The Deputy Commissioner of Income Tax. Circle-1(1), Guntur V. Andhrapradesh State Housing Corporation Limited, Tadepalli

ITA 128/VIZ/2020

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 1137 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 2 year(s) 2 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-05-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2016-2017
• Appeal Filed On: 15-03-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL

Judgement Text

आयकर अपीलीयअधिकरण, धिशाखापटणम पीठ, धिशाखापटणम IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM श्री द ु व्वूरु आर एल रेड्डी, न्याधयक सदस्य एिं श्री एस बालाकृ ष्णन, लेखा सदस्य के समक्ष BEFORE SHRI DUVVURU RL REDDY, HON’BLE JUDICIAL MEMBER & SHRI S BALAKRISHNAN, HON’BLE ACCOUNTANT MEMBER आयकर अपील सं./ I.T.A. Nos.126, 127, 128/Viz/2020 (ननधधारण वर्ा / AY :2014-15, 2015-16, 2016-17) DCIT, Circle-1(1), Guntur. Vs. M/s. Andhra Pradesh State Housing Corporation Ltd., Guntur. PAN: AABCA 7206 L (अपीलधथी/ Appellant) (प्रत्यथी/ Respondent) C.O. Nos. 21,22 & 23/Viz/2020 (In आयकर अपील सं./ I.T.A. Nos.126, 127, 128/Viz/2020) (ननधधारण वर्ा / AY :2014-15, 2015-16, 2016-17) M/s. Andhra Pradesh State Housing Corporation Ltd., Guntur. PAN: AABCA 7206 L Vs. DCIT, Circle-1(1), Guntur. (अपीलधथी/ Appellant) (प्रत्यथी/ Respondent) अपीलधथी की ओर से/ Appellant by : Sri C. Subrahmanyam प्रत्यधथी की ओर से / Respondent by : Sri MN Murthy Naik, CIT-DR सुनवधई की तधरीख / Date of Hearing : 10/05/2022 घोर्णध की तधरीख/Date of Pronouncement : 26/05/2022 O R D E R PER Bench : The captioned appeals are filed by the Revenue against the order of the Ld. CIT(A)-2, Guntur emanating from the order of the AO passed U/s. 143(3) of the Act for the AY 2014-15, 2015-16 and 2016-17. 2 2. The Revenue has raised identical grounds in all the three appeals and therefore, for the sake of reference the grounds of appeal for the AY 2014-15 are extracted herein below for reference: “1. The order of the Ld. CIT(A), Guntur is erroneous both in law and on facts of the case. 2. The Ld. CIT(A), Guntur erred in granting relief by deleting the addition made by the Assessing Officer on account of interest payments on loan without considering the fact that the Revenue‟s appeals are pending before the Hon‟ble High Court for the previous years. 3. The Ld. CIT(A) directed the AO to disallow the administrative expenditure at 2% without any scientific or logical reasoning. 4. The Ld. CIT(A) failed to appreciate the facts that assessee had not produced any evidence in respect of interest receipts. 5. The Ld. CIT(A) failed to appreciate the fact that assessee had not produced any evidence in respect of administrative expenditure. 6. Any other grounds that may be urged at the time of hearing.” 3. Brief facts of the case are that the assessee-company is an undertaking by the Government of Andhra Pradesh and engaged in the construction of subsidized housing for the weaker sections of the society. The assessee-company filed its return of income for the AY 2014-15 on 25/11/2014 admitting a loss of Rs. 53,10,05,566/-; Rs.1,96,15,87,452/- (AY 2015-16) and Rs. 43,55,60,751/- (AY 2016-17). The case was selected for scrutiny and the assessment was completed determining the total income of Rs.48,40,80,880/-; Rs. NIL and Rs. 3,16,50,768/- for the AYs 2014-15; 2015-16 and 2016-17 respectively. 3 4. The crux of the issue in the present appeal relates to disallowance of interest on loans to the amount of Rs.38,30,71,105/-; Rs. 25,13,09,254/- and Rs. 23,24,22,804/- for the AYs 2014-15; 2015-16 and 2016-17 respectively by the AO. The AO observed that the assessee is involved in construction of low cost housing to the beneficiaries belonging to the weaker sections of the society. The projects are funded by subsidies and grants from Government, loan from banks and financial institutions and contribution from beneficiaries. The assessee-company provides finances by way of loans to the beneficiaries as per AP Government policy and recovers the loan altogether with interest in installments. The assessee receives subsidy from the Government of Andhra Pradesh as part of the loan. The loan amount for which the Government stood as guarantor is disbursed to beneficiaries by normal rate of interest and recoveries from the beneficiaries are shown as liability. The repayment of principal and interest for which loan is made by the Government on behalf of the company and the same is treated as loans given to the Government. In the instant case, the Government pays the principal and interest on behalf of the company. The amounts so paid towards repayment of loans are treated as loans given to the company. Hence the interest on loans forms part of the expenditure and debited to the income and expenditure account. The AO opined that the interest on loans cannot be claimed as expenditure in the hands of the 4 assessee and the same is to be disallowed. Aggrieved by the order of the AO, the assessee is in appeal before the CIT(A). The Ld. CIT(A) considering the submissions of the assessee stated that a similar issue has been adjudicated upon by the ITAT, Hyderabad Bench in its order in ITA No.376 to 381/Hyd/2010 in the assessee’s own case for the AY 2002-03 to 2006-07. Aggrieved by the order of the Ld. CIT(A), the Revenue is in appeal before us. 5. The Ld. DR submitted that the Revenue preferred an appeal before the High Court of Andhra Pradesh and Telangana in tune with the Departmental policy to keep the matters alive. Per contra, the Ld. AR submitted that the assessee’s case is covered by the order of the ITAT in its decision in ITA No.376 to 381/Hyd/2010 (supra). 6. We have heard the rival contentions and perused the material available on record and the orders of the Authorities below. We find that the Ld. CIT(A) in his order has followed the decision of the Hon’ble ITAT, Hyderabad A-Bench in the appellant’s own case for the AY 2002-03 to 2006-07 in ITA ITA No.376 to 381/Hyd/2010, dated 21/01/2011. Relevant portion of the decision of the Hyderabad Tribunal is extracted herein below for reference: “5. We have considered the submissions of both the parties and perused the material available on record. The learned counsel for the assessee clearly proved that the assessee 5 company is not in the business of construction of houses. Hence, there is no question of offering income from the construction activity. We find that the income of the assessee corporation only comprises of admission fees, supervisions charges, interest, differential cost of cement and other material and managerial subsidy from the State Government. We find merit in the argument of the learned counsel for the assessee that, due to the G.O‟s issued by the State Government from time to time for one time settlement of dues or waiver of interest, the Assessee Corporation is not collected any interest from the beneficiaries and also the principal amount in several cases. However, it is fact that some amounts are recovered from the beneficiaries and the same are shown as „recoveries from the beneficiaries‟ in the Balance Sheet. There is no dispute with regard to the payment of interest to the bank and financial institutions. The department disallowed the entire interest payment made by the assessee Corporation only on the ground that the assessee has not offered any income on interest recovered from its beneficiaries. After considering the totality of facts and the circumstances of the case, we are of the view that the lower authorities are not correct in disallowing the interest payment to various commercial banks and financial institutions. Hence, we allow the grounds raised by the assessee on this issue. However, we direct the assessee Corporation to furnish the details of interests received from its beneficiaries for all the assessment years under consideration and we direct the assessing officer to treat the said interest receipts as the income of the assessee Corporation in the respective assessment years. Accordingly, the ground raised by the assessee is partly allowed as indicated above.” 7. Respectfully following the decision of the Coordinate Bench at Hyderabad in the assessee’s own case, we do not see any reason to interfere with the order of the Ld. CIT(A) on the issue. Thus, ground no.2 raised by the Revenue is dismissed. 6 8. With respect to ground no.3 in ITA No.126/Viz/2020, the Ld. CIT(A) has reasonably estimated the disallowance of administrative expenses and hence we find no infirmity in the order of the Ld. CIT(A). Thus, Ground No.3 raised by the Revenue is dismissed. 9. The Cross Objections raised by the assessee are supportive in nature and therefore they need no separate adjudication. 10. In the result, three appeals of the Revenue are dismissed and the cross objections of the assessee are disposed off. Pronounced in the open Court on the 26 th May, 2022. Sd/- Sd/- (द ु व्वूरु आर.एल रेड्डी) (एस बालाकृ ष्णन) (DUVVURU RL REDDY) (S.BALAKRISHNAN) न्याधयकसदस्य/JUDICIAL MEMBER लेखा सदस्य/ACCOUNTANT MEMBER Dated : 26.05.2022 OKK - SPS 7 आदेश की प्रनतनलनप अग्रेनर्त/Copy of the order forwarded to:- 1. ननधधाऩरती/ The Assessee – M/s. Andhra Pradesh State Housing Corporation Ltd, SP River View Building, Besides Municipal Hospital, Tadepalli, Guntur Dist. 2. रधजस्व/The Revenue – The ACIT, Circle-1(1), 1 st Floor, CR Buildings, Kannavarithota, Guntur. 3. The Principal Commissioner of Income Tax, 4. आयकर आयुक्त (अपील)/ The Commissioner of Income Tax (A)-2, Guntur. 5. नवभधगीय प्रनतनननध, आयकर अपीलीय अनधकरण, नवशधखधपटणम/ DR, ITAT, Visakhapatnam 6. गधर्ा फ़धईल / Guard file आदेशधनुसधर / BY ORDER Sr. Private Secretary ITAT, Visakhapatnam