Shri Hemant Umedbhai Patel, Ahmedabad V. The Asstt. Commissioner of Income Tax, Circle-2(2), Ahmedabad

ITA 1231/AHD/2017

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 4135 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 9 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-02-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 19-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: A C SHAH
• Keywords: Sale consideration of property below Jantri Value; Business expenditure; Cost of acquisition; Set aside; Capital Gains
• Section: 50C; 48

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH (BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER & SHRI MAHAVIR PRASAD, JUDICIAL MEMBER) ITA. NO: 1231/AHD/2017 (ASSESSMENT YEAR: 2012-13) HEMANT UMEDBHAI PATEL 2, PURSHOTTAM BUNGALOWS, NEW C.G. ROAD, CHANDKHEDA, AHMEDABAD V/S THE A.C.I.T., CIRCLE-2(2), AHMEDABAD (APPELLANT) (RESPONDENT) PAN: AIZPP8146K APPELLANT BY : SHRI A.C. SHAH & BHADRESH GANDHAKWALA , AR RESPONDENT BY : SHRI VIDHYUT TRIVEDI, SR. D.R . ( )/ ORDER DATE OF HEARING : 10 -01-202 0 DATE OF PRONOUNCEMENT : 19 -02-2020 PER MAHAVIR PRASAD, JUDICIAL MEMBER 1. THIS APPEAL HAS BEEN FILED BY THE ASSESSEE IS DIREC TED AGAINST THE ORDER OF THE LD. CIT(A)-10, AHMEDABAD DATED 22.03.2017 PERTAININ G TO A.Y. 2012-13 AND FOLLOWING GROUNDS HAVE BEEN TAKEN: ITA NO. 1231 /AHD/2017 . A.Y. 2012-13 2 (1) THAT ON FACTS AND IN LAW, THE LEARNED CIT (A) H AS GRIEVOUSLY ERRED IN NOT ALLOWING THE CLAIM OF THE APPELLANT OF INTEREST EXPENSE OF RS.77,58,664/- MADE U/S 36(I) (III) OF THE ACT. (2) THAT ON FACTS AND IN LAW, THE LEARNED CIT (A) O UGHT TO HAVE ALLOWED THE SAID CLAIM AS BUSINESS EXPENDITURE AS PRAYED FOR. (3) THAT, ALTERNATIVELY, AND WITHOUT PREJUDICE, ON FACTS AND IN LAW, THE LEARNED CIT(A) HAS GRIEVOUSLY ERRED IN NOT ALLOWING THE CL AIM OF THE APPELLANT OF INTEREST EXPENSE OF RS.77,58,664/- U/S 48 OF THE ACT. 4) THAT ON FACTS, AND IN LAW THE LEARNED CIT (A) HA S GRIEVOUSLY ERRED IN CONFIRMING THE ADDITION OF RS.4,65,755/- MADE U/S 50C OF THE A CT. 5) THAT ON FACTS, AND IN LAW THE LEARNED CIT (A) HA S GRIEVOUSLY ERRED IN CONFIRMING THE CHARGING OF INTEREST U/S 234A, 234B, 234C AND 2 34D OF THE ACT. 2. THE ASSESSEE HAS NOT PRESSED GROUND NO. 4. NOW SOLI TARY GROUND REMAIN FOR ADJUDICATION IS DISALLOWANCE OF INTEREST EXPENSES O F RS. 77,58,664/- MADE U/S. 36(1)(III). 3. FACTS OF THE CASE ARE THAT ASSESSEE IS A PARTNER IN MULTIPLE PARTNERSHIP FIRM AND ASSESSEE IS ALSO DOING BUSINESS OF MULTIPLE PURCHAS E AND SALE OF COMMERCIAL LAND BEING IMMOVABLE PROPERTIES AND ENTER HUGE TRAN SACTION OF BANKING BUSINESS. 4. ON PERUSAL OF THE COMPUTATION OF INCOME FOR AY 2012 -13, IT WAS OBSERVED THAT THE ASSESSEE HAS CLAIMED INTEREST EXPENSES OF RS 77 ,58,664/- AS DEDUCTION UNDER THE HEAD 'INCOME FROM CAPITAL GAINS.' THE REL EVANT PART FROM COMPUTATION OF INCOME UNDER THE HEAD CAPITAL GAINS IS REPRODUCED HEREUNDER: PARTICULAR SALES PRICE/YEAR PURCHASE COST/YEA R TRANSFER- EXPENSES COST OF IMPROVEMENT EXEMPT CAPITAL GAIN LAND CHANDKHEDA 257/2 2633850.00 2410.731.00 0.00 0.00 0.00 223119.00 ITA NO. 1231 /AHD/2017 . A.Y. 2012-13 3 LAND TRAGAD 329/2 1450000.00 1298438.00 0.00 0.00 0.00 151562.00 LAND ZUNDAL 408/2 2422000.00 779860.00 0.00 0.00 0.00 1642140.00 LAND CHANDKHEDA 258/259 6870000.00 6711000.00 0.00 0.00 0.00 159000.00 LAND ZUNDAL 4 16/1 2850000.00 1410000.00 0.00 0.00 0.00 1440000.00 LAND TRAGAD - 280/1 ,- 418750.00 376500.00 0.00 0.00 0.00 42250.00 LAND ZUNDAL 38 1/1 10963885.00 2074265.00 0.00 0.00 0.00 8889620.00 LAND CHANDKHEDA 6 1 0/6 3880000.00 4168379.00 0.00 0.00 0.00 -288379.00 LAND ZUNDAL 4 11/3 2125000.00 1992500.00 0.00 0.00 0.00 132500.00 COMMISSION EXP. 0.00 0.00 675000.00 0.00 0.00 -675000.00 INTEREST EXP. 0.00 0.00 7758664.00 0.00 0.00 -775864.00 SECURITY EXP. 0.00 0.00 45000.00 0.00 0.00 -45000.00 TOTAL 33613485.00 21221673.00 847664.00 0.00 0.00 3913148.00 5. THE LD. A.O. WAS OF THE OPINION THAT INCOME TAX ACT DOES NOT ALLOW INTEREST EXPENSES AS PERMISSIBLE DEDUCTION WHILE COMPUTING I NCOME UNDER HEAD CAPITAL GAINS. THEREAFTER A SHOW CAUSE NOTICE WAS ISSUED TO THE ASSESSEE AS TO WHY INTEREST EXPENSES OF RS. 77,58,664/- SHOULD NOT BE DISALLOWED. 6. IN REPLY TO THE SAID NOTICE, ASSESSEE STATED THAT AS PER THE BOMBAY HIGH COURT JUDGMENT IN THE CASE OF HABIB HUSSEIN VS. CIT (SUPR A) IT IS HELD THAT THE WORD ITA NO. 1231 /AHD/2017 . A.Y. 2012-13 4 COST HAS NOT BEEN DEFINED IN THE INCOME TAX ACT. HENCE THE DICTIONARY MEANING OF THE WORK COST. THE DICTIONARY MEANING OF THE WORD COST IS WHAT IS LAID OUT OF SUFFERED TO OBTAIN ANYTHING. THEREFORE, INTEREST EXPENSES INCURRED BY THE ASSESSEE WOULD FALL WITHIN THE EXPR ESSION OF THE WORD COST AND IS HENCE FORTH DEDUCTIBLE WITHIN THE MODE PRESC RIBED IN THE COMPUTATION SECTION 48. 7. AND ASSESSEE ALSO SUBMITTED THAT COST OF ACQUISITIO N MEANS COST OF ACQUIRING THE PROPERTY AND IT INCLUDES EXPENSES RELATING TO T HE PURCHASE PRICE OF THE PROPERTIES, STAMP DUTY, REGISTRATION CHARGES ETC. 8. BUT LD. A.O. DID NOT AGREE WITH THE SUBMISSION OF T HE ASSESSEE AND HELD THAT ASSESSEE HAS FAILED TO PROVE ANY DIRECT NEXUS BETWE EN SOURCES OF BORROWED FUNDS AND INTEREST PAID THEREUPON AND THEIR UTILIZA TION VIS A VIS PURCHASE OF THE PROPERTIES TRANSFERRED. 9. THEREAFTER ASSESSEE PREFERRED FIRST STATUTORY APPEA L BEFORE THE LD. CIT(A) BUT TO NO AVAIL AND LD. CIT(A) JUST CONFIRMED THE ACTION O F THE AO. 10. WE HAVE GONE THROUGH THE RELEVANT RECORD AND IMPUGN ED ORDER AND HEARD BOTH THE PARTIES. THE APPELLANT IS ENGAGED IN THE BUSINE SS OF PURCHASE AND SALE OF PLOT AND LAND DURING THE YEAR UNDER CONSIDERATION. THE ASSESSEE ENTERED INTO 7 TRANSACTION WORTH OF RS. 1.60 CRORE. THE ASSESSEES BORROWED MONEY FOR THESE PROPERTIES AS NON GENUINE. BUT LOWER AUTHORITIES HA VE DOUBTED THE GENUINENESS OF THE LOAN AND INTEREST PAID THEREON. ITA NO. 1231 /AHD/2017 . A.Y. 2012-13 5 11. SECTION 48 SAYS THAT IN ORDER TO CALCULATE THE CAPI TAL GAIN, COST OF ACQUISITION AND COST OF IMPROVEMENT SHOULD BE REDUCED FROM THE SALE CONSIDERATION. AS ASSESSEE IS ENGAGED IN THE BUSINESS OF SALE AND PUR CHASE OF THE LAND. HENCE, HE WILL BE ENTITLED FOR INTEREST EXPENSES. IN ORDER TO VERIFY THE GENUINENESS OF EXPENSES, WE SET ASIDE THIS MATTER BACK TO THE FILE OF THE ASSESSING OFFICER TO VERIFY THE DETAILS PERTAINING TO COST OF ACQUISITIO N AND COST OF IMPROVEMENT AND WILL ALSO ENSURE THAT EXPENDITURE INCURRED WHOLLY A ND EXCLUSIVELY IN CONNECTION WITH THE ACQUISITION OR TRANSFER OF THE LANDS RELAT ING TO BUSINESS OF THE ASSESSEE AND THEREAFTER WILL DECIDE THE MATTER AS PER PROVIS IONS OF LAW. 12. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLO WED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN OPEN COURT ON 19- 02- 2020 SD/- SD/- (PRADIP KUMAR KEDIA) (MAHAVIR PRASAD) ACCOUNTANT MEMBER TRUE COPY JUDICIAL MEMBER AHMEDABAD: DATED 19 /02/2020 RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHME DABAD