DCIT, V. M/s Subramanian Plaza,

ITA 1295/BANG/2013

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 7039 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 1 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-10-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 29-08-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR P K SRIHARI
• Assessee Lawyers: R V DEVRAJ

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, JUDICIAL MEMBER AND SHRI JASON P. BOAZ, ACCOUNTANT MEMBER ITA NO.1295/BANG/2013 ASSESSMENT YEAR : 2009-10 THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 7(1), BANGALORE. VS. M/S. SUBRAMANIAN PLAZA, NO.1, SJR PRIMUS, INDUSTRIAL LAYOUT, 7 TH BLOCK, KORAMANGALA, BANGALORE 560 095. PAN : ABDFS 5618J APPELLANT RESPONDENT APPELLANT BY : DR. P.K. SRIHARI, ADDL. CIT(DR) RESPONDENT BY : SHRI R.V. DEVRAJ, CA DATE OF HEARING : 01.10.2014 DATE OF PRONOUNCEMENT : 10.10.2014 O R D E R PER N.V. VASUDEVAN, JUDICIAL MEMBER THIS APPEAL BY THE REVENUE IS AGAINST THE ORDER DATED 18.6.2013 OF THE CIT(APPEALS)-III, BANGALORE RELATING TO ASSESSM ENT YEAR 2009-10. GROUND NO.2 RAISED BY THE REVENUE IS THE EFFECTIVE GROUND AND THE SAME READS AS UNDER:- ITA NO. 1295/BANG/2013 PAGE 2 OF 5 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE THE LEARNED CIT(A) HAS NOT APPRECIATED THE FACT THAT AS PER BOARDS CIRCULAR NO.28 DATED 20.08.1969 THE ASSESSEE HAS TO PROVE TO THE SATISFACTION OF THE AO THAT THE SECOND BORROWAL HAS BEEN FULLY UTILIZED FOR THE PURPOSE OF REPAYMENT OF ORIGINAL L OAN. IN THE INSTANT CASE, THE ASSESSEE HAS FAILED TO PROVE THAT THE ORIGINAL LOAN WAS TAKEN FOR THE PURPOSE OF CONSTRUCTION AND ALSO THAT THE NEW LOAN TAKEN WAS UTILIZED FOR THE PURPOSE OF REPAYMEN T OF THE ORIGINAL LOAN. 2. THE FACTS AND CIRCUMSTANCES UNDER WHICH THE ABOV E ISSUE ARISES FOR CONSIDERATION ARE AS FOLLOWS. THE ASSESSEE IS AN I NDIVIDUAL. HE DERIVED RENTAL INCOME FROM LETTING OUT OF PROPERTY. PART O F THE RENTAL INCOME WAS ASSESSED UNDER THE HEAD INCOME FROM HOUSE PROPERTY . THE ASSESSEE CLAIMED DEDUCTION OF INCOME U/S. 24(B) OF THE ACT O N CAPITAL BORROWED, WHICH WAS USED FOR THE PURPOSE OF ACQUIRING AND CON STRUCTING THE PROPERTY FROM WHICH RENTAL INCOME WAS DERIVED AND CHARGED TO TAX UNDER THE HEAD INCOME FROM HOUSE PROPERTY. THE ORDER OF THE AO D OES NOT GIVE ANY REASON AS TO WHY THE CLAIM OF THE ASSESSEE FOR DEDU CTION U/S. 24(B) IS REJECTED, BUT IN THE COMPUTATION OF TOTAL INCOME TH E CLAIM OF ASSESSEE HAS BEEN REJECTED. 3. ON APPEAL BY THE ASSESSEE, THE LD. CIT(APPEALS) FOUND THAT THE ASSESSEE HAD ORIGINALLY BORROWED MONIES FROM ITS SI STER CONCERN FOR THE PURPOSE OF CONSTRUCTION OF PROPERTY IN QUESTION AND SUBSEQUENTLY THE ASSESSEE HAD AVAILED OF LOAN FROM HDFC BANK AND LIQ UIDATED THE EARLIER ITA NO. 1295/BANG/2013 PAGE 3 OF 5 LOAN BORROWED FROM SISTER CONCERN. THE CIT(A) FOUN D THAT CBDT IN CIRCULAR NO.28 DATED 20.8.1969 HAD CLARIFIED THAT EVEN IN A CASE WHERE THE ORIGINAL LOAN BORROWED FOR THE PURPOSE OF CONSTRUCTION OR AC QUIRING A PROPERTY IS REPAID BY AVAILING OF ANOTHER LOAN TAKEN BY THE ASS ESSEE, THE INTEREST PAID ON THE LATER LOAN IS ALSO ELIGIBLE FOR DEDUCTION U/ S. 24(B) OF THE ACT. THE CIT(A) DELETED THE DISALLOWANCE OBSERVING AS FOLLOW S:- 6.1 .. AN ADDED ANGLE OF RELEVANCE IS THAT IN THE CASE OF SISTER CONCERN M/S . SJR BUILDERS, FOR THE AY 05-06 THE ENTIRE INTEREST CLAIM OF RS.58 ,13,391/- WAS DISALLOWED BY THE AO ON THE ARGUMENT THAT LOANS HAD BEEN ADVANCED TO ITS SISTER CONCERNS FREE OF INTEREST TO THE EXTENT OF RS.19.90 CRORES, WITH THE LOAN ADVANCED TO THE PRES ENT APPELLANT BEING ALSO MENTIONED IN THAT LIST IN THE BODY OF TH E ASSESSMENT ORDER. THAT ADDITION BY THE AO WAS ACCEPTED BY THE SISTER CONCERN AS PER THE NARRATION IN THE ASSESSMENT ORDE R. THE OPENING BALANCE IN THE LEDGER ACCOUNT OF THE SISTER CONCERN IN THE BOOKS OF THE APPELLANT AS ON 1-4-2005 REFLECTS THE VERY FIGURE OF RS.5,82,44,129/- CONSIDERED BY THE AO OF THE SISTER CONCERN IN THAT ASSESSMENT ORDER AND THUS CONFIRMING THE POSIT ION WITH RESPECT TO THE INTEREST FREE LOAN TAKEN. 6.2 HENCE, IN THESE CIRCUMSTANCES, I FIND THAT THE DENIAL BY THE AO OF THE INTEREST ON THE SUBSEQUENT LOAN TAKEN FRO M HDFC BANK GOES AGAINST THE PROVISIONS OF SECTION 24 AND THE BOARDS CIRCULAR NO.28. HENCE, THE CLAIM MADE BY THE APPEL LANT IS ALLOWABLE AND THE DISALLOWANCE IS DELETED. 4. AGGRIEVED BY THE ORDER OF THE CIT(APPEALS), REVE NUE HAS PREFERRED THE PRESENT APPEAL BEFORE THE TRIBUNAL. ITA NO. 1295/BANG/2013 PAGE 4 OF 5 5. WE HAVE HEARD THE SUBMISSIONS OF THE LD. DR, WHO REITERATED THE STAND OF THE REVENUE AS REFLECTED IN GROUND NO.2 SE T OUT IN THE EARLIER PART OF THIS ORDER. 6. WE HAVE CONSIDERED THE SUBMISSIONS OF THE LD. DR . WE ARE OF THE VIEW THAT THE CONTENTIONS PUT FORTH BY THE REVENUE ARE WITHOUT ANY BASIS. THE ASSESSING OFFICER DISALLOWED INTEREST CLAIMED A S A DEDUCTION U/S. 24(B) OF THE ACT ON THE GROUND THAT THE LOAN AMOUNT AVAIL ED BY THE ASSESSEE FROM HDFC BANK ON WHICH INTEREST WAS PAID, HAD NOT BEEN UTILISED FOR THE CONSTRUCTION OF COMMERCIAL COMPLEX AND THEREFORE DI D NOT FULFIL THE CONDITION OF HAVING BEEN USED FOR THE PURPOSE OF CONSTRUCTION OF BUILDING. WITH REGARD TO THE CLAIM THAT THE SECOND LOAN AVAILED FR OM HDFC BANK WAS USED TO REPAY THE EARLIER LOAN TAKEN FROM SISTER CONCERN , THE AO TOOK THE VIEW THAT THE SECOND LOAN WAS TAKEN IN THE NAME OF ASSES SEE, BUT USED BY THE SISTER CONCERN FOR ITS OWN BUSINESS PURPOSES. IT I S THUS CLEAR THAT NEXUS BETWEEN FIRST AND SECOND LOAN CLEARLY EXISTS AND TH E GROUND RAISED BY THE REVENUE GOES BEYOND THE FINDING OF THE AO. SUCH A CONTENTION BY THE REVENUE IS THEREFORE NOT SUSTAINABLE. IN THE GIVEN CIRCUMSTANCES, CIRCULAR NO.28 DATED 20.8.1969 WAS CLEARLY APPLICABLE TO THE CASE OF THE ASSESSEE. WE ARE THEREFORE OF THE VIEW THAT THE CIT(APPEALS) WAS FULLY JUSTIFIED IN DIRECTING THE AO TO ALLOW THE ASSESSEES CLAIM OF D EDUCTION U/S. 24(B) OF THE ACT. WE DO NOT FIND ANY GROUNDS TO INTERFERE WITH THE ORDER OF THE CIT(APPEALS). ITA NO. 1295/BANG/2013 PAGE 5 OF 5 7. CONSEQUENTLY, THE APPEAL BY THE REVENUE IS DISMISSED . PRONOUNCED IN THE OPEN COURT ON THIS 10 TH DAY OF OCTOBER , 2014 . SD/- SD/- ( JASON P. BOAZ ) ( N.V. VASUDEVA N ) ACCOUNTANT MEMBER JUDICIAL MEMBE R BANGALORE, DATED, THE 10 TH OCTOBER , 2014 . /D S/ COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR / SENIOR PRIVATE SECRETARY ITAT, BANGALORE.