BADA SAAB PROPERTIES P. LTD, MUMBAI V. ACIT CIR 9(1), MUMBAI

ITA 1306/MUM/2009

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 49376 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 3 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-06-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I
• Next Hearing Date: 14-04-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 26-02-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: T T JACOB
• Assessee Lawyers: V C SHAH
• Keywords: Sale consideration of property below Jantri Value; Set aside
• Section: 50C; 201

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH I,MUMBAI BEFORE SHRI D.K. AGARWAL (JM) & SHRI T.R. SOOD (AM ) I.T.A.NO.1306/MUM/2009 (A.Y. 2005-06) BADA SAAB PROPERTIES PVT.LTD., 501, KRYSTAL, 206, N.S.PATKAR MARG (WATERFIELD RD.), BANDRA (W), MUMBAI-400 050. PAN: AAACB1642A VS. ASST. COMMR. OF INCOME-TAX, CIR. 9(1), AAYKAR BHAVAN, M.K. ROAD, MUMBAI-400 020. APPELLANT RESPONDENT APPELLANT BY SHRI V.C. SHAH. RESPONDENT BY SHRI T .T. JACOB. O R D E R PER T.R. SOOD, AM : IN THIS APPEAL, THE ASSESSEE HAS RAISED THE FOLLO WING TWO GROUNDS : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LEARNED CIT (A) ERRED IN SUSTAINING THE DISALLOWANCE OF INTERST AMOUNTING TO RS.15,54,405/- CLAIMED AS DEDUCTION IN COMPUTING ASSESSABLE INCOME FROM HOUSE PROPERTY THOUGH IT WAS EXPLAINED THAT TH E BORROWINGS IN RESPECT OF WHICH INTEREST WAS PAID AN D CLAIMED AS DEDUCTION WERE UTILIZED FOR PAYING OFF T HE AMOUNT BORROWED FOR THE PURPOSE OF CONSTRUCTION OR ACQUISITION. IT WAS EXPLAINED THAT INTEREST ON AMOU NTS BORROWED UTILIZED FOR PAYING, BORROWING MADE FOR ACQUIRING OR CONSTRUCTING THE PROPERTY WAS ALLOWABL E AS DEDUCTION. THIS CLARIFICATION WAS OVERLOOKED BY CIT (A) WHILE DECIDING THE APPEAL. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LD. CIT (A) ERRED IN SUSTAINING THE ADOP TION OF THE VALUE OF CONSIDERATION AT RS.9,42,98,500/- AS A GAINST ACTUAL CONSIDERATION OF RS.9,21,00,000/- BY APPLYIN G THE SPROVISION OF SECTION 50C THOUGH IT WAS EXPLAINED T HAT THERE WAS DELAY IN GETTING TRANSFER APPROVAL FROM ITA NO.1306/M/09 BADA SAAB PROPERTIES P.LTD.. 2 MORTGAGEE BANK AND THE MARKET VALUE AS ON THE DATE OF COMMITMENT OF SALE WAS RS.9,21,00,000/- ONLY. AND HENCE, THE PROVISIONS OF SECTION 50C IF APPLIED ON THE DATE OF COMMITMENT OF SALE THERE WERE NO DIFFERENCE BETWEEN THE VALUE AS PER READY RECKONER AND THE DA TE OF COMMITMENT OF SALE. THE INCLUSION OF RS.21,98,500/- IN SALE CONSIDERATION IS THEREFORE REQUIRED TO BE DELE TED. GROUND NO.1: 2. AFTER HEARING BOTH THE PARTIES, WE FIND THA T DURING ASSESSMENT PROCEEDINGS THE AO NOTICED THAT THE ASSESSEE HAD CL AIMED DEDUCTION OF INTEREST AMOUNTING TO RS.15,54,405/- FROM INCOME U NDER THE HEAD INCOME FROM HOUSE PROPERTY AS INTEREST ON BORROWED CAPITA L. THE LOAN WAS TAKEN FROM KOTAK MAHINDRA BANK AGAINST THE PROPERTY WHICH WAS LEASED OUT TO ICICI BANK. LATER ON, THE ASSESSEE TOOK LOAN FROM ICICI B ANK AND REPAID THE AMOUNT TO KOTAK MAHINDRA BANK. THEREFORE, THE AO OB SERVED THAT THE ASSESSEE HAS NOT BEEN ABLE TO PROVE THAT MONEY WAS BORROWED FOR ACQUIRING OR CONSTRUCTION OF THE PROPERTY AND ACCORDINGLY INT EREST WAS NOT ALLOWED. 3. ON APPEAL, THE ACTION OF AO WAS CONFIRM ED BY THE CIT(A). 4. THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT IDENTICAL ISSUE CAME BEFORE THE TRIBUNAL IN ASSTT. YEAR 2004-05 IN ITA N OS.3150 & 4230/MUM/08 AND WAS DECIDED IN FAVOUR OF THE ASSESSEE. 3.1 ON THE OTHER HAND, THE LD. D.R. RELIED ON T HE ORDER OF CIT(A). 4. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE FIND THAT IDENTICAL ISSUE CAME BEFORE THE TRIBUNAL IN ASSTT. YEAR 2004-05 AND WAS DECIDED VIDE PARAS-6 & 7 WHICH IS AS UNDER : 6. WE HAVE HEARD THE LD. REPRESENTATIVES OF T HE PARTIES AND RECORD PERUSED. IN BRIEF, THE ADMITTED FACTS OF THE CASE ARE THAT THE ASSESSEE HAS TAKEN ORIGINAL LOAN FROM CORPORATION BANK WHICH WAS UTILIZED FOR CONSTRUCTIO N OF THE PREMISES. SUBSEQUENTLY, THE ASSESSEE SUBSTITUTED IT BY TAKING A FRESH LOAN FROM KOTAK MAHINDRA BANK LTD. A ND PART OF THAT LOAN WAS UTILIZED FOR REPAYMENT OF LOA N TAKEN ITA NO.1306/M/09 BADA SAAB PROPERTIES P.LTD.. 3 FROM CORPORATION BANK. SECTION 24(B) PROVIDES THAT WHERE THE PROPERTY HAS BEEN ACQUIRED, CONSTRUCTED, REPAIR ED, RENEWED OR RE-CONSTRUCTED WITH BORROWED CAPITAL, TH E AMOUNT OF ANY INTEREST PAYABLE ON SUCH CAPITAL IS A N ALLOWABLE DEDUCTION WHILE CALCULATING INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY. THE ISSUE TO BE EXAMINED IN THIS GROUND OF APPEAL IS WHETHER THE OR IGINAL LOAN TAKEN FOR CONSTRUCTION OF PREMISES AND SUBSEQU ENTLY SUBSTITUTED BY ANOTHER LOAN, UNDER THE CIRCUMSTANCE S, IS ENTITLED FOR INTEREST DEDUCTION IN RESPECT OF THE F RESH LOAN FOR SUBSTITUTION OF THE ORIGINAL LOAN. WE FIND THAT THIS CONTROVERSY HAS BEEN RESOLVED BY THE CBDT BY ISSUIN G A CIRCULAR NO.28 DATED 20-08-1969, WHICH READS AS UND ER : CIRCULAR NO.28 DATED 20.8.1969 SEC. 24(1) OF THE I.T. ACT, 1961 INSTRUCTIONS REGARDING INCOME FROM HOUSE PROPERTY SECTION 24(1) (VI) OF THE IT ACT, 1961 PROVIDES THAT WHERE THE PROPERTY HAS BEEN ACQUIRED, CONSTRUCTED, REPAIRED , RENEWED OR RE-CONSTRUCTED WITH BORROWED CAPITAL, THE AMOUNT OF ANY INTEREST PAYABLE ON SUCH CAPITAL SHALL BE ALLOWED AS AN ADMISSIBLE DEDUCTION IN THE COMPUTATION OF THE INCOME FROM THE SAID PROPERTY. 2. A QUESTION HAS BEEN RAISED WHETHER IN A CASE WHERE A FRESH LOAN HAS BEEN RAISED TO REPAY THE ORIGINAL LOAN TAKEN FOR THE ABOVE PURPOSE, THE INTEREST PAYABLE IN RESPECT OF THE SECOND LOAN WOULD ALSO BE ADMISSIBLE AS A DEDUCTION UNDER S. 24(1)(VI) OF THE IT ACT. 3. THE MATTER HAS BEEN CONSIDERED BY THE BOARD AND IT HAS BEEN DECIDED THAT IF THE SECOND BORROWING HAS REALLY BEEN USED MERELY TO REPAY THE ORIGINAL LOAN AND THIS FACT IS PROVED TO THE SATISFACTION OF THE ITO, THE INTEREST PAID ON THE SECOND LOAN WOULD ALSO BE ALLOWED AS A DEDUCTION UNDER S.24(1)(VI). 7. AS STATED ABOVE, THAT THE CLAIM OF THE ASSESSE E IS ONLY IN RESPECT OF A PORTION OF THE FRESH LOAN WHIC H HAS BEEN SUBSTITUTED TO THE ORIGINAL LOAN UTILISED FOR THE PURPOSE OF CONSTRUCTION OF THE PREMISES IS IN DISPU TE. FROM THE ABOVE CBDT CIRCULAR WE FIND THAT THE CBDT HAS CLEARLY INSTRUCTED THE OFFICER THAT IF THE SECOND B ORROWED AMOUNT HAS REALLY BEEN USED MERELY TO REPAY THE ORI GINAL ITA NO.1306/M/09 BADA SAAB PROPERTIES P.LTD.. 4 LOAN, THE INTEREST PAID TO THAT EXTENT IS AN ALLOWA BLE DEDUCTION. THE AO IS BOUND TO FOLLOW THE CBDT CIRCU LAR. WE, THEREFORE, FIND THAT THE INTEREST CLAIM OF THE ASSESSEE IS ALLOWABLE, WE ACCORDINGLY ALLOW IT. FOLLOWING THE ABOVE ORDER, WE DECIDE THIS ISSUE IN FAVOUR OF THE ASSESSEE. GROUND NO. 2: 5. AFTER HEARING BOTH THE PARTIES, WE FIND THAT DUR ING ASSESSMENT PROCEEDINGS THE AO NOTICED THAT THE ASSESSEE HAS SHOWN SALE CON SIDERATION OF THE PROPERTY AT RS.9.21 CRORES, WHEREAS THE VALUE FOR STAMP DUTY P URPOSE WAS RS.9,42,98,500/-. ACCORDINGLY, THE AO, IN VIEW OF S EC. 50C, ADOPTED THE VALUE AT RS.9,42,98,500/- AS SALE CONSIDERATION. 5.1 ON APPEAL, THE ACTION OF AO WAS CONFIRMED BY THE LD. CIT(A). 6. THE LD. COUNSEL OF THE ASSESSEE INVITED OUR ATTE NTION TO PAGE-5 OF THE PAPER BOOK WHICH IS A COPY OF LETTER WRITTEN TO AO IN WHI CH IT WAS EXPLAINED HOW THE ORIGINAL DEED OF THE PROPERTY WAS MADE IN THE YEAR 2003 AND HOW THE SAME COULD NOT BE EXECUTED IMMEDIATELY AND THE REASON FOR ENH ANCEMENT OF STAMP DUTY. HE SUBMITTED THAT ALL THESE EXPLANATIONS HAVE NOT BEEN CONSIDERED. 6.1 ON THE OTHER HAND, THE LD. D.R. RELIED ON THE O RDERS OF AO AND CIT(A). 7. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE FIND THAT THE EXPLANATIONS GIVEN BEFORE THE AO VIDE LETTER DATED 27-11-2007 HAVE NOT BEEN CONSIDERED BY THE AO AT ALL. THEREFORE, WE DEEM IT FIT TO SET ASIDE THE ORDER OF LD. CIT(A) AND REMIT THE MATTER BACK TO THE FILE OF AO WITH A DIRECTION TO C ONSIDER THE EXPLANATION OF THE ASSESSEE WHY HIGHER STAMP DUTY WAS PAID AND THEN D ECIDE THE ISSUE AFTER PROVIDING ADEQUATE OPPORTUNITY TO THE ASSESSEE. 8. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. ITA NO.1306/M/09 BADA SAAB PROPERTIES P.LTD.. 5 ORDER PRONOUNCED ON THE 24TH DAY OF JUNE, 201 1. SD/- SD/- (D.K. AGARWAL) (T.R. SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI: 24TH JUNE , 2011. NG: COPY TO : 1. ASSESSEE. 2.DEPARTMENT. 3 CIT(A)-IX,MUMBAI. 4 CIT-IX,MUMBAI. 5.DR,I BENCH,MUMBAI. 6.MASTER FILE. (TRUE COPY) BY ORDER, ASST.REGISTRAR, ITAT, MUMBAI. ITA NO.1306/M/09 BADA SAAB PROPERTIES P.LTD.. 6 DETAILS DATE INITIALS DESIGN ATION 1. DRAFT DICTATED ON 14-06-11 SR.PS/ 2. DRAFT PLACED BEFORE AUTHOR 15-06-11 SR.PS/ 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/ 6. KEPT FOR PRONOUNCEMENT ON SR.PS/ 7. FILE SENT TO THE BENCH CLERK SR.PS/ 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9. DATE ON WHICH FILE GOES TO THE AR 10. DATE OF DISPATCH OF ORDER