The Punjab State Federation of cooperative House building Societies, Chandigarh V. ACIT, Chandigarh

ITA 1298/CHANDI/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 68426 (ITAT-CHANDIGARH)
• Duration Of Justice: 8 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-08-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 29-07-2013
• Assessment Year: 2009-2010
• Appeal Filed On: 14-12-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: MANJET SINGH
• Keywords: Capital asset; Business income
• Section: 43B; 56

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH A, CHANDIGARH BEFORE SHRI T.R. SOOD, A.M AND MS. SUSHMA CHOWLA, JM ITA NO. 1298/CHD/2012 ASSESSMENT YEAR : 2009-10 THE PUNJAB STATE FEDERATION V A.C.I.T. C-4(1) OF COOP HOUSE BUILDING CHANDIGARH SOCIETIES LTD. SCO 150-152 SECTOR 34-A, CHANDIGARH (APPELLANT) (RESPONDENT) APPELLANT BY SHRI M.R. SHARMA RESPONDENT BY: SHRI MANJET SINGH DATE OF HEARING 6.8.2013 DATE OF PRONOUNCEMENT 23 .8.2013 O R D E R PER T.R.SOOD, A.M THIS APPEAL IS DIRECTED AGAINST THE ORDER DATED 11. 9.2012 OF THE LD. CIT(A), CHANDIGARH. 2 IN THIS APPEAL THE ASSESSEE HAS RAISED FOLLOWING GROUNDS: 1 THAT THE ORDER OF THE ASSESSING OFFICER AS UPHELD B Y THE COMMISSIONER OF INCOME TAX (APPEALS) CHANDIGARH IS BAD IN LAW AND IS BEYOND ALL THE CANNONS OF LAW AND JUSTICE. 2. THAT THE ORDER OF THE ASSESSING OFFICER AS UPHEL D BY THE COMMISSIONER OF INCOME TAX (APPEALS) CHANDIGARH HOL DING THAT THE INCOME OF RS. 9,62,280/- OUT OF THE AMOUNT OF I NTEREST RECEIVED FROM COMMERCIAL BANKS AS INCOME FROM OTHER SOURCES AND THAT TOO SETTING OFF/ALLOWING EXPENSES ATTRIBUT ABLE TO THE EARNING OF THE SAID INCOME @ 1% MORE PARTICULARLY W HEN THE LOANS RAISED HAVE BEEN DEPOSITED IN THE BANKS AND H AVE EARNED INTEREST UNDER CONSIDERATION AS PER THE PROVISION O F THE LAW IN THE 2 FACTS AND CIRCUMSTANCES OF THE CASE IS BAD IN LAW A ND NEEDS TO BE SET-ASIDE. 3. THAT THE ORDER OF THE ASSESSING OFFICER AS UPHEL D BY THE COMMISSIONER OF INCOME TAX (APPEALS) CHANDIGARH DIS ALLOWING CLAIM OF THE APPELLANT U/S 80P(2)(A)(I) IN RESPECT OF THE INTEREST INCOME RECEIVED FORM COMMERCIAL BANKS AMOUNTING TO RS. 962280/- BEING BUSINESS INCOME CLAIMED AND HOLDING THE SAME AS INCOME FROM OTHER SOURCES IS BAD IN LAW AND NEEDS T O BE SET- ASIDE. 4. THAT THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) CHANDIGARH DISALLOWING RS. 6,85,79,103/-U/S 43B AND THEREBY NOT COMPUTING THE TOTAL AMOUNT TOWARDS THE ENHANCEMENT OF BUSINESS INCOME OF THE APPELLANT AND DIRECTING THE ASSESSING OFFICER TO PROPORTIONALITY ALLOW THE DEDUCTION U/S 80P(2)(A)(I ) OF THE INCOME TAX ACT IS BAD IN LAW AND NEEDS TO BE SET-ASIDE. 5. THAT THE ORDER OF THE ASSESSING OFFICER AS UPHEL D BY THE COMMISSIONER OF INCOME TAX (APPEALS) CHANDIGARH TRE ATING THE INCOME OF RS. 1,45,22,463/- AS BUSINESS AND REJECTI NG THE CLAIM OF THE APPELLANT FOR THE SAME AS LONG TERM CAPITAL GAIN AND DENYING THE CONSEQUENTIAL BENEFITS IS BAD IN LAW AN D NEEDS TO BE SET-ASIDE. 6. THAT THE ORDER OF THE ASSESSING OFFICER AS UPHEL D BY THE COMMISSIONER OF INCOME TAX (APPEALS) CHANDIGARH MAK ING AN ADDITION OF RS. 49,353/- BEING THE AMOUNT OF INTERE ST NEITHER ACCRUED NOR RECEIVED DURING THE YEAR UNDER CONSIDER ATION IS BAD IN LAW AND NEEDS TO BE SET-ASIDE. 3 GROUND NO. 1 IS OF GENERAL NATURE AND DOES NOT RE QUIRE ANY SEPARATE ADJUDICATION. 4 GROUNDS NO. 2 & 3 - AFTER HEARING BOTH THE PARTIE S WE FIND THAT DURING ASSESSMENT PROCEEDINGS THE AO NOTICED T HAT ASSESSEE HAS RECEIVED INTEREST FROM DEPOSIT FROM VA RIOUS BANKS. FOLLOWING THE DECISION OF HON'BLE PUNJAB & HARYANA HIGH COURT IN ASSESSEES OWN CASE IN ITA NO. 643/2010 VIDE ORDER DATED 10.5.2011, INTEREST RECEIVED FROM VARIOUS BANKS WAS HELD TO BE INCOME FROM OTHER SOURCES AND NOT ELIGIBLE F OR DED UCTION U/S 80P. ACTION OF THE ASSESSING OFFICER WAS CONFIRMED BY TH E LD. CIT(A). 3 5 BEFORE US, THE LD. COUNSEL OF THE ASSESSEE FAIRLY ADMITTED THAT NO DOUBT THE HON'BLE HIGH COURT HAS CLEARLY HE LD THAT INTEREST FROM BANK IS TO BE TREATED AS INCOME FROM OTHER SOU RCES AND NOT ELIGIBLE FOR DEDUCTION U/S 80P(2)(A)(I) OF THE ACT HAS TO BE ALLOWED. HOWEVER, AT THE SAME TIME IF IT IS TREATE D TO BE THE INCOME FROM OTHER SOURCES THEN THE EXPENDITURE INCU RRED FOR EARNING SUCH INCOME HAS TO BE ALLOWED IN TERMS OF S ECTION 57(III) OF THE ACT. IN THIS REGARD HE REFERRED TO PAGE 22 OF PAPER BOOK WHICH IS CHART OF INTEREST PAID AND RECEIVED WHICH HAS BEEN EXTRACTED BY THE ASSESSING OFFICER AND SUBMITTED TH AT THE ASSESSEE HAD PAID LOT OF INTEREST AND THEREFORE, I NTEREST SHOULD HAVE BEEN ALLOWED AGAINST SUCH INCOME. EVEN IN CAS E OF HDFC BANK WHICH IS MAJOR ITEM FOR INTEREST RECEIVED AMOU NTING TO RS. 9,48,578/- AN INTEREST AMOUNTING TO RS. 24,16,100/- HAS BEEN PAID. HOWEVER, ON INQUIRY FROM THE BENCH HE ADMITT ED THAT THE ASSESSEE HAS NOT BORROWED ANY SUM FOR MAKING FDR WH ICH WAS MADE IN THE BANK IN SHAPE OF MARGIN MONEY. HE ALSO REFERRED TO PAGE 7 OF PAPER BOOK WHICH IS A COPY OF PROFIT AND LOSS ACCOUNT AND POINTED OUT THAT THE ASSESSEE HAD INCURRED EXP ENDITURE OF ABOUT 12 CRORES APART FROM INTEREST PAID AND THEREF ORE, PROPORTIONATE EXPENDITURE SHOULD HAVE BEEN ALLOWED. 6 ON THE OTHER HAND, THE LD. DR FOR THE REVENUE ST RONGLY SUPPORTED THE ORDER OF ASSESSING OFFICER AND THE LD . CIT(A). 7 WE HAVE HEARD THE RIVAL SUBMISSIONS CAREFULLY AND DO NOT FIND ANY FORCE IN THE SUBMISSIONS OF THE LD. COUNSE L OF THE ASSESSEE. THE HON'BLE PUNJAB & HARYANA HIGH COURT HAS CLEARLY 4 HELD IN ASSESSEES OWN CASE IN ITA NO. 643 OF 2010 WHILE REVERSING THE DECISION OF THE TRIBUNAL THAT INTERES T RECEIVED BY THE ASSESSEE FROM COMMERCIAL BANK WOULD NOT BE COVERED BY SECTION 80P(2)(A)(I) AND THEREFORE, SHOULD BE TAXED AS INC OME FROM OTHER SOURCES U/S 56 OF THE ACT. AS FAR AS ALLOWABILITY OF INTEREST IS CONCERNED, IT WAS ADMITTED BEFORE US THAT THE ASSES SEE HAS NOT BORROWED ANY AMOUNT FOR THE PURPOSE OF MAKING FDRS THEREFORE, INTEREST PAID ON THE BORROWINGS CANNOT BE ALLOWED A S DEDUCTION U/S 57(III). THE HON'BLE SUPREME COURT IN CASE OF CIT V. DR. V.P. GOPINATH (2001) 248 ITR 449 (S.C) HAS HELD ACCORDIN GLY . IN THAT CASE THAT THE ASSESSEE RECEIVED INTEREST FROM THE B ANK ON THE FIXED DEPOSIT WHICH WAS INCOME IN HIS HANDS AND IT COULD STAND DIMINISHED ONLY IF THERE WAS A PROVISION IN LAW PER MITTING SUCH DIMINUTION. THERE WAS NO SUCH PROVISIONS OF LAW AN D THE INTEREST ON THE LOAN TAKEN FROM THE BANK DID NOT REDUCE HIS INCOME BY WAY OF INTEREST ON THE FIXED DEPOSIT. ON THE ABOVE FAC TS IT WAS HELD AS UNDER: HELD, THAT THE INTEREST THAT THE ASSESSEE RECEIVED FROM THE BANK ON THE FIXED DEPOSIT WAS INCOME IN HIS HANDS A ND IT COULD STAND DIMINISHED ONLY IF THERE WAS A PROVISIO N IN LAW PERMITTING SUCH DIMINUTION. THERE WAS NO SUCH PROV ISIONS OF LAW AND THE INTEREST ON THE LOAN TAKEN FROM THE BAN K DID NOT REDUCE HIS INCOME BY WAY OF INTEREST ON THE FIXED D EPOSIT. THEREFORE, FOLLOWING ABOVE DECISION NO DEDUCT ION CAN BE ALLOWED IN RESPECT OF INTEREST. AS FAR AS ALLOWA BILITY OF EXPENDITURE IS CONCERNED FOR MAKING FDRS HARDLY ANY ADMINISTRATIVE EFFORT IS REQUIRED AND THEREFORE, WE ARE OF THE OPINION THAT 1% EXPENDITURE WHICH WAS ALLOWED BY THE ASSESSING OFFICER AND THUS THE ASSESSING OFFICER IS HIMSELF 5 MOST REASONABLE AND DOES NOT REQUIRE ANY INTERFEREN CE. THEREFORE, WE CONFIRM THE ORDER OF THE LD. CIT(A) IN THIS RESPECT. 8 GROUND NO. 4 AFTER HEARING BOTH THE PARTIES WE FIND THAT DURING ASSESSMENT PROCEEDINGS THE AO NOTICED THAT THE ASSESSEE HAD NOT MADE A PAYMENT OF INTEREST TO CERTAIN BANKS . IN RESPONSE TO THE QUERY, IT WAS MAINLY STATED THAT IF ANY DISA LLOWANCE WAS MADE, THE SAME WOULD INCREASE THE BUSINESS INCOME A ND THEREFORE, CORRESPONDING DEDUCTION U/S 80P WOULD A LSO INCREASE. THE ASSESSING OFFICER DID NOT ACCEPT THIS SUBMISSIO N AND A SUM OF RS. 6,85,79,103/- WAS DISALLOWED U/S 43B OF THE AC T. 9 ON APPEAL, THE LD. CIT(A) AGREED WITH THE SUBMISS IONS AND ALLOWED PARTIAL RELIEF BY PARA 4.3 WHICH READS AS U NDER: 4.3 I HAVE CONSIDERED THE SUBMISSION OF THE LD. COU NSEL. IN THE CASE OF THE APPELLANT, THE ENTIRE INTEREST PAYABLE DOES NOT PERTAIN TO INCOMES, ELIGIBLE FOR DEDUCTION U/S 80P(2)(A)(I) OF THE ACT. HENCE, IF THE DISALLOWANCE OF INTEREST PAYABLE IS M ADE U/S 43B, THE APPELLANT WILL BE ELIGIBLE FOR DEDUCTION U/S 80 P(2)(A)(I) OF THE ACT ONLY IN RESPECT OF THE INTEREST, WHICH PERTAINS TO THE INCOME ELIGIBLE FOR DEDUCTION UNDER THIS SECTION. AS IT WI LL NOT BE POSSIBLE TO SEPARATELY WORK OUT THE AMOUNT OF INTEREST PAYAB LE U/S 43B IN RESPECT OF THE INCOME ELIGIBLE FOR DEDUCTION U/S 80 P(2)(A)(I) AND INCOMES NOT SO ELIGIBLE; THE ASSESSING OFFICER IS D IRECTED TO RESTRICT THE DISALLOWANCE OF INTEREST PAYABLE U/S 4 3B OF THE ACT ON PROPORTIONATE BASIS ONLY IN RESPECT OF INCOME, WHIC H IS NOT ELIGIBLE FOR DEDUCTION U/S 80P(2)(A)(I) OF THE ACT. GROUND OF APPEAL NO. 4 IS PARTLY ALLOWED. 10 BEFORE US, THE LD. COUNSEL OF THE ASSESSEE SUBMI TTED THAT PRINCIPALLY APPELLATE AUTHORITY HAS ACCEPTED HIS CO NTENTION BUT THERE WAS NO JUSTIFICATION FOR ALLOWING ONLY THE PR OPORTIONATE DEDUCTION U/S 80P(2)(A)(I) PERHAPS BECAUSE WHOLE OF THE AMOUNT WAS BORROWED FOR THE PURPOSE OF BUSINESS. 6 11 ON THE OTHER HAND, THE LD. DR FOR THE REVENUE S UBMITTED THAT THE ASSESSEE HAS SOME INCOME FROM CAPITAL GAIN AND THEREFORE, PERHAPS DEDUCTION IN RESPECT OF DISALLOWANCE U/S 4 3B WAS JUSTIFIED. 12 WE HAVE HEARD THE RIVAL SUBMISSIONS CAREFULLY A ND FIND THAT TAXABLE INCOME OF RS. 94,37,145/- WAS MAINLY FROM C APITAL GAIN. THERE ARE NO FACTS AVAILABLE ON HOW MUCH MONEY WAS BORROWED FOR THE PURPOSE OF ACQUIRING CAPITAL ASSETS. THERE FORE, IN OUR OPINION, THE LD. CIT(A) WAS RIGHT IN OBSERVING THAT IT IS NOT POSSIBLE TO SEPARATELY WORK OUT THE AMOUNT OF INTER EST PAYABLE U/S 43B OF THE ACT IN RESPECT OF INCOME ELIGIBLE FOR D EDUCTION U/S 80P(2)(A)(I) AND INCOME NOT SO ELIGIBLE. ACCORDING LY WE CONFIRMED THE ORDER OF THE LD. CIT(A) AND DISMISS T HIS GROUND. 13 GROUND NO. 5 AFTER HEARING BOTH THE PARTIES WE FIND THAT DURING ASSESSMENT PROCEEDINGS THE AO NOTICED THAT THE ASSESSEE HAS SHOWN INCOME FROM PROJECTS AMOUNTING TO RS. 1,4 5,22,463/-. IT WAS FURTHER NOTICED THAT MAIN OBJECT OF THE ASSE SSEE WAS TO GRANT LOANS TO THE MEMBER URBAN AND RURAL COOP HOUS E BUILDING SOCIETIES OF THE STATE FOR CONSTRUCTION OF HOUSES. IN RESPONSE TO THE QUERY IT WAS STATED THAT THE ASSESSEE WAS TREAT ING THE IMMOVABLE PROPERTY AS ITS CAPITAL ASSET AND THEREFO RE, ANY GAIN RECEIVED SHOULD BE TREATED AS CAPITAL GAIN. THE AS SESSING OFFICER DID NOT ACCEPT THE SUBMISSIONS AND TREATED THE INCO ME OF RS. 1,45,22,463/- AS BUSINESS INCOME. ACTION OF THE AS SESSING OFFICER HAS BEEN CONFIRMED BY THE LD. CIT(A). 7 14 BEFORE US, THE LD. COUNSEL OF THE ASSESSEE REITE RATED THE SUBMISSIONS MADE BEFORE THE ASSESSING OFFICER AND T HE LD. CIT(A). 15 ON THE OTHER HAND, THE LD. DR FOR THE REVENUE S TRONGLY SUPPORTED THE ORDER OF ASSESSING OFFICER AND THE LD . CIT(A). 16 AFTER CONSIDERING THE RIVAL SUBMISSIONS WE AGREE WITH THE OBSERVATIONS OF THE ASSESSING OFFICER THAT THE ASSE SSEE WAS TO GRANT LOAN TO THE URBAN & RURAL COOP SOCIETIES AND TO BUILD VARIOUS HOUSING COMPLEXES. IT IS NOT THE CASE OF ON E OR TWO ODD INVESTMENTS BUT IT IS THE BUSINESS OF CONSTRUCTION, THEREFORE, INCOME FROM SELLING OF HOUSES HAS BEEN RIGHTLY TREA TED AS TO BE INCOME FROM BUSINESS & PROFESSION. ACCORDINGLY TH IS GROUND IS DISMISSED. 17 GROUND NO. 6 AFTER HEARING BOTH THE PARTIES WE FIND THAT DURING ASSESSMENT PROCEEDINGS THE AO NOTICED THAT A SUM OF RS. 49,353/- WHICH WAS INTEREST ON FDRS, WAS NOT CREDIT ED TO PROFIT AND LOSS ACCOUNT AS PER AUDIT REPORT. THEREFORE, SAME WAS SEPARATELY TAXED. 18 BOTH THE PARTIES WERE HEARD. 19 AFTER CONSIDERING THE RIVAL SUBMISSIONS WE FIND THAT THIS ISSUE IS IDENTICAL TO THE ISSUE RAISED IN GROUNDS N O. 2 & 3 OF THE ASSESSEE WHICH WE HAVE ADJUDICATED IN PARA 7 OF THI S ORDER. FOLLOWING THAT ORDER WE HOLD THAT THIS INTEREST INC OME AMOUNTING TO RS. 49,353/- IS ALSO NOT ELIGIBLE FOR DEDUCTION U/S 80P(2)(A)(I) OF THE ACT AND ACCORDINGLY WE CONFIRM THE ORDER OF THE LD. CIT(A) AND DISMISS THIS GROUND OF THE ASSESSEE. 20 IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON 23.8.2013 SD/- SD/- (SUSHMA CHOWLA) (T.R. SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 23.8.2013 SURESH COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT/THE C IT(A)/THE DR 8