ACIT, CHENNAI V. Senthilnathan Chettiar, CHENNAI

ITA 1268/CHNY/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 73726 (ITAT-CHENNAI)
• Duration Of Justice: 8 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-03-2014
• Appeal Filed By: Department
• Bench Allotted: C
• Next Hearing Date: 04-03-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 07-06-2013
• Court: TRIBUNAL
• Department Lawyers: T N BETGERI
• Assessee Lawyers: RAGHAV PRASAD B
• Keywords: Business expenditure

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI . . . , ! , ' # $ BEFORE DR. O.K. NARAYANAN, VICE PRESIDENT & SHRI VIKAS AWASTHY, JUDICIAL MEMBER . / I.T.A. NO. 1268/MDS/2013 / ASSESSMENT YEAR : 2007-08 ASSISTANT COMMISSIONER OF INCOME TAX, MEDIA CIRCLE-II, CHENNAI ( !% /APPELLANT) VS SHRI SENTHILNATHAN CHETTIAR, NO.2/13A, II ND STREET, NORTH GOPALAPURAM, CHENNAI - 86 [PAN: AASPS 6065 R] ( &'!% /RESPONDENT) / APPELLANT BY : SHRI T.N.BETGERI, JCIT / RESPONDENT BY : SHRI RAGHAV PRASAD, B, CA / DATE OF HEARING : 04-03-2014 ! / DATE OF PRONOUNCEMENT : 05-03-2014 #( / O R D E R PER VIKAS AWASTHY, JUDICIAL MEMBER: THE APPEAL OF THE REVENUE IS AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS)-VI, CHENNAI DAT ED 08-01-2013 RELEVANT TO THE ASSESSMENT YEAR (AY) 200 7-08. I.T.A. NO. 1268/MDS/2013 2 2. THE ASSESSEE HAD FILED HIS RETURN OF INCOME FOR THE AY. 2007-08 ON 06-08-2007 ADMITTING A LOSS ` 37,91,151/-. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND NOTICE U /S.143(2) OF THE INCOME TAX ACT, 1961 (HEREIN AFTER REFERRED TO AS THE ACT) WAS ISSUED TO THE ASSESSEE. DURING THE COURSE OF ASSES SMENT PROCEEDINGS, THE ASSESSING OFFICER MADE CERTAIN ADD ITIONS/ DIS-ALLOWANCES IN THE INCOME RETURNED BY THE ASSESS EE. THE ASSESSING OFFICER APART FROM OTHER DIS-ALLOWANCES M ADE DIS- ALLOWANCE OF ` 38,83,792/- IN RESPECT OF INTEREST PAYMENTS. THE ASSESSEE HAD PURCHASED BUSINESS ASSET, A THEATRE AT MOUNT ROAD, CHENNAI IN THE YEAR 2004. THE ASSESSEE HAD B EEN SCREENING FILMS IN THE THEATRE TILL THE END OF THE AY.2006-07. IN THE BEGINNING OF AY.2007-08, THE ASSESSEE STOPPED SCREE NING OF FILMS AND STARTED USING THE PREMISES AS PAID CAR PARKING. THE INCOME FROM CAR PARKING WAS OFFERED BY THE ASSESSEE AS BUS INESS INCOME. FOR THE PURCHASE OF BUSINESS ASSET VIZ. THE THEATRE , THE ASSESSEE HAD BORROWED FUNDS ON WHICH THE INTEREST WAS BEING PAID TO THE LENDERS. THE ASSESSING OFFICER OBSERVED THAT SINCE THEATRE BUSINESS HAS STOPPED, INTEREST EXPENDITURE CANNOT B E ALLOWED AS BUSINESS EXPENDITURE SPECIALLY IN RESPECT OF NEW LO ANS RAISED DURING THE YEAR WHEN THE BUSINESS OF SCREENING OF F ILMS HAS I.T.A. NO. 1268/MDS/2013 3 CEASED TO EXIST. THE ASSESSING OFFICER MADE ADDITI ON OF ` 38,83,792/- BY DIS-ALLOWING THE INTEREST CLAIM. AGGRIEVED AGAINST THE ASSESSMENT ORDER DATED 30-12- 2009, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(APP EALS). THE CIT(APPEALS) ALLOWED THE APPEAL OF THE ASSESSEE WIT H THE FOLLOWING OBSERVATIONS: I HAVE GONE THROUGH THE ORDERS OF THE AO AS WELL A S ARGUMENTS OF THE AR. IT IS A FACT THAT THIS INCOME COULD NOT HAVE ARISEN IF THE BUSINESS ASSET WAS NOT PURCHASED OUT OF THE LOAN TAKEN FROM THE FINANCE CREDITORS. SINCE THE I NCOME FROM THE GAITY THEATRE HAS BEEN OFFERED AND TAXED AS BUS INESS INCOME TILL AY.06-07, THE INTEREST EXPENDITURE CANN OT BE DISALLOWED BY TREATING IT AS EXPENDITURE US 57(1) S INCE THE INTEREST INCOME FROM THE BANK IS ` 48,716/-. IT IS ALSO WORTH POINTING OUT HERE THAT FOR THE SAME SET OF FACTS IN THE AY 2006- 07, THE AO HAD CATEGORICALLY ALLOWED THE INTEREST O N THESE LOANS AS BUSINESS EXPENDITURE. SINCE CONSISTENCY I S THE CARDINAL PRINCIPLE OF THE TAXATION, I DO NOT FIND A NY REASON WHY THIS INTEREST SHOULD BE TREATED DIFFERENTLY IN THE SUBSEQUENT YEARS. HENCE, THE ASSESSEE GETS RELIEF ON THIS GRO UND AND THE AO IS DIRECTED TO TREAT THE INTEREST AS BUSINESS EX PENDITURE. THE REVENUE HAS FILED APPEAL BEFORE THE TRIBUNAL AS SAILING THE FINDINGS OF THE CIT(APPEALS) ON THE ISSUE. 3. SHRI T.N.BETGERI, APPEARING ON BEHALF OF THE REV ENUE SUBMITTED THAT THE ASSESSEE HAD NOT FURNISHED ANY E VIDENCE TO I.T.A. NO. 1268/MDS/2013 4 SHOW THAT THE LOANS WERE TAKEN FOR THE PURCHASE OF THE THEATRE. MOREOVER, THE ASSESSEE HAS CLAIMED INTEREST EXPENDI TURE UNDER THE HEAD INCOME FROM OTHER SOURCES BUT THE CIT(AP PEALS) HAS ERRED IN ALLOWING THE INTEREST EXPENDITURE AS BUSI NESS EXPENDITURE. THE LD.DR CONTENDED THAT SINCE THE T HEATRE BUSINESS CEASES TO EXIST IN THE RELEVANT AY, THE IN TEREST EXPENDITURE CANNOT BE ALLOWED. 4. ON THE OTHER HAND, SHRI RAGHAV PRASAD, APPEARING ON BEHALF OF THE ASSESSEE SUBMITTED THAT ASSESSEE HAD ONLY ST OPPED SCREENING OF FILMS AND THE SAME PREMISES IS NOW BEI NG USED AS A PAID PARKING LOT. THE BUSINESS ASSET IS STILL IN T HE POSSESSION OF THE ASSESSEE AND THE INCOME FROM PARKING OF VEHICLE S IS BEING ASSESSED TO TAX. THE LD.AR CONTENDED THAT AS FAR A S NEW LOANS ARE CONCERNED, THE SAME WERE TAKEN FOR THE PAYMENT OF OLD LOANS AS THE OLD CREDITORS WERE PRESSING HARD FOR THE REP AYMENT OF THE LOAN AMOUNT. THE LD.AR VEHEMENTLY SUPPORTED THE FI NDINGS OF THE CIT(APPEALS) ON THE ISSUE AND PRAYED FOR THE DISMIS SAL OF THE APPEAL OF THE REVENUE. 5. WE HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESENTATIVES OF BOTH THE SIDES. WE HAVE ALSO PE RUSED THE I.T.A. NO. 1268/MDS/2013 5 ORDERS OF THE AUTHORITIES BELOW. IT IS AN UN-DISPU TED FACT THAT THE ASSESSEE IS STILL IN THE POSSESSION OF THE PROPERTY . THE ASSESSEE HAS CHANGED THE USE OF BUSINESS ASSET BY CHANGING THE NATURE OF BUSINESS FROM SCREENING FILMS TO UTILIZE THE PROPER TY FOR PAID PARKING. TILL AY.2006-07, THE INTEREST EXPENDITURE WAS ALLOWED AS BUSINESS EXPENDITURE. ONLY BY VIRTUE OF THE FACT THAT THE ASSESSEE HAS STOPPED SCREENING FILMS IN THE THEATRE AND HAS TAKEN UP ANOTHER BUSINESS IN ITS PLACE AT THE SAME PREMISES, THE INTEREST EXPENDITURE CANNOT BE DIS-ALLOWED. THE BUSINESS AS SET FOR THE ACQUISITION OF WHICH LOAN WAS TAKEN IS STILL IN POS SESSION OF THE ASSESSEE AND IS BEING USED FOR BUSINESS PURPOSE, MA Y BE IN A BUSINESS OF A DIFFERENT NATURE. WE DO NOT FIND ANY INFIRMITY IN THE IMPUGNED ORDER. THE APPEAL OF THE REVENUE IS DISMI SSED BEING DEVOID OF MERIT. ORDER PRONOUNCED ON WEDNESDAY, THE 05 TH MARCH, 2014 AT CHENNAI. SD/- SD/- (DR. O.K. NARAYANAN) (VIK AS AWASTHY) VICE PRESIDENT JUDICIAL MEMBER DATED: 05 TH MARCH, 2014 TNMM COPY TO: APPELLANT/RESPONDENT/CIT(A)/CIT/DR