Shri Pankaj Chandrakant Shah, Ahmedabad V. The Income Tax Officer, Ward 10(4), Ahmedabad

ITA 1421/AHD/2013

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 3652 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-06-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 16-05-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 14-05-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ANILKUMAR BHARADWAJ
• Assessee Lawyers: SOHAM MASHRUWALA
• Keywords: Depreciation
• Section: 37(1)

Judgement Text

, C IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD BEFORE SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER AND SHRI RAJPAL YADAV, JUDICIAL MEMBER ./ ITA NO.1421/AHD/2013 / ASSTT.YEAR: 2008-2009] SHRI PANKAJ CHANDRAKANT SHAH C/O. M/S.MADHUSUDAN C. MASHRUWALA AND CO., CHARTERED ACCOUNTANTS AKIK, 301-303, OPP: LIONS HALL MITHAKHALI AHMEDABAD 380 006. PAN : ACUPS 1964 K VS ITO, WARD - 10(4) AHMEDABAD. ( APPLICANT ) (RESPONDENT) ASSESSEE BY : SHRI SOHAM MASHRUWALA REVENUE BY : SHRI ANIL KUMAR BHARADWAJ, SR.DR / DATE OF HEARING : 16/05/2016 / DATE OF PRONOUNCEMENT: 01/06/2016 *+/ O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER: THE ASSESSEE IS IN APPEAL BEFORE US AGAINST THE ORD ER OF THE LD.CIT(A)-XVI DATED 13.3.2013 PASSED FOR THE ASSTT. YEAR 2008-09. 2. THE GROUNDS OF APPEAL TAKEN BY THE ASSESSEE ARE NOT IN CONSONANCE WITH THE RULE 8 OF THE INCOME TAX (APPEL LATE TRIBUNAL) RULES, 1963 - THEY ARE DESCRIPTIVE AND ARGUMENTATIV E IN NATURE. IN BRIEF THE ASSESSEE HAS RAISED TWO SUBSTANTIAL GROUN DS OF APPEAL VIZ. (A) THE LD.CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS.5,24,587/- WHICH WAS ADDED BY THE AO WITH THE AID OF SECTION 4 0(A)(IA) OF THE ITA NO.1421/AHD/2013 2 INCOME TAX ACT. IN THE SECOND GROUND, THE ASSESSEE HAS SUBMITTED THAT THE LD.CIT(A) HAS ERRED IN CONFIRMING THE ADDI TION OF RS.12,07,016/- WHICH WAS ADDED BY THE AO BY MAKING DISALLOWANCE OUT OF INTEREST CLAIM. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN INDIVIDUAL. HE HAS FILED HIS RETURN OF INCOME ON 29.9.2008 DECLARI NG TOTAL INCOME AT RS.8,03,970/-. THE ASSESSEE AT THE RELEVANT TIME W AS RUNNING THREE PROPRIETORSHIP CONCERNS VIZ. (I) M/S.P.C. SHAH & CO MPANY, (II) M/S.P. CHOTALAL DISTRIBUTORS, AND (III) M/S.P. CHOTALAL EX TRUSION WORKS. THE ASSESSEE WAS ENGAGED AS C&F AGENT FOR PHARMACEUTICA L PRODUCTS. ON SCRUTINY OF THE ACCOUNTS, IT REVEALED TO THE AO THA T THE ASSESSEE HAS MADE CERTAIN PAYMENTS WHICH ARE DEBITED TO THE PROF IT & LOSS ACCOUNT. THESE PAYMENTS MAY ATTRACT TDS PROVISIONS. THEREFO RE, HE CALLED FOR VARIOUS DETAILS FROM THE ASSESSEE VIDE SHOW CAUSE N OTICE DATED 26.10.2010. ACCORDING TO THE AO, THE ASSESSEE HAD SUBMITTED DETAILS AS REQUIRED, BUT DID NOT FURNISH DETAILS WITH RESPE CT TO COMMISSION PAID IN THE PROPRIETORSHIP CONCERN VIZ. M/S.P. CHOTALAL DISTRIBUTORS AND M/S.P.C. SHAH & COMPANY. ACCORDING TO THE AO, A CO MMISSION AGGREGATING TO RS.5,24,587/- (RS.57,971 PAID TO P.C HOTALAL DISTRIBUTORS PLUS RS.4,66,616/- BY M/S.P.CHOTALAL SHAH & CO.) WE RE PAID WITHOUT DEDUCTION OF TDS UNDER SECTION 194H OF THE INCOME T AX. THE LD.AO DID NOT ALLOW DEDUCTION OF THE EXPENDITURE ON ACCOUNT O F NON-DEDUCTION OF TDS. HE MADE ADDITION OF RS.5,24,587/-. 4. APPEAL TO THE CIT(A) DID NOT BRING ANY RELIEF TO THE ASSESSEE. 5. THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT T DS WAS DEDUCTED AND PAID. DUE TO OVERSIGHT AND MISTAKE OF THE CLER K IN THE BOXES MEANT FOR MAKING A MENTION OF THE ASSESSMENT YEAR, IT WAS WRITTEN 2007-08 INSTEAD OF 2008-09. DUE TO THIS ERROR, THE LD.AO A SSUMED THAT THE ITA NO.1421/AHD/2013 3 PAYMENT WAS RELEVANT FOR THAT YEAR, AND NOT FOR THI S YEAR. HE IGNORED THE DATE OF PAYMENT I.E. 23.7.2007. THE ASSESSEE H AS APPLIED FOR RECTIFICATION OF TDS CERTIFICATE WHICH WAS ALSO REC TIFIED THE COPY OF THE APPLICATION AND TDS CERTIFICATE ISSUED FOR COMMISSI ON HAS BEEN PLACED ON PAPER BOOK BY THE ASSESSEE. ON THE STRENGTH OF THIS DOCUMENT, THE LD.COUNSEL FOR THE ASSESSEE CONTENDED THAT THE ADDI TION OF RS.5,24,587/- DESERVES TO BE DELETED. ON THE OTHER HAND, LD.DR R ELIED UPON THE ORDERS OF THE REVENUE AUTHORITIES. 6. ON DUE CONSIDERATIONS OF THE FACTS AND CIRCUMSTA NCES, WE ARE OF THE VIEW THAT THE HONBLE DELHI HIGH COURT IN THE S IMILAR FACTS, IN THE CASE OF CIT VS ANSAL LAND MARK TOWNSHIP P. LTD., IN ITA APPEAL NO.160 OF 2015, HAS OBSERVED THAT SECOND PROVISO TO SECTIO N 40(A)(IA) OF THE INCOME TAX ACT IS TO BE READ AS APPLICABLE WITH RET ROSPECTIVE EFFECT. ACCORDING TO THIS PROVISO, IF A PAYEE HAS FILED ITS RETURN OF INCOME DISCLOSING THE PAYMENT RECEIVED, THEN, THE ASSESSEE WOULD NOT BE CONSIDERED IN DEFAULT. IN THE PRESENT CASE, ACCORD ING TO THE ASSESSEE, THE TDS WAS DEDUCTED AND IT WAS PAID. SOME, WRONG ASSESSMENT YEAR WAS MENTIONED WHICH WAS RECTIFIED LATER ON. THUS, THE TAXES ON THE PAYMENT OF RS.5,24,587/- ALLEGED TO HAVE BEEN PAID. HOWEVER, WE FIND THAT RECTIFICATION APPLICATION FOR CORRECTION IN TH E ASSESSMENT YEAR IN TDS PAYMENT WAS MADE ON 26.4.2011 I.E. SUBSEQUENT T O THE PASSING OF THE ASSESSMENT ORDER. THE LD.COUNSEL FOR THE ASSES SEE FILED A WRONG CERTIFICATE IN THE PAPER BOOK ALLEGING THAT THIS DO CUMENT WAS FILED BEFORE THE AO. IF THE APPLICATION WAS MADE AFTER A SSESSMENT ORDER, THEN, HOW IT CAN BE SUBMITTED DURING THE ASSESSMENT PROCEEDINGS. THE ASSESSMENT ORDER WAS PASSED ON 27.12.2010. CONSIDE RING ALL THESE ASPECTS, WE DEEM IT APPROPRIATE TO SET ASIDE THIS I SSUE TO THE FILE OF THE AO. THE LD.AO SHALL EXAMINE THE ISSUE ON BOTH THE POINTS VIZ. (A) IF THE PAYEES HAVE ACCOUNTED THESE RECEIPTS IN THEIR INCOM E, THEN, THE ASSESSEE WILL NOT BE CONSIDERED IN DEFAULT, AND (B) THE AO WOULD ITA NO.1421/AHD/2013 4 DETERMINE WHETHER THE ASSESSEE HAS DEDUCTED TDS AND MADE PAYMENT OF TDS IN THE GOVERNMENT TREASURY, BECAUSE, ACCORDI NG TO THE CORRECT CERTIFICATE, THE ASSESSEE HAS ALLEGED PAYMENT OF SU CH TDS ON THESE PAYMENTS. THIS FACT CANNOT BE VERIFIED BY THE AO I N THE ORIGINAL ROUND OF LITIGATION, BECAUSE OF THE WRONG CERTIFICATE SUB MITTED BY THE ASSESSEE. IF ANY ONE CONDITION IS BEING SATISFIED, THEN NO DISALLOWANCE WOULD BE MADE, THEREFORE, THIS GROUND OF THE APPEAL IS ALLOWED FOR STATISTICAL PURPOSE. 7. THE NEXT GRIEVANCE OF THE ASSESSEE IS THAT THE L D.CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS.12,07,016/-. 8. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IN HIS COMPUTATION OF INCOME HAS DIRECTLY CLAIMED DEDUCTION OF RS.12,07,0 16/- UNDER THE HEAD INTEREST PAID. HE ADJUSTED THE SAME FROM THE BUSIN ESS PROFIT AS RECEIPT FROM M/S.P.C.SHAH & CO., AND P.CHHOTALAL DISTRIBUTO RS. WHEN THE LD.AO HAS CONFRONTED THE ASSESSEE WITH REGARD TO THIS CLA IM, HE HAS CONTENDED AS UNDER: I HAVE CLAIMED RS.12,07,016/- BEING INT4REST P AID BY ME TO ICICI BANK FOR BUSINESS LOAN BORROWED AGAINST MY OF FICE BUILDING PROPERTY DURING THE AY 2006-07 I.E. 25/02/2006, WHI CH WAS TRANSFERRED TO MY PROPRIETARY P. CHOTALAL DISTRIBUT ORS IN THE SAME YEAR. THE COPY OF STATEMENT BEARING NO.10737337 RE CEIVED BY ME FROM ICICI BANK FOR THE PERIOD FROM 01/04/2007 T O 31/03/2008 IS ENCLOSED HEREWITH. 9. THE LD.AO HAD MADE ELABORATE ANALYSIS OF THE REC ORD AND OBSERVED THAT ICICI BANK SANCTIONED LOAN IN THE JOI NT NAME OF SHRI PANKAJ CHANDRAKANT SHAH AND SMT. POONAM PANKAJ SHAH FOR PURCHASE OF RESIDENTIAL HOUSE PROPERTY. THUS, THIS LOAN WAS NEVER TRANSFERRED IN THE ACCOUNT OF P. CHOTALAL DISTRIBUTORS NOR IT WAS SHOWN AS BUSINESS ASSET. ACCORDING TO THE AO, THE DEDUCTION UNDER SE CTION 37(1) OF THE INCOME TAX ACT IS NOT AVAILABLE TO THE ASSESSEE, BE CAUSE THIS WAS NOT A BUSINESS LOAN. ITA NO.1421/AHD/2013 5 10. ON APPEAL, THE LD.CIT(A) HAS CONFIRMED THE ADDI TION BY OBSERVING AS UNDER: 5.2 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE C ASE AND THE SUBMISSIONS MADE BY THE APPELLANT. IT IS AN UNDISPU TED FACT OF THE CASE THAT THE LOAN FROM THE ICICI BANK HAS BEEN TAK EN AS A HOME LOAN AS EVIDENT FROM THE CERTIFICATE OF IGICI BANK PROVIDED BY THE APPELLANT AND REFERRED BY THE A O IT IS ALSO AN UND ISPUTED FACT OF THE CASE THAT THE APPELLANT HAS NOT DISCLOSED THE S AID ASSET AS A BUSINESS ASSET IN THE BALANCE SHEET OF HIS PROPRIET ARY CONCERN NOR HAS CLAIMED ANY DEPRECIATION. THE MERE FACT THAT TH E APPELLANT IS PROPRIETOR OF CERTAIN BUSINESS ENTITIES WOULD NOT M AKE HIM ELIGIBLE FOR CLAIM OF INTEREST CHARGED BY THE BANK UNLESS TH E APPELLANT IS ABLE TO DEMONSTRATE WITH COGENT EVIDENCE THAT THE L OAN WAS TAKEN IN RESPECT OF A COMMERCIAL PROPERTY AS A COMMERCIAL PROPERTY LOAN AND SUCH PROPERTY WAS DISCLOSED AND USED AS A BUSIN ESS ASSETS THE VERY FACT THAT THE PROPERTY HAS NOT BEEN DISCLO SED AS BUSINESS ASSET ON WHICH NO DEPRECIATION HAS BEEN CLAIMED, IT SELF SHOWS THAT NO INTEREST THEREIN CAN'BE ALLOWED AS A BUSINE SS EXPENDITURE SECTION 37(1) OF THE I T. ACT CLEARLY PROHIBITS ANY EXPENDITURE WHICH IS OF CAPITAL IN NATURE AND WHICH IS NOT OF T HE NATURE OF 'PERSONAL EXPENSES' OF THE ASSESSEE INTEREST ON BOR ROWED CAPITAL IS ALLOWED U/S. 36(1)(III) PROVIDED BORROWED CAPITA L WAS USED FOR PURPOSES OF BUSINESS IN THE INSTANT CASE, BORROWED CAPITAL IS THE LOAN TAKEN FROM THE ICICI BANK FOR PURCHASE OF A PR OPERTY UNDER THE HOME LOAN CATEGORY INTEREST ON THIS LOAN DO NOT HAVE ANY NEXUS WITH APPELLANTS BUSINESS SINCE THE VERY PURPO SE OF LOAN WAS NOT TO UTILISE IN THE BUSINESS BUT TO GET A HOME LO AN ON SOFT TERMS. IT IS A KNOWN FACT THAT HOME LOANS AS COMMERCIAL LO ANS ATTRACT LESSER RATE OF INTEREST THE APPELLANT IS THUS MAKIN G A PATENTLY CLAIM OF INTEREST THE CLAIM OF THE APPELLANT IS NOT COVERED EITHER U/S 37(1) OR U/S. 36(1)(III). ACCORDINGLY, IT IS H ELD THAT THE ADDITION MADE BY THE LD.AO DOES NOT REQUIRES ANY IN TERFERENCE AT THIS STAGE AND DESERVES TO BE CONFIRMED. THE ADDIT ION OF RS.12,07,016/- MADE BY THE LD.AO ON ACCOUNT OF INAD MISSIBLE CLAIM OF INTEREST IS THEREFORE CONFIRMED AND THE GR OUND OF APPEAL NO.4 IS DISMISSED. 11. BEFORE, THE LD.COUNSEL FOR THE ASSESSEE HAS REI TERATED HIS SUBMISSIONS, AS WERE RAISED BEFORE THE AO. HE PLAC ED ON RECORD COPY OF LOAN DISBURSEMENT LETTER, MUNICIPAL TAX BILL AND BU PERMISSION DATED 13.10.1992. HE FURTHER CONTENDED THAT THE ASSESSEE HAS TAKEN LOAN FOR ITA NO.1421/AHD/2013 6 BUSINESS PURPOSE. FUNDS WERE INVESTED IN THE BUSIN ESS IN THE SAME YEAR. IT WAS ALSO CONTENDED BY THE LD.COUNSEL FOR THE ASSESSEE THAT INTEREST RATE WERE CHEAPER, THEREFORE, THE ASSESSEE HAS BORROWED FUNDS BY MORTGAGING THE PROPERTY. 12. ON THE OTHER HAND, THE LD.DR RELIED UPON BY THE ORDER OF THE AO. 13. ON DUE CONSIDERATION OF THE FACTS AND CIRCUMSTA NCES, WE DO NOT FIND ANY MERIT IN THE SUBMISSION OF THE LD.COUNSEL FOR THE ASSESSEE. THERE IS NO DISPUTE WITH REGARD TO THE PROPOSITION THAT AS PER SECTION 36(1)(III), THE AMOUNT OF INTEREST PAID ON CAPITAL BORROWED FOR THE PURPOSE OF BUSINESS OR PROFESSION WOULD BE ALLOWED TO THE ASSESSEE. IT IS FOR THE ASSESSEE TO DEMONSTRATE THAT LOANS WERE TAKEN FOR THE PURPOSE OF BUSINESS, AND THEY WERE USED FOR THE PUR POSE OF BUSINESS. THE LD.REVENUE AUTHORITIES HAVE RECORDED A CONCURRE NT FINDING THAT THE LOAN WAS TAKEN IN THE JOINT NAMES FOR THE PURCHASE OF A HOUSE. BEFORE US, NEITHER THE COPY OF THE LOAN APPLICATION NOR MO RTGAGE DEED WAS PRODUCED. THE ASSESSEE EVEN FAILED TO RECONCILE TH E LOAN AMOUNT CAME TO HIS POSSESSION FROM THE BANK, AND HOW IT WAS USE D FOR THE PURPOSE OF BUSINESS. NO DOCUMENTARY EVIDENCE HAS BEEN PLACED ON RECORD. THE FINDING OF THE FACT RECORDED BY THE LD.REVENUE AUTH ORITIES BELOW REMAINED UN-REBUTTED. THE AO HAS OBSERVED THAT ON PERUSAL OF THE LOAN APPLICATION IT REVEALED THAT IT WAS A HOUSING LOAN. NOW THE ASSESSEE HAS FILED A LOAN DISBURSEMENT LETTER. IT NOWHERE DISCLOSES THE NATURE OF THE LOAN. IT ONLY DISCLOSES THE DISBURSE MENT OF LOAN. THESE DOCUMENTS ARE NEITHER HERE NOR THERE. SIMILARLY, T HE ASSESSEE HAS FIELD COPY OF BU PERMISSION DATED 13.10.1992 IN GUJARATI. IT IS NOWHERE DISCERNIBLE WHETHER THIS DOCUMENT WAS FILED BEFORE THE AO OR NOT. HOW THIS DOCUMENT IS HELPFUL TO THE ASSESSEE IS NOT DIS CLOSED BEFORE US. ITA NO.1421/AHD/2013 7 THEREFORE, WE DO NOT FIND ANY MERIT IN THE GROUND N O.2 RAISED BY THE ASSESSEE IN THE APPEAL. THUS, THIS GROUND IS DISMI SSED. 14. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE COURT ON 1 ST JUNE, 2016 AT AHMEDABAD. SD/- SD/- (PRAMOD KUMAR) ACCOUNTANT MEMBER (RAJPAL YADAV) JUDICIAL MEMBER