Addarsh Management P. LTD., Hooghly V. ITO, WD-1(4), KOLKATA, Kolkata

ITA 1359/KOL/2016

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 8860 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 5 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-11-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 03-09-2019
• Assessment Year: 2011-2012
• Appeal Filed On: 17-06-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: C J SINGH JCITSRDR
• Keywords: Earning of tax free income; Proportionate interest; Speculation loss; Commercial expediency; Rule 8D
• Section: 143(3); 14A; 37(1)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH A KOLKATA BEFORE SHRI S.S.GODARA, JUDICIAL MEMBER AND DR. A.L. SAINI, ACCOUNTANT MEMBER ITA NO. 1359 / KOL / 2016 ASSESSMENT YEAR :2011-12 ADDARSH MANAGEMENT PVT. LTD. C/O S.N. GHOSH & ASSOCIATES, ADVOCATES SEVEN BROTHERS LODGE, P.O. BUROSHIBTALA, P.S. CHINSURAH, DIST. HOOGHLY [ PAN NO.AACCA 1789 K ] V/S . INCOME TAX OFFICER, WARD-1(4), AAYKAR BHAWAN, P-7, CHOWRINGHEE SQUARE, KOLKATA-700 069 /APPELLANT .. / RESPONDENT /BY APPELLANT SHRI SOMNATH GHOSH, ADVOCATE /BY RESPONDENT SHRI C.J. SINGH, JCIT-SR-DR /DATE OF HEARING 03-09-2019 /DATE OF PRONOUNCEMENT 22 -11-2019 / O R D E R PER S.S.GODARA, JUDICIAL MEMBER:- THIS ASSESSEES APPEAL FOR ASSESSMENT YEAR 2011-12 ARISES AGAINST THE COMMISSIONER OF INCOME TAX (APPEALS)-9 KOLKATAS OR DER DATED 22.03.2016 PASSED IN CASE NO.223/CIT(A)-9/WD-1(4)/2015-16/KOL, INVOLVING PROCEEDINGS U/S 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT T HE ACT. HEARD BOTH THE PARTIES. CASE FILE PERUSED. 2. THE ASSESSEES FIRST AND FOREMOST GRIEVANCE SEEK S TO REVERSE BOTH THE LOWER AUTHORITIES ACTION DISALLOWING ITS SEC.24(B) INTEREST AMOUNT OF 30,80,025/- IN THE COURSE OF ASSESSMENT AND AFFIRM IN THE LOWER APPELLATE PROCEEDINGS. THE CIT(A)S DETAILED DISCUSSION TO TH IS EFFECT READS AS UNDER:- 4 CONCLUSION: ITA NO.1359/KOL/2016 A.Y. 2011-12 ADDARSH MANAGEMETN P. LTD. VS. ITO WD-1(4) KOL . PAGE 2 41 THE AO HAS DISALLOWED THE INTEREST OF RS 30,80, 025 PAID TO HDFC BANK. THIS INTEREST WAS CLAIMED AS DEDUCTION U/S 24(B) AG AINST INCOME FROM HOUSE PROPERTY. DEDUCTION OF INTEREST U/S 24(B) IS ALLOWA BLE DEDUCTION PROVIDED THE LOAN IS TAKEN FOR PURCHASE OF PROPERTY. IN THE INST ANT CASE, THE LOANS FROM HDFC BANK ARE NOT HOUSING LOANS BUT TERM LOAN AND H AS BEEN USED FOR PROVIDING LOANS TO SISTER CONCERNS AND OTHERS, EITH ER INTEREST FREE OR WITH INTEREST. THIS IS A NORMAL BUSINESS LOAN TAKEN FROM BANK, PART OF WHICH HAS BEEN UTILIZED FOR FINANCING PART OF THE COST OF A P ROPERTY. THE APPELLANT DOES NOT HAVE CLEAR BIFURCATION OF INTEREST WHICH IS ATT RIBUTABLE TO THE LOAN FOR PURCHASE OF PROPERTY AND THAT FOR GIVING INTEREST F REE/INTEREST BEARING ADVANCES TO SISTER CONCERNS OR OTHERS. IT IS FURTHE R SEEN THAT THE LOANS FROM HDFC ARE NOT HOUSING LOANS WHICH CARRY LOWER RATE O F INTEREST AND WHICH ARE TO BE SPENT AS PER DIRECTIONS OF BANK BUT NORMAL BU SINESS LOANS WHICH WERE DISBURSED BY BANK ON THE SECURITY OF PROPERTY AND R EPAYMENTS OUT OF RENT OF THIS PROPERTY. THE APPELLANT WAS FREE TO USE IT THE WAY HE LIKED FOR INTEREST FREE/INTEREST BEARING LOANS TO SISTER CONCERNS/OTHE RS FOR HIS BUSINESS. THEREFORE, AS THE LOANS WERE TAKEN FOR BUSINESS AND WERE ADVANCED AS LOANS TO OTHER CONCERN FOR BUSINESS, THE SAME CANNOT BE A LLOWED AS DEDUCTION U/S 24(B) AGAINST INCOME FROM HOUSE PROPERTY. THIS DISA LLOWANCE IS CONFIRMED AND THE GROUND NUMBER 1 IS DISMISSED. 3. IT IS THUS CLAIMED THAT BOTH THE LOWER AUTHORITI ES HOLD THE ASSESSEE TO HAVE FAILED IN PROVING NEXUS OF THE LOAN AMOUNT IN ISSUE AVAILED / UTILIZED FOR THE PURCHASING THE HOUSE PROPERTY IN ISSUE. MR. GHO SH INVITES OUR ATTENTION TO SOME BASIC FACTS. HE SUBMITS THAT THIS ASSESSEE IS ENGAGED INVESTMENT AND LOAN BUSINESS. HE TAKES US TO PARA 2.2 PAGE 4 IN TH E ASSESSMENT ORDER THAT THE ASSESSEES SHORT TERM LOAN AMOUNT BORROWED FROM HDFC BANK HELD TO HAVE NOT UTILIZED FOR PURCHASING HOUSE PROPERTY BUT IT HAD PROVIDED INTEREST FREE ADVANCES TO OTHER CONCERNS IN THE REGULAR COUR SE OF BUSINESS. HE REFERS TO THE CORRESPONDING INTEREST DETAILS IN PAGES 27 I N THE PAPER BOOK INDICATING AMOUNT PAID TO M/S HDFC BANK. IT IS REITERATED THAT IN CASE THE LOWER AUTHORITIES HAVE DECLINED THE ASSESSEES DEDUCTION CLAIM U/S24(B) OF THE ACT, THE SAME DESERVES TO BE ALLOWED U/S 36(1)(III) SINC E THE ASSESSEES INTEREST BEARING FUNDS HAD BEEN ADVANCED TO ITS SISTER CONCE RN IN REGULAR COURSE OF BUSINESS INVOLVING COMMERCIAL EXPEDIENCY. LEARNED D EPARTMENTAL REPRESENTATIVE FAILS TO DISPUTE THAT NEITHER OF THE LOWER AUTHORITY HAS ADJUDICATED ALL THESE CLINCHING ASPECTS WHILST DISA LLOWING THE ASSESSEES INTEREST AMOUNT. WE THEREFORE DEEM IT APPROPRIATE T HAT THIS FIRST SUBSTANTIVE GROUND RAISED IN THE INSTANT APPEAL DESERVES TO BE RESTORED BACK TO THE ITA NO.1359/KOL/2016 A.Y. 2011-12 ADDARSH MANAGEMETN P. LTD. VS. ITO WD-1(4) KOL . PAGE 3 ASSESSING OFFICER FOR AFRESH ADJUDICATION AS PER LA W WITHIN THREE EFFECTIVE OPPORTUNITIES OF HEARING. WE ORDER ACCORDINGLY. 4. MR. GHOSH DOES NOT PRESS FOR ASSESSEES SECOND S UBSTANTIVE GROUND CHALLENGING CORRECTNESS OF BOTH THE LOWER AUTHORITI ES ACTION ADDING SPECULATION LOSS OF 2,76,530/- THEREBY DENYING ITS SET OFF AGAINST THE SHORT TERM LOSS OF 36,33,469/-. THIS SECOND SUBSTANTIVE GROUND IS DECL INED AS NOT PRESSED. 5. NEXT COMES ASSESSEES THIRD SUBSTANTIVE GROUND S EEKING TO DELETE TRAVELLING EXPENSE DISALLOWANCE OF 16,62,171/- MADE IN BOTH THE LOWER PROCEEDINGS ON THE PREMISE THAT THE ASSESSEE FAILED TO PROVE THE SAME TO HAVE BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE P URPOSE OF ITS BUSINESS U/S 37(1) OF THE ACT. 6. WE FIND THAT NEITHER PARTY(IES) SUBMISSIONS AGAI NST AND IN SUPPORT OF THE IMPUGNED DISALLOWANCE DESERVES TO BE ACCEPTED IN EN TIRETY AS THE ASSESSEE HAD FAILED TO PROVE NEXUS OF THE IMPUGNED EXPENSES WITH THE CORRESPONDING BUSINESS / OTHER ACTIVITIES AND THE REVENUE HAS NOT PIN-POINTED ANY SPECIFIC DEFECT IN THE IMPUGNED CLAIM. WE THEREFORE DEEM IT APPROPRIATE THAT A LUMP SUM DISALLOWANCE @ 10% OF THE SUM IN ISSUE OF 16,62,171/- WOULD MEET THE ENDS OF JUSTICE WITH A RIDER THAT SAME SHALL NOT BE TREATED AS A PRECEDENT. THE IMPUGNED DISALLOWANCE SUM OF 16,62,171/- IS RESTRICTED TO 1,66,217/- ONLY. CONSEQUENTIAL COMPUTATION TO FOLLOW. 7. LASTLY COMES SEC. 14A R.W.S. RULE 8D DISALLOWAN CE OF 10,21,610/- MADE IN THE COURSE OF ASSESSMENT AND UPHOLD IN THE LOWER APPELLATE PROCEEDINGS. IT COMPRISES OF PROPORTIONATE INTEREST AND ADMINISTRATIVE EXPENDITURE FIGURES AMOUNTING TO 10,25,497/- AND 1,17,148/-; RESPECTIVELY. IT TRANSPIRES DURING THE COURSE OF HEARING THAT THE AS SESSEES INTEREST FREE FUNDS READ AN AMOUNT OF 15,40,89,600/- AS AGAINST EXEMPT INCOME YIELDING ITA NO.1359/KOL/2016 A.Y. 2011-12 ADDARSH MANAGEMETN P. LTD. VS. ITO WD-1(4) KOL . PAGE 4 INVESTMENTS OF 200,02,348/- ONLY. THE NECESSARY PRESUMPTION IN SUC H A CASE AS PER HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. RELIANCE UTILITIES AND POWER LTD. REPORTED IN (2009) 313 ITR 340 (BOM) IS THAT OF DE PLOYMENT OF INTEREST FREE FUNDS IN EXEMPT INVESTMENTS ONLY. WE ACCORDINGLY DELETE THE FORMER DISALLOWANCE OF PROPORTIONATE INTEREST EXPEN DITURE AMOUNTING TO 10,25,497/-. 8. COMING TO ADMINISTRATIVE EXPENDITURE DISALLOWANC E AMOUNTING TO 1,17,148/-, IT EMERGES THAT NEITHER OF THE LOWER AU THORITY HAS TAKEN INTO CONSIDERATION ONLY THE EXEMPT INCOME YIELDING INVES TMENTS A PER TRIBUNALS CO- ORDINATE BENCHS ORDER REI AGRO LTD. VS. DCIT (2013) 35 TAXMANN.COM 404 (KOL). WE THEREFORE DIRECT THE ASSESSING OFFICER TO FINALIZE CONSEQUENTIAL COMPUTATION AS PER LAW. THIS GROUND IS TAKEN AS PAR TLY ALLOWED. 9. THIS ASSESSEES APPEAL IS PARTLY ALLOWED IN ABOV E TERMS. ORDER PRONOUNCED IN THE OPEN COURT 22/11/2019 SD/- SD/- ( &) (( &) ( A.L.SAINI) (S.S.GODARA) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) KOLKATA, *DKP )- 22 / 11 /201 9 / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-ADDARH MANAGEMENT P. LTD. C/O S.N.GHOSH & ASSOCIATES, ADVOCATES SEVEN BROTHERS LODGE P.O. BUROSHIBTALA, P.S. CHINISURAH, DIST. HOOGHLY, PIN-7121 05 2. /RESPONDENT-ITO WARD-1(4), AAYAKAR BHAWAN, P-7, CHO WRINGHEE SQ. KOLKATA-69 3. 4 5 / CONCERNED CIT KOLKATA 4. 5- / CIT (A) KOLKATA 5. 8 ((4, 4, / DR, ITAT, KOLKATA 6. = / GUARD FILE. BY ORDER/ , /TRUE COPY/ 4,