Bhojia Cements Service Limited, Chandigarh V. ACIT, Chandigarh

ITA 1427/CHANDI/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 6828 (ITAT-CHANDIGARH)
• Duration Of Justice: 8 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-09-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 22-12-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: CHANDRA KANTA
• Assessee Lawyers: N K SAINI

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI. SANJAY GARG, JUDICIAL MEMBER AND DR. B.R.R. KUMAR, ACCOUNTANT MEMBER ITA NO. 1427/CHD/2016 ASSESSMENT YEARS: 2011-12 BHOJIA CEMENTS SERVICES VS. ASST. CIT LIMITED SCO 855, FIRST FLOOR CIRCLE 3(1), NAC MANIMAJRA CHANDIGARH CHANDIGARH PAN NO. AAACB6960H (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI. N.K. SAINI DEPARTMENT BY : SMT. CHANDRAKANTA DATE OF HEARING : 02/08/2017 DATE OF PRONOUNCEMENT : 20/09/2017 ORDER PER DR. B.R.R. KUMAR, AM THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE A GAINST THE ORDER OF THE LD. CIT(A)-2, AMRITSAR CAMP AT CHANDIGARH DT. 2 6/10/2016. 2. IN THIS APPEAL ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THE ORDER PASSED BY THE LEARNED CIT(A) IS CONTRA RY TO LAW & FACTS OF THE CASE. 2. THE LD. AO HAS ERRED IN CONFIRMING THE ADDITION OF RS. 17,61,039 MADE TO THE INCOME OF ASSESSEE ON ACCOUNT OF SHORT CHARGE OF IN TEREST ON ADVANCES WHICH IS AGAINST THE PROVISIONS OF INCOME TAX ACT 1961 WHERE AS THE NET AMOUNT DEBITED TO THE INTEREST ACCOUNT WAS ONLY RS. 3,22,585/- (IN TEREST PAID ON LOANS RS. 46,74,708/- INTEREST RECEIVED RS. 43,52,123/-). 3. THE LD. AO HAS ERRED IN LAW IN MAKING ADDITION O F RS. 1,96,000/- UNDER THE HEAD INCOME FROM HOUSE PROPERTY WHEREAS THE RENT SO RECE IVED HAD ALREADY SHOWN AS ITS INCOME IN AY 2012-13 AND TAX ALREADY PAID. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A C & F AGENT AND WORKS FOR ULTRA-TECH CEMENTS. HE HAS FILED ORIGINAL RETURN OF INCOME FOR AY 2011-12 ON 29/09/2011 DECLARING TOTAL INCOME OF RS. 41,83,870/ -. THE AO FOUND THAT THE ASSESSEE HAS NOT SHOWN RENTAL INCOME FOR THE AY 201 1-12 WHEREAS ASSESSEE HAS 2 SHOWN RENTAL INCOME OF RS. 54,000/- FOR THE AY 2010 -11. THE AO OBSERVED THAT THE ASSESSEE HAS CLAIMED CREDIT OF TDS ON RENT IN H IS RETURN OF INCOME WHEREAS THE RENT HAS NOT BEEN OFFERED TO TAX AND HENCE AN A MOUNT OF RS. 1,96,000/- WAS ADDED TO THE INCOME AFTER GIVING BENEFIT OF TAX UND ER SECTION 24. 4. AGGRIEVED THE ASSESSEE FILED APPEAL BEFORE THE L D. CIT (A). 5. BEFORE THE CIT(A) THE ASSESSEE STATED THAT HE HA S DECLARED THE RECEIPT FROM 01/04/2010 TO 30/11/2010 AMOUNTING TO RS. 2,80 ,000/- ALONG WITH THE RECEIPT OF RENT FROM 01/04/2009 TO 31/03/2010 OF RS. 4,20,0 00/- DURING THE FINANCIAL YEAR 2011-12 AND PAID THE TAX ACCORDINGLY. THE INCOME SO DECLARED IN THE AY 2012- 13 AS SINCE HAVE BEEN ASSESSED THEREFORE THE TAX OF PROVISIONAL RENT OF RS. 2,80,000/-(1,96,000/-) MADE BY THE AO FOR THE AY 20 11-12 SHOWS THAT THE SAME HAS BEEN TAXED TWICE. 6. THE LD. CIT(A) HELD THAT THE ASSESSEE HAS NOT ES TABLISHED WITH ANY EVIDENCE THAT RENTAL INCOME DECLARED IN ITS RETURN FOR THE AY 2012-13 INCLUDED THE RENT FROM 01/04/2009 TO 30/11/2010 AMOUNTING TO RS. 7.00 LACS. 7. BEFORE US THE LD. AR SUBMITTED THAT THE AMOUNT C OULD NOT BE QUANTIFIED BECAUSE OF LITIGATION PENDING BEFORE THE HONBLE CI VIL COURT OF CHANDIGARH. THE RENT HAS BEEN PAID TO THE ASSESSEE UP TO 30/11/2010 NLY. HE EXPLAINED THAT SINCE THE AMOUNT OF THE RENT WAS FIXED AT THE RATE OF RS . 35,000/- PER MONTH BY THE HONBLE COURT, THE SAME WAS PUT UNDER THE DISPUTED RENT. HE SUBMITTED THAT SINCE RENT RECEIVABLE FOR THE PERIOD UNDER CONSIDER ATION FROM 01/04/2009 ONWARDS HAD NOT BECOME FINAL AND IT IS SUBJECTED T O THE REVISION THE SAME WAS TREATED AS INCOME IN THE CURRENT YEAR. 8. WE HAVE GONE THROUGH THE FACTS ON RECORD AND IT IS HEREBY HELD THAT THE MATTER IS BEING REFERRED TO THE FILE OF THE AO TO V ERIFY WHETHER THE ASSESSEE HAS FILED HIS RETURN DECLARING THE RENTAL INCOME FOR TH E PERIOD OF 01/04/2009 TO 30/03/2010 IN THE AY 2012-13. IF IT IS FOUND THAT T HE ASSESSEE HAS OFFERED THIS 3 AMOUNT IN THE YEAR AS SUBMITTED BY THE ASSESSEE, TH E SAME AMOUNT NEED NOT BE TAXED AGAIN. THIS GROUND MAY BE TREATED AS ALLO WED. 9. REGARDING THE SECOND GROUND, THE AO HAS MADE AN ADDITION OF RS. 17,61,039/- ON ACCOUNT OF INTEREST AS THE INTEREST PAYMENT WERE MORE THAN THE INTEREST EARNINGS AND THE LOANS RECEIVED FROM THE B ANK AT HIGHER INTEREST AND HAS ADVANCED THE SAME AT LOWER RATE OF INTEREST. 10. LD. CIT(A) HAS CONFIRMED THE ADDITION ON THE GR OUND THAT THE BALANCE SHEET OF THE ASSESSEE REVEALED THAT THERE WERE LOAN S OF 3,05,08,291/- ON WHICH THE ASSESSEE WAS PAYING INTEREST OF RS. 46,74,708.0 5 AND ON THE OTHER HAND THE ASSESSEE WAS EARNING INTEREST OF RS. 43,52,123.38 O N THE ADVANCE OF RS. 3,98,95,999/- GIVEN BY IT. IT WAS HELD BY THE AUTHO RITIES BELOW THAT HE ASSESSEE HAD BORROWED FUNDS FROM THE BANK AT HIGHER RATE OF INTEREST AND ADVANCED THE SAME AT LOWER RATE OF INTEREST. 11. BEFORE US THE LD. AR SUBMITTED THAT THE ASSESSE E HAD TO GIVE SECURITY DEPOSIT TO M/S. ULTRA TECH CEMENTS LTD. AND AS PER THE AGREED TERMS AN AMOUNT OF 7.5% PER ANNUM INTEREST WOULD BE PAID BY THE REC IPIENT ON THE SECURITY DEPOSIT GIVEN BY THE ASSESSEE. THE ASSESSEE SUBMITT ED THAT THE SECURITY DEPOSITS WAS REQUIRED TO AS THE ASSESSEE IS A C&F AGENT OF T HE M/S ULTRA TECH CEMENTS PVT. LTD. AND IT IS A REQUIREMENT OF BUSINESS EXPED IENCY. 12. IT WAS SUBMITTED THAT, EVEN THIS INTEREST WAS N OT DISALLOWABLE AS IT IS NOT THE CASE OF THE DEPARTMENT THAT ASSESSEE HAS ADVANCED I NTEREST FREE ADVANCES TO RELATIVES OR DIRECTORS OF THE COMPANY. MOST OF LOAN S ADVANCED ARE OLD LOANS AND WERE ADVANCED OUT OF ITS OWN RESERVE AND SURPL USES AND INTEREST ON ALL SUCH LOANS AND ADVANCES IS BEING CHARGED. OBJECTION OF THE LEARNED ASSESSING OFFICER IS THAT, IT HAS RECEIVED LESSER INTEREST AS COMPARED TO INTEREST PAID .THE LD.AR ARGUED THAT THE INTEREST HAS BEEN ACTUALLY P AID ALONG WITH SOME OF THE PRINCIPAL AMOUNT AS THESE PAYMENTS ARE BEING MADE T O BANKS AS EQUATED 4 MONTHLY INSTALLMENTS ON LOANS AGAINST PROPERTY. IT WAS ALSO POINTED OUT THAT THE M/S ULTRATECH CEMENTS LTD. IS PAYING AN INTEREST OF ONLY 7.5% ON ITS SECURITY DEPOSITS AS PER POLICY/AGREEMENT OF THE COMPANY. IT WAS ALSO REITERATED THAT THE ASSESSEE BEING THE C&F AGENT HAS TO HAVE SECURI TY DEPOSIT WITH M/S ULTRATECH CEMENTS LTD FOR BUSINESS EXPEDIENCY. 13. KEEPING IN VIEW THE ABOVE POSITION OF LAW AND F ACTS, AND FOR THE REASONS DISCUSSED ABOVE THERE IS NO JUSTIFICATION FOR THE A SSESSING OFFICER TO DISALLOW THE SUM OF RS. 17,61,039/- OUT OF INTEREST CLAIM OF RS. 46,74,708/- DEBITED TO PROFIT AND LOSS ACCOUNT. 14. THE APPEAL OF THE ASSESSEE IS ALLOWED. THE ORDER IS PRONOUNCED ON 20/09/2017 IN THE OPEN COURT. SD/- SD/- (SANJAY GARG) (DR. B.R.R. K UMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER AG COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DEPARTMENTAL REPRESENTATIVE