PUSHPANJALI HOSPITALITY, NEW DELHI V. ITO, WARD- 20(2), NEW DELHI

ITA 1228/DEL/2019

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 6558 (ITAT-DELHI)
• Duration Of Justice: 5 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-08-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Appeal Filed On: 15-02-2019
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S L ANURAGI
• Keywords: Earning of tax free income
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH SMC , NEW DELHI BEFORE SH. BHAVNESH SAINI, JUDICIAL M EMBER ITA NO. 1228/DEL/2019 : ASSTT. YEAR : 2013 - 14 PUSHPANJALI HOSPITALITY PVT. LTD. , 29, NAJAFGARH ROAD, SHIVAJI MARG, NEW DELHI - 110015 VS INCOME TAX OFFICER, WARD - 20(2), NEW DELHI - 110092 (APPELLANT) (RESPONDENT) PAN NO. A A A CM0006B ASSESSEE BY : NONE REVENUE BY : SH. S. L. ANURAGI , SR. DR DATE OF HEARI NG : 17 .07 .201 9 DATE OF PRONOUNCEMENT : 01.08 .201 9 ORDER THIS APPEAL BY THE ASSESSEE HAS BEEN DIRECTED AGAINST THE ORDER OF LD. CIT(A) - 7 , NEW DELHI DATED 08.01 .2018 FOR ASSESSMENT YEAR 2013 - 14 . 2. BRIEFLY THE FACTS OF THE CASE ARE THAT ASSESSEE COMPANY DURING THE YEAR IS CONSTRUCTING A HOTEL IN GOA. NO OTHER BUSINESS ACTIVITY IS BEING UNDERTAKEN DURING THE YEAR. RETURN OF INCOME WAS FILED ON 14.09.2013, DECLARING LOSS OF ( - ) RS.1,21,897/ - . THE AO PASS ED THE ASSESSMENT ORDER U/S 143(3) OF THE INCOME TAX ACT, 1961 DATED 29.02.2016, M AKING ADDITION OF RS.27,91,207 / - AFTER DISALLOWING THE AMOUNT ON ACCOUNT OF INTEREST PAID ON OVERDRAFT AND LEGAL & PROFESSIONAL CHARGES AND DISALLOWANCE OF RS.38,425/ - U/S 14A OF THE ACT. 3. THE ASSE SSEE CHALLENGED BOTH THE ADDITION BEFORE LD. CIT(A). THE ASSESSEE CONTENDED BEFORE THE LD. CIT(A) THAT IT HAD A FIXED DEPOSIT WITH HDFC BANK AND FOR ITS ROUTINE EXPENSES FOR GOA HOTEL, I T HAD TAKEN A N OVERDRAFT LIMIT AGAINST FDR AS THE ROUTINE EXPENSES WER E NOT FIXED NOR THEY WERE LUMP SUM. HAD IT BEEN FINANCED BY WITHDRAWING THE FDR THEN THERE ITA NO . 1228 /DEL /201 9 PUSHPANJALI HOSPITALITY PVT. LTD. 2 WOULD HAVE BEEN NO INTEREST INCOME AND NO FINANCE COST. THE PAYMENTS WERE NOT LARGE IN TERMS OF AMOUNT , THE DECISION WAS TAKEN BY THE BOARD OF DIRECTOR TO TAKE THE O VERDRAFT LIMIT AGAINST THE FDR WHICH IS A PRUDENT BUSINESS POLICY. THE COMPANY KEPT THE MONEY IN FIXED DEPOSIT AND WITHDREW MONEY AGAINST AN OVERDRAFT ACCOUNT AGAINST THE SAME FIXED DEPOSIT. HAD THE COMPANY NOT PUT THE AMOUNT IN FIXED DEPOSIT, THE COMPANY WOULD NOT HAVE BEEN ABLE TO EARN THE INTEREST ON FIXED DEPOSIT AND NO INCOME WOULD HAVE ACCRUED TO THE COMPANY AND ONLY LOSSES WOULD HAVE BEEN THERE. THE ASSESSEE EARNED INCOME ON THE DEPOSITS, THE INTEREST HAS BEEN PAID OUT OF INTEREST EARNED AND SINCE TH E ASSET WAS BEING DEPLOYED AS A LONG TERM PROJECT IN GOA , ONLY THE NET AMOUNT OF INTEREST EARNED AND INTEREST PAID ON THE SAME FD COULD HAVE BEEN ADDED AND NOT THE TOTAL INTEREST PAID. THE LD. CIT(A), HOWEVER, FOUND THAT ASSESSEE HAD NOT BEEN CARRYING OUT ANY BUSINESS ACTIVITY. THEREFORE, INTEREST INCOME WAS RIGHTLY ASSESSED AS INCOME FROM OTHER SOURCES. AS REGARDS, THE DISALLOWANCE U/S 14A OF THE ACT , THE LD. CIT(A) CONSIDERED THE SUBMISSIONS OF THE ASSESSEE AND NOTICED THAT DURING THE YEAR ASSESSEE HAS RE CEIVED DIVIDEND INCOME OF RS.3,11,250/ - . THE ASSESSEE HAD MADE TOTAL INVESTMENT OF RS.76,97,000/ - . THE AO WAS NOT SATISFIED WITH THE CLAIM OF THE ASSESSEE WITH REGARD TO EXPENSES INCURRED TO EARN THE EXEMPT INCOME AND THEREBY REJECTED THE CLAIM. THE AO DET ERMINED THE EXPENDITURE WHICH WAS RELATABLE TO THE EXEMPT INCOME. THE AO HAS SHOWN THE RELATIONSHIP BETWEEN THE EXEMPT INCOME AND EXPENDITURE INCURRED. THE LD. CIT(A), THEREFORE, CONFIRMED THE ADDITION U/S 14A OF THE ACT ALSO. 4 . THE ASSESSEE IN THE PRES ENT APPEAL HAS CHALLENGED THE ADDITIONS OF RS.27,44,326/ - AND ADDITION OF RS.38,425/ - . 5 . THE ASSESSEE HAS BEEN NOTIFIED THE DATE OF HEARING THROUGH REGISTERED POST, HOWEVER, NONE APPEARED ON BEHALF OF THE ASSESSEE. ITA NO . 1228 /DEL /201 9 PUSHPANJALI HOSPITALITY PVT. LTD. 3 6 . AFTER CONSIDERING THE SUBMISSIONS OF LD. DR, I AM OF THE CONSIDERED VIEW THAT NO INTERFERENCE IS REQUIRED IN THE MATTER. IT IS AN ADMITTED FACT THAT DURING THE YEAR UNDER CONSIDERATION, NO BUSINESS ACTIVITY WAS BEING UNDERTAKEN BY THE ASSESSEE. THE AO EXAMINED BOTH THE ISSUES IN DETAIL AND R IGHTLY MADE THE ADDITIONS. IN ABSENCE OF ANY MATERIAL ON RECORD, NO INTERFERENCE IS CALLED FOR IN THE MATTER. 7 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISMISSED . (ORD E R PRONOUN CED IN THE COURT ON 01/08 /2019 ) SD/ - ( BHAVNESH SAINI) JUDICIAL MEMBER DAT ED: 01/08 /2019 *SUBODH* COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT 4 . CIT(APPEALS) 5 . DR: ITAT ASSISTANT REGISTRAR