Dy. Commissioner of Income Tax , Circle-16(2), Hyderabad V. Alexandrla Science Centre (Pragnapur) Private Limited , Hyderabad

ITA 1266/Hyd/2019

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 6820 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 7 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-04-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB-B
• Next Hearing Date: 16-03-2021
• Assessment Year: 2013-2014
• Appeal Filed On: 13-08-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: LAXMINIWAS SHAR MA
• Section: 143(3); 201

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B : HYDERABAD (THROUGH VIRTUAL CONFERENCE) BEFORE SHRI SATBEER SINGH GODARA, JUDICIAL MEMBER AND LAXMI PRASAD SAHU, ACCOUNTANT MEMBER ITA NO. 1 2 66 /H/20 1 9 ASSESSMENT YEAR: 201 3 - 1 4 DY. COMMISSIONER OF INCOME - TAX, CIRCLE 5 (1), HYDERABAD. VS. ALEXANDRIA SCIENCE CENTRE (PRAGNAPUR) PVT. LTD. (PRESENTLY KNONW AS M/S MN LIFE SCIENCE CENTRE (PRAGNAPUR) PVT. LTD., HYDERABAD. PAN AADCV 5902 G (APPELLANT) (RESPONDENT) REVENUE BY: SHRI ROHIT MUJUMDAR ASSESSEE BY: SHRI LAXMINIWAS SHARMA DATE OF HEARING: 1 6 /0 3 /2021 DATE OF PRONOUNCEMENT: 09 /04/2021 O R D E R PER L.P. SAHU, A.M. : T H IS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST CIT( A ) - 4 , HYDERABADS ORDER DATED 2 1 / 0 5 /201 9 INVOLVING PROCEEDINGS U/S 143(3) OF THE INCOME TAX ACT, 1961 ; IN SHORT THE ACT WHEREIN THE REVENUES GRIEVANCE IS THAT THE CIT(A) ERRED IN DELETING THE ADDITION MADE ITA NO . 1 2 66 /H YD/ 20 1 9 : - 2 - : TOWARDS INTEREST EXPENSES CLAIMED WITHOUT APPRECIATING THAT THE SAME NEED TO BE CAPITALIZED. 2. BRIEFLY THE FACTS OF THE CAS E ARE THAT THE ASSESSEE COMPANY, ENGAGED IN THE BUSINESS OF HOSPITAL CONSTRUCTION, E - FILED ITS RETURN OF INCOME ON 26/11/2013 ADMITTING LOSS AT RS. 2,87,20,942/ - . SUBSEQUENTLY, THE CASE WAS SELECTED FOR SCRUTINY UNDER CASS AND ACCORDINGLY, STATUTORY NOTICE S WERE ISSUED TO THE ASSESSEE, AGAINST WHICH, THE ASSESSEE FURNISHED THE INFORMATION. 2.1 THE AO OBSERVED THAT DURING THE YEAR THE ASSESSEE HAD RECEIVED DEBENTURE APPLICATION MONEY WHICH WAS INVESTED IN COMPULSORY CONVERTIBLE DEBENTURES (CCDS) FROM ALEXA NDRIA REAL ESTATE CYPRUS NO. 1 LTD , FOR WHICH THE ASSESSEE HAD PAID INTEREST ON CCDS AMOUNTING TO RS. 2,48,63,202/ - . THE AO NOTED THAT THE ASSESSEE HAD DEBITED THE INTEREST EXPENDITURE AGAINST THE RENTAL INCOME AS THERE IS NO RELATION TO THE INCOME OFFERE D AND THE EXPENDITURE CLAIMED AND THE ASSESSEE HAS NOT OFFERED ANY INCOME FROM BUSINESS OPERATIONS AS THERE WERE NO BUSINESS TRANSACTIONS DURING THE YEAR. IN VIEW OF THE ABOVE OBSERVATIONS, THE AO DISALLOWED THE INTEREST AMOUNT OF RS. 2,48,63,202/ - BY HOLD ING THAT FROM THE EXTRACTS OF THE MINUTES OF THE MEETING OF THE BOARD OF DIRECTORS HELD ON 25 TH JULY, 2012 IT WAS DECIDED TO CAPITALIZE THE DEBENTURE SUBSCRIPTION AMOUNT RECEIVED, THEREFORE, THE SUBSCRIPTION AMOUNT RECEIVED WAS ITA NO . 1 2 66 /H YD/ 20 1 9 : - 3 - : CAPITALIZED DURING THE YEAR THE INTEREST INCURRED ON IT ALSO HAS TO BE CAPITALIZED. 2. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A) AND CONTENDED THAT THERE IS NO POINT IN THE CONTENTION OF THE AO THAT SINCE THE SUBSCRIPTION AMOUNT RECEIVED TOWARDS CCD IS CAPITALIZ ED DURING THE YEAR, INTEREST EXPENSE ON THE SAME IS ALSO TO BE CAPITALIZED. 3. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE CIT(A) OBSERVED THAT THE ASSESSEE DERIVED INCOME FROM LETTING OUT THE PROPERTIES I.E. RENTAL INCOME, WHICH HAS BEEN SHOW N AS INCOME FROM OPERATIONS IN THE P&L ACCOUNT AND SINCE THE ASSESSEE HAS RECOGNIZED REVENUE FROM OPERATION AND THE SAME HAS BEEN OFFERED TO TAX, THE AO IS NOT JUSTIFIED IN MAKING THE SAID DISALLOWANCE OF RS. 2,48,63,202/ - TOWARDS INTEREST AMOUNT. HE, THER EFORE, DIRECTED TO DELETE THE SAID DISALLOWANCE. 4. AGGRIEVED BY THE ORDER OF CIT(A), THE REVENUE IS IN APPEAL BEFORE THE ITAT. 5. CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD AS WELL AS THE ORDERS OF REVENUE AUTHORITIES. THE CAS E OF THE ASSESSEE IS THAT D URING THE YEAR UNDER APPEAL, A SSESSEE HAS ISSUED 3,02,25,853 CC DS OF RS. 10 EACH AGAINST WHICH A SSESSEE RECEIVED RS.30,22,258,530/ - ITA NO . 1 2 66 /H YD/ 20 1 9 : - 4 - : AND THE SAME WAS UTILIZED FOR PURCHASE OF ITS BUSINESS ASSETS (LAND BUILDING, PLANT AND EQUIPMENT AND FURNITURE & FIXTURES). THESE ASSETS HAVE BEEN LEASED BY THE A SSESSEE AND INCOME IN THE FORM OF RENTAL AND MAINTENANCE CHARGES HAVE BEEN CREDITED TO PROFIT AND LOSS AND A CCORDINGLY OFFERED TO TAX. AS THE INTEREST EXPENS ES INCURRED ON THE BORROWING WHICH ARE UTILIZED FOR ACQUIRING THE ASSETS, INCOME DERIVED FROM WHICH IS CREDITED TO P&L ACCOUNT AND OFFERED TO TAX. THEREFORE, THERE IS A DIRECT NEXUS BETWEEN THE INCOME OFFERE D AND THE EXPENDITURE CLAIMED. THE CIT(A) CONSIDERING THE FACTS OF THE CASE OF THE ASSESSEE, DIRECTED THE AO TO DELETE THE DISALLOWANCE OF RS. 2,48,63,202/ - MADE TOWARDS INTEREST PAID. WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE CIT(A) AND U PHOLDING THE SAME, WE DISMISS THE GROUND RAISED BY THE REVENUE ON THIS COUNT. 6. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 9 TH APRIL , 2021 . SD/ - SD/ - (S . S . GODARA) (L . P . SAHU) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDE RABAD, DATED : 9 TH APRIL , 20 2 1 . KV ITA NO . 1 2 66 /H YD/ 20 1 9 : - 5 - : C OPY TO : 1 DC I T, CIRCLE 5 (1), 2 ND FLOOR, B - BLOCK, IT TOWERS, AC GUARDS, HYDERABAD . 2 ALEXANDRIA SCIENCE CENTRE (PRAGNAPUR) PVT. LTD. (PRESENTLY KNONW AS M/S MN LIFE SCIENCE CENTRE (PRAGNAPUR) PVT. LTD., BUILDING 450, GENOME VALLEY, TURKAPALLY (V), SHAMIRPET MANDAL, HYDERABAD. 3 CIT( A ) - 4 , HYDERABAD 4 PR. CIT 4 . HYDERABAD. 5 ITAT, DR, HYDERABAD 6 GUARD FILE.