Swire Holdings Pvt Ltd, Bangalore V. The Income Tax Officer ward-12(2), Bangalore

ITA 1465/BANG/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 7062 (ITAT-BANGALORE)
• Duration Of Justice: 5 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-12-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 1995-1996
• Appeal Filed On: 22-06-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: LA TA VISHNOI
• Keywords: Business income; Opportunity of being heard

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC - C BENCH : BANGALORE BEFORE SHRI ARUN KUMAR GARODIA, ACCOUNTANT MEMBER ITA NO. 1465 /BANG/201 7 ASSESSMENT YEAR : 1995 - 96 M/S. SWIRE HOLDINGS PVT. LTD., 1 ST FLOOR, EMBASSY POINT, 150, INFANTRY ROAD, BANGALORE 560 001. PAN: AADCS 1539G VS. THE INCOME-TAX OFFICER, WARD 12 (2), BANGALORE. APPELLANT RESPONDENT ASSESSEE BY : SMT. LA TA VISHNOI, CA REVENUE BY : SHRI P.V. PRADEEP KUMAR, ADDL. CIT (DR) DATE OF HEARING : 06 .1 2 .2017 DATE OF PRONOUNCEMENT : 08 .1 2 .2017 O R D E R PER SHRI A.K. GARODIA, ACCOUNTANT MEMBER; THIS IS AN IS AN ASSESSEES APPEAL DIRECTED AGAINST THE ORDER OF LD. CIT(A), BANGALORE -6, BANGALORE DATED 24.03.2017 FOR ASSESS MENT YEAR 1995-96. 2. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER. 1. THE COMMISSIONER OF INCOME-TAX (APPEALS) ERRED B OTH IN LAW AND ON THE FACTS OF THE CASE IN HOLDING THAT THE INTERE ST OF RS.1,89,025/- SHOULD BE ASSESSED UNDER 'OTHER SOURCES'. 2. HE FAILED TO APPRECIATE THAT THE APPELLANT HAD A DVANCED THE MONEY FOR PURCHASE OF THE PROPERTY AND THAT IT COUL D NOT PRODUCE DOCUMENTARY EVIDENCE SINCE THE ASSESSMENT WAS TAKEN UP, AFTER A LAPSE OF 15 YEARS 3. HE FAILED TO APPRECIATE THAT ACE PROPERTY DEVELO PERS PRIVATE LIMITED WAS ALSO CARRYING ON BUSINESS OF REAL ESTAT E DEVELOPER AND THAT, THEREFORE, IT WAS ONLY A TRADE ADVANCE. 4. HE ALSO FAILED TO APPRECIATE THAT THE ADVANCE WA S MADE OUT AS PART OF ITS BUSINESS ACTIVITIES AND THAT, THEREFORE, IT SHOULD BE ASSESSED AS 'BUSINESS INCOME'. ITA NO. 1465/BANG/2017 PAGE 2 OF 4 5. THE ADDITION MADE IS UNREASONABLE. 6. THE APPELLANT, THEREFORE, PRAYS THAT RS.1,89,025 /- MAY BE ASSESSED UNDER 'BUSINESS'. 3. BRIEF HISTORY OF THIS CASE IS THIS THAT THE ASSE SSEE IS ENGAGED IN REAL ESTATE BUSINESS. IN THE PRESENT YEAR, THE AO TAXED A SUM OF RS. 1,89,025/- AS INCOME FROM OTHER SOURCES ALTHOUGH THIS WAS THE CLAIM OF T HE ASSESSEE THAT IT HAS EARNED THIS INCOME AS BUSINESS INCOME. THIS WAS TH E CONTENTION THAT THE ASSESSEE ADVANCED MONEY IN ORDER TO BUY LAND FOR TH E PURPOSE OF CARRYING ON BUSINESS ACTIVITIES AND SINCE, THE SAID TRANSACTION COULD NOT BE FINALIZED, THE ADVANCE WAS RETURNED ALONG WITH INTEREST AND THE SA ME IS OFFERED TO TAX UNDER THE HEAD BUSINESS INCOME. THE REVENUE REJECTED THI S CONTENTION ON THE GROUND THAT THE ASSESSEE DURING THE RELEVANT ASSESSMENT YE AR HAS NOT EVEN COMMENCED THE BUSINESS AND THEREFORE, INTEREST EARN ED IS INCOME FROM OTHER SOURCES. WHEN THE ASSESSEE CARRIED THE APPEAL IN A PPEAL BEFORE CIT(A), THE ASSESSMENT ORDER WAS CONFIRMED BUT FURTHER APPEAL W AS FILED BY THE ASSESSEE BEFORE THE TRIBUNAL AND IT WAS HELD BY TRIBUNAL THA T THIS INTEREST INCOME SHOULD BE ASSESSED AS BUSINESS INCOME. THE REVENUE FILED APPEAL BEFORE THE HON'BLE KARNATAKA HIGH COURT AGAINST THIS TRIBUNAL ORDER. THE HONBLE KARNATAKA HIGH COURT REMANDED THE MATTER BACK TO THE FILE OF AO FO R FRESH DECISION WITH THE DIRECTION THAT IF THE INTEREST IS RECEIVED BY THE A SSESSEE ALONG WITH THE REFUND OF ARREARS AMOUNT PAID BY THE ASSESSEE, IT HAS TO BE T REATED AS INCOME FROM BUSINESS BUT IF THE ASSESSEE HAD EARNED INTEREST BY LENDING MONEY OR INVESTING THE AMOUNT IN ANY FINANCIAL INSTITUTIONS, SUCH INTE REST HAS TO BE TREATED AS INCOME FROM OTHER SOURCES. AS PER THE DIRECTION OF HONBLE HIGH COURT, THE AO FRAMED THE FRESH ASSESSMENT ORDER ON 24.12.2010. I N THE SAME, THE AO HAS NOTED THAT THE ASSESSEE HAS NOT PROVIDED ANY SUBSTA NTIAL EVIDENCE TO SUPPORT ITS CLAIM THAT THE TRANSACTION BETWEEN THE ASSESSEE COMPANY AND M/S. ACE PROPERTIES DEVELOPERS P. LTD. WAS A BUSINE SS TRANSACTION. THE AO HAS ALSO NOTED THE COMMENTS OF THE AUDITORS IN THE AUDITORS REPORT AS PER WHICH, THE ASSESSEE COMPANY HAS GRANTED LOANS AND A DVANCED IN THE NATURE OF LOANS INCLUDING THE LOAN IN QUESTION GIVEN TO SAPHI RE INVESTMENTS PRIVATE LIMITED AND ACE PROPERTIES PVT. LTD. THE AO ASSESSE D THIS INTEREST INCOME AS INCOME FROM OTHER SOURCES. THE ASSESSEE AGAIN CARR IED THE MATTER IN APPEAL ITA NO. 1465/BANG/2017 PAGE 3 OF 4 BEFORE CIT(A) BUT WITHOUT SUCCESS. NOW THE ASSESSE E IS IN FURTHER APPEAL BEFORE US IN THE SECOND ROUND. 4. THE LD. AR OF ASSESSEE MADE VARIOUS SUBMISSIONS BUT SHE COULD NOT ESTABLISH THAT THE INTEREST RECEIVED BY THE ASSESSEE IN THE P RESENT YEAR IS ALONG WITH THE REFUND OF ARREARS AMOUNT PAID BY THE ASSESSEE AS HA S BEEN HELD BY HONBLE KARNATAKA HIGH COURT AND UNDER THIS SITUATION, THE COMMENTS OF AUDITORS IN THE AUDITORS REPORT ASSUMES MORE SIGNIFICANCE AND WITH OUT ANY EVIDENCE IN SUPPORT OF ASSESSEES CLAIM THAT IT HAS GIVEN MONEY AS ADVA NCE FOR PURCHASE OF LAND AND RECEIVED BACK THE INTEREST ON REFUND OF SUCH AD VANCE GIVEN FOR PURCHASE OF LAND, THE COMMENTS OF THE AUDITORS HAS TO BE ACCEPT ED THAT THIS WAS THE LOAN TRANSACTION AND AFTER ACCEPTING THAT, AS PER THE JU DGEMENT OF HON'BLE KARNATAKA HIGH COURT IN ASSESSEES OWN CASE, THE INTEREST INC OME HAS TO BE ASSESSED AS INCOME FROM OTHER SOURCES BUT I ALSO FIND THAT AS P ER THE P & L ACCOUNT OF THE ASSESSEE MADE AVAILABLE ON RECORD, THERE ARE VARIOU S EXPENSES INCURRED UNDER VARIOUS HEADS TO THE EXTENT OF RS. 19,06,156.70/- A ND NONE OF THE AUTHORITIES BELOW HAS EXAMINED THIS ASPECT AS TO WHETHER ANY AM OUNT OF EXPENDITURE OUT OF THIS TOTAL EXPENDITURE IS INCURRED FOR EARNING O F THE INTEREST INCOME IN QUESTION ASSESSED AS INCOME FROM OTHER SOURCES AND THIS IS V ERY IMPORTANT BECAUSE EVEN IF THIS INCOME IS ASSESSED AS INCOME FROM OTHE R SOURCES, IT HAS TO BE SEEN AS TO WHETHER ANY EXPENDITURE IS ALLOWABLE U/S. 57 (III) OF THE IT ACT. THIS EXERCISE WAS NOT DONE BY ANY OF THE AUTHORITIES BEL OW AND HENCE, I RESTORE THE MATTER BACK TO THE FILE OF AO FOR CARRYING OUT THIS EXERCISE WITH THE DIRECTION THAT HE SHOULD DECIDE THE ISSUE ON THIS ASPECT AS TO WHE THER ANY DEDUCTION IS ALLOWABLE U/S 57 (III) AGAINST INTEREST INCOME ASSE SSED BY HIM AS INCOME FROM OTHER SOURCES ALTHOUGH I UPHOLD THIS ACTION OF THE AO THAT INTEREST INCOME IS ASSESSIBLE AS INCOME FROM OTHER SOURCES. FOR THE L IMITED PURPOSE OF DECIDING THIS ASPECT AS TO WHETHER ANY DEDUCTION IS ALLOWABL E U/S. 57(III), THE MATTER IS RESTORED BACK TO THE FILE OF AO FOR FRESH DECISION AFTER PROVIDING ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. ITA NO. 1465/BANG/2017 PAGE 4 OF 4 5. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES IN THE TERMS INDICATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE MENT IONED ON THE CAPTION PAGE. SD/- (ARUN KUMAR GARODIA) ACCOUNTANT MEMBER BANGALORE, DATED, THE 08 TH DECEMBER, 2017. /MS/ COPY TO: 1. APP ELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY, INCOME TAX APPELLATE TRIBUNAL, BANGALORE.