING OFFICER BE RESTORED. 3. THE APPELLANT CRAVES TO ADD OR AMEND ANY GROU NDS OF APPEAL BEFORE THE APPEAL IS HEARD OR DISPOSED OF. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A PRIVATE LIMITED COMPANY AND HAD SHOWN INCOME FROM HOUSE PRO PERTY AND LOSS 2 FROM BUSINESS. THE ASSESSEE HAD FILED RETURN OF IN COME DECLARING NIL INCOME I.E. AFTER ADJUSTING THE INCOME FROM HOUSE P ROPERTY AGAINST BUSINESS LOSS DETERMINED DURING THE YEAR. THE CLAI M OF DEPRECIATION ON BUILDING AGAINST WHICH RENTAL INCOME WAS SHOWN BY T HE ASSESSEE WAS DISALLOWED BY THE ASSESSING OFFICER, WHICH HAS BEEN ACCEPTED BY THE ASSESSEE. FURTHER THE ASSESSEE HAD CLAIMED INTERES T PAID TO BANK AT RS.23,67,516/-. THE SAID EXPENDITURE WAS DEBITED T O THE INCOME FROM BUSINESS. THE ASSESSING OFFICER REQUISITIONED THE ASSESSEE TO FURNISH THE DETAILS OF LOANS RAISED FOR RUNNING ITS BUSINES S AND THE NATURE OF BUSINESS CARRIED ON BY THE ASSESSEE. THE ASSESSING OFFICER AFTER EXAMINING THE SAID DETAILS OBSERVED THAT AS PER DETAILS FURNISHED BY THE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS IT IS SE EN THAT THE INTEREST CLAIMED AS EXPENSES BY THE ASSESSEE IS NOT A BUSINE SS EXPENSES AND HENCE CANNOT BE ALLOWED AS BUSINESS EXPENDITURE. THEREFO RE A SUM OF RS.23,67,516/- IS ADDED TO THE BUSINESS INCOME OF T HE ASSESSEE . 4. BEFORE THE CIT (APPEALS) THE CLAIM OF THE ASSESS EE WAS THAT THE SAID INTEREST OF RS.23,67,516/- WAS PAID TO ING VYS YA BANK FOR THE LOAN TAKEN FOR SHOWROOM NOS. 1,2 AND 3, SECTOR 9D, CHAND IGARH AND WAS TO BE ADJUSTED AGAINST THE RENTAL INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY. THE SUBMISSIONS ARE REPRODUCED BY THE C IT (APPEALS) UNDER PARA 4 READ AS UNDER: 4. DURING THE APPELLATE PROCEEDINGS, THE LD. COUNSEL S UBMITTED AS UNDER : IT IS SUBMITTED THAT THE LD. ASSESSING OFFICER HAS MADE THE DISALLOWANCE OF AMOUNTING TO RS.23,67,516/- PAID TO ING VYSYA BANK ON THE GROUND THAT THIS INTEREST CLAIMED BY THE APP ELLANT IS NOT A BUSINESS EXPENSE AND HENCE CANNOT BE ALLOWED AS BUS INESS EXPENDITURE. IN THIS REGARD IT IS SUBMITTED THAT T HE APPELLANT COMPANY ENJOYS BOTH BUSINESS AND RENTAL INCOME WHIC H ARE PART OF THE PROFIT AND LOSS ACCOUNT PRODUCED HEREWITH. THE APPE LLANT ENJOYS THE RENTAL INCOME FROM SCO NO. 1-2-3, SECTOR 9, CHANDIG ARH AGAINST WHICH LOAN HAS BEEN RAISED FROM ING VYSYA BANK LTD. AND AN INTEREST OF RS.23,67,516/- HAS BEEN PAID BY THE APPELLANT ON THIS LOAN. THE 3 COPY OF THE INTEREST CERTIFICATE FROM THE BANK IS S UBMITTED HEREWITH (ANNEX.2). HENCE THERE IS NO DISPUTE REGARDING THE PAYMENT OF THE INTEREST BY THE APPELLANT AS PER THE ASSESSMENT ORD ER. SINCE THE APPELLANT HAS SHOWN BOTH THE BUSINESS INCOME AND RE NTAL INCOME IN ITS PROFIT AND LOSS ACCOUNT SO IT HAS ACCORDINGLY DEBIT ED THE INTEREST EXPENSE. HOWEVER, THE LD. ASSESSING OFFICER HAS DIS ALLOWED IT MERELY ON THE GROUND THAT IT IS NOT A BUSINESS EXPENSE, WHICH IS NOT JUSTIFIED. THE SAID INTEREST HAS BEEN PAID ON THE LOAN RAISED FROM ING VYSYA BANK FOR THE PURCHASE OF THE COMMERCIAL PROPERTY SCO 1-2-3, SECTOR 9-D, CHANDIGARH FROM WHICH THE ASSESSEE HAS SHOWN RENTAL INCOME DURING THE YEAR UNDER CONSIDERATION IN ITS COMPUTATION OF INCOME. HENCE, THE WHOLE OF THE INTEREST PAID IS DULY DEDUCTIBLE FROM THE SAID RENTAL INCOME AS PER SECTION 24 OF THE INCOME TAX ACT. 1961. THOU GH IT IS NOT A BUSINESS EXPENSE, AS CLAIMED BY THE ASSESSEE UNDER A BONA FIDE BELIEF, BUT THE SAME IS DULY DEDUCTIBLE UNDER THE HEAD 'INCOME FROM HOUSE PROPERTY' SHOWN BY THE ASSESSEE IN ITS COMPUTATION OF INCOME AS PER THE PROVISIONS OF I. T. ACT, 1961 WHILE COMPUTING ITS TOTAL INCOME. THE DETAILS REGARDING THE SAID INTEREST ARE ENCLOSED HEREWITH WHICH WERE DULY SUBMITTED DURING THE ASSESSMENT PROCEEDINGS. MOREOVER, THE ASSESSEE HAD CLAIMED INTEREST PAYMENTS IN THE EARLIER YEARS ALSO WHICH HAVE BEEN ACCEPTED BY THE DEPARTMENT. ' 5. THE CIT (APPEALS) ALLOWED THE CLAIM OF THE ASSES SEE OBSERVING THAT AGAINST THE RENTAL INCOME SHOWN BY THE ASSESSEE, TH E DEDUCTION WAS CLAIMED ON ACCOUNT OF HOUSE TAX PAID BUT THE ASSESS EE HAD NOT CLAIMED THE EXPENDITURE ON PROPERTY TAX AND INTEREST PAID O N THE LOAN RAISED FOR THE PURCHASE OF THE PROPERTY AGAINST SUCH RENTAL IN COME, BUT HAD CLAIMED THE SAID EXPENSES AS PER THE BUSINESS INCOME. THE CLAIM OF THE ASSESSEE WAS FOUND TO BE CORRECT BY THE CIT (APPEALS) AND CO NSEQUENTLY THE ASSESSING OFFICER WAS DIRECTED TO ALLOW THE SAME. 6. THE REVENUE IS IN APPEAL AGAINST THE ORDER OF TH E CIT (APPEALS). SHRI HARRY RICKY APPEARED ON BEHALF OF THE ASSESSEE AND SHRI N.K.SAINI PUT IN APPEARANCE ON BEHALF OF THE REVENUE AND PUT FORWARD THEIR CONTENTIONS. 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. ADMITTEDLY, THE ASSESSEE IN THE RETURN OF INCOME FI LED FOR THE FINANCIAL YEAR 2006-07 HAD DECLARED TWO SOURCES OF INCOME I.E . THE INCOME FROM BUSINESS AND INCOME FROM PROPERTY. THE RENTAL INCO ME EARNED BY THE 4 ASSESSEE FROM THE PROPERTY WAS ADJUSTED AGAINST THE BUSINESS LOSS SUFFERED BY THE ASSESSEE IN ITS BUSINESS. THE ASSE SSEE CLAIMS TO HAVE TAKEN LOAN FROM ING VYSYA BANK FOR INVESTING IN THE SAID PROPERTY FROM WHICH IT IS EARNING RENTAL INCOME. HOWEVER, THE AS SESSEE FAILED TO MAKE THE AFORESAID CLAIM IN THE RETURN OF INCOME. HOWEV ER, DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE EXPLANATION OF THE AS SESSEE VIS--VIS CLAIM OF INTEREST EXPENDITURE WAS CLEAR THAT THE SA ID EXPENDITURE HAD BEEN INCURRED FOR THE PURCHASE OF THE PROPERTY. IN THE ENTIRETY OF THE FACTS AND CIRCUMSTANCES OF THE CASE WHERE MERELY BE CAUSE THE ASSESSEE COMPANY HAD CLAIMED EXPENDITURE IN THE PROFIT & LOS S ACCOUNT, WHEREIN BOTH THE INCOME FROM BUSINESS AND RENTAL INCOME ARE REFLECTED, THE SAME WOULD NOT LEAD TO DISALLOWANCE OF INTEREST EXPENDIT URE IN THE HANDS OF THE ASSESSEE ON MERE FORMALITY OF CLAIMING THE SAME UNDER DIFFERENT HEAD OF INCOME THAN THE ONE UNDER WHICH SAME IS ALLOWED. ADMITTEDLY, THE ASSESSEE HAD DECLARED INCOME FROM HOUSE PROPERTY BU T HAD FAILED TO CLAIM THE INTEREST EXPENDITURE AGAINST THE PROPERTY INCOME EARNED BY IT. MERE CLAIM OF A PARTICULAR EXPENDITURE UNDER A HEAD DIFFERENT FORM THE HEAD OF INCOME UNDER WHICH THE SAME IS TO BE ALLOWE D AS A DEDUCTION DOES NOT LEAD TO DISALLOWANCE OF THE SAID EXPENDITU RE IN THE HANDS OF THE ASSESSEE, SPECIALLY IN THE ABSENCE OF ANY FURTHER E NQUIRIES BEING MADE BY THE ASSESSING OFFICER. THE CIT (APPEALS) VIDE PARA 5 OBSERVED AS UNDER: 5. I HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTI ONS AND MATERIAL ON RECORD. I FIND THAT THE ASSESSING OFFIC ER HAS WRONGLY DISALLOWED THE CLAIM OF INTEREST PAID TO THE BANK. THE REASONS FOR THIS FINDING ARE AS UNDER : (I) THE ASSESSING OFFICER HAS RIGHTLY DISALLOWED THE DEPRECIATION ON SCO NO. 1-2-3, SECTOR 9, CHANDIGARH , THE INCOME FROM WHICH HAS BEEN SHOWN UNDER THE HEAD 'IN COME FROM HOUSE PROPERTY'. (II) THE ASSESSING OFFICER DISALLOWED THE INTEREST PAID TO ING VYSYA BANK LTD. AMOUNTING TO RS.23675167- PAID BY T HE 5 APPELLANT AND DEBITED AGAINST RENTAL INCOME DESPITE THE FACT THAT THERE IS NO DISPUTE REGARDING THE INTEREST HAV ING BEEN PAID. (III) A PERUSAL OF COMPUTATION SHEET OF INCOME SHOWS THAT APPELLANT HAD EARNED - RENTAL INCOME OF RS. 1008168 07- FROM SCO NO. 1-2-3, SECTOR 9, CHANDIGARH WHICH AFTER TAK ING DEDUCTION OF HOUSE TAX PAID AMOUNTING TO RS.482477- AND DEDUCTION U/S 24(A) SHOULD HAVE BEEN SHOWN AT RS.70 23403/-. INSTEAD OF SHOWING RENTAL INCOME AT RS.7023403/-, T HE APPELLANT SHOWED RENTAL INCOME AT RS. 100816807- AN D CLAIMED EXPENSES OF RS.23675167- UNDER THE HEAD 'INTEREST - BANK' AND RS.482477- UNDER THE HEAD 'PROPERTY-TAX'. (IV) THE ASSESSING OFFICER WHILE MAKING THE ASSESSMENT, ALLOWED THE EXPENSES CLAIMED UNDER THE HEAD 'PROPER TY TAX' BUT DISALLOWED THE EXPENSES CLAIMED UNDER THE HEAD 'BANK INTEREST', WHICH IS NOT JUSTIFIED. (V) ONCE THE ASSESSING OFFICER HAS ACCEPTED THE CONTENT ION OF THE ASSESSEE REGARDING 'RENTAL INCOME' AND FURTHER ALLO WED EXPENDITURE CLAIMED UNDER PROPERTY TAX, IT IS QUITE UNREASONABLE TO DISALLOW INTEREST PAID TO BANK ON L OANS RAISED FOR PURCHASE OF THE PROPERTY STATING THAT TH IS WAS NOT AN ALLOWABLE BUSINESS EXPENSE. 8. IN VIEW OF THE ABOVE SAID, WE FIND NO MERIT IN T HE GROUNDS OF APPEAL RAISED BY THE REVENUE AND UPHOLDING THE ORDE R OF THE CIT (APPEALS) WE CONFIRM THE ALLOWANCE OF EXPENDITURE O F RS.23,67,516/-. THE GROUNDS OF APPEAL RAISED BY THE REVENUE ARE THU S DISMISSED. 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 27 TH DAY OF NOVEMBER, 2012. SD/- SD/- (MEHAR SINGH) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 27 TH NOVEMBER, 2012 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/TH E CIT/THE DR. ASSISTANT REGISTRAR, ITAT, CHANDIGARH 6