LITLOIER PROPERTIES HOLDING P.LTD, MUMBAI V. DCIT 5(2), MUMBAI

ITA 1470/MUM/2013

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 7763 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-03-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 30-12-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 22-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJESH KUMAR YADAV
• Assessee Lawyers: SHRI
• Keywords: Proportionate interest; Additional evidence

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUM BAI , , BEFORE S/SHRI RAJENDRA, A.M. AND SANJAY GARG,J.M. ./ITA NO.1470/MUM/2013 , / ASSESSMENT YEAR: 2008-09 M/S. LITOLIER PROPERTIES HOLDINGS PVT.LTD. 101, DOCTOR CENTER, 135, AUGUST KRANTI MARG,KEMPS CORNER, MUMBAI-400 036. PAN: AAACL 0610 N VS. DY.CIT-5(2) 5TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD MUMBAI-400 020. ( /APPELLANT ) ( / RESPONDENT ) ./ITA NO.1979/MUM/2013 , / ASSESSMENT YEAR: 2008-09 ./ITA NO.1982/MUM/2013 , / ASSESSMENT YEAR: 2009-10 DY.CIT-5(2) MUMBAI-400 020. VS. M/S. LITOLIER PROPERTIES HOLDINGS PVT.LTD. MUMBAI-400 036. ( /APPELLANT ) ( / RESPONDENT ) REVENUE BY: SHRI RAJESH KUMAR YADAV ASSESSEE BY: SHRI PANKAJ TOPRANI / DATE OF HEARING: 06.02.2017 / DATE OF PRONOUNCEMENT: 17.03.2017 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) , -PER RAJENDRA,AM: CHALLENGING THE ORDERS OF THE CIT(A)-5,MUMBAI,DTD.1 2.12.2012,THE ASSESSE AND THE ASSESSING OFFICER(AO)HAVE FILED APPEALS FOR THE ABOVE MENTION ED ASSESSMENT YEARS(A.Y.S).ASSESSEE- COMPANY IS ENGAGED IN THE BUSINESS OF GIVING PROPER TIES ON LEASE/RENT. DURING THE COURSE OF HEARING BEFORE US,THE AR PRODU CED ADDITIONAL EVIDENCES WITH THE REQUEST TO ACCEPT THE SAME UNDER RULE 29 OF THE INCOME TAX APP ELLATE TRIBUNAL RULES, 1963. IT WAS ARGUED THAT THE ADDITIONAL EVIDENCES DID NOT REQUIRE ANY F URTHER INVESTIGATION FACTS AND WERE IN SUPPORT OF THE MAIN CONTENTION RAISED BEFORE THE FIRST APPE LLATE AUTHORITY(FAA), THAT THE DETAILS OF BANK ACCOUNT WOULD HELP IN DECIDING THE ISSUE BEFORE THE BENCH. THE DEPARTMENTAL REPRESENTATIVE (DR)LEFT THE ISSUE TO THE DISCRETION OF THE BENCH. AFTER CONSIDERING THE DETAILS OF THE BANK ACCOUNTS, FILED BY THE ASSESSEE, WE ARE OF THE OPIN ION THAT IT WOULD HELP US TO DECIDE THE GROUNDS OF APPEAL CONTESTED BY THE ASSESSEE. THEREFORE, WE ADMIT THE ADDITIONAL EVIDENCES PRODUCED BY THE ASSESSEE. 2. DETAILS OF DATES OF FILING OF RETURNS OF INCOMES,RE TURNED INCOMES,DATES OF ASSESSMENTS ETC.CAN BE SUMMARISED AS UNDER: 1470-1979-1982/M/13 LITOLIER (08-09)(09-10) 2 A.Y. ROI FILED ON RETURNED INCOME(RS.) ASSESSMENT DT. ASSESSED INCOME(RS.) 2008-09 30/09/2008 1.80 CRORES 10.12.2010 4.20 CROR ES 2009-10 30/09/2009 5.93 CRORES 30.12.2011 7.91 CROR ES ITA/1470/MUM/2013,AY.08-09: 3. EFFECTIVE GROUND OF APPEAL,RAISED BY THE ASSESSEE,I S ABOUT DISALLOWANCE OF INTEREST OF RS. 57.29 LAKHS CLAIMED BY THE ASSESSEE U/S.57(III) OF THE AC T.DURING THE ASSESSMENT PROCEEDINGS, THE AO FOUND THAT THE ASSESSEE HAD CLAIMED EXPENSES ON ACC OUNT OF INTEREST TO BANK, AMOUNTING RS.2,57, 29,167/-.HE DIRECTED THE ASSESSEE TO JUSTIFY THE AV AILABILITY OF SAID EXPENSES AGAINST THE SOURCE AND TO PROVE THE NEXUS THAT SUCH EXPENSES HAD BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR EARNING INCOME UNDER THE SAME HEAD. IN ITS REPLY DATED 24/1 1/2010, THE ASSESSEE SUBMITTED THAT IT HAD GIVEN TURNOVER OF RS. 10 CRORES TO M/S. FOUNTAIN HE AD MOTELS PRIVATE LTD. (FHMPL) FOR A SHORT TERM PERIOD OF 3 TO 6 MONTHS FROM ITS DENA BANK O/D ACCOUNT ON 15/10/2007 ON AGREED INTEREST AT THE RATE OF 13.5% PER ANNUM,THAT ACCORDINGLY THE INTEREST INCOME OF RS. 61.87 LAKHS ON THE ABOVE LOAN WERE SHOWN BY THE ASSESSEE ON ACCRUAL BA SIS, THAT THE AMOUNT OF RS.10 CRORES WAS GIVEN OUT OF THE OVERDRAFT ACCOUNT OF DENA BANK,THA T OUT OF THE TOTAL INTEREST OF RS.1.90 CRORES (2.30 CRORES -39.45 LAKHS) A SUM OF RS. 1.33 CRORES WAS CAPITALISED, THAT THE BALANCE OF RS. 57.29 LAKHS,PERTAINING TO THE LOAN OF RS. 10 CRORES,WAS C LAIMED AS DEDUCTION FROM THE INCOME FROM OTHER SOURCES.THE ASSESSEE ENCLOSED A COPY OF INTER EST ACCOUNT OF DENA BANK OVERDRAFT ACCOUNT AS WELL AS A COPY OF LEDGER ACCOUNT OF FHMPL.AFTER CON SIDERING THE SUBMISSION OF THE ASSESSEE THE AO HELD THAT SUBMISSIONS MADE BY IT WERE FACTUALLY INCORRECT,THAT THE PERUSAL OF OVERDRAFT ACCOUNT STATEMENT OF DENA BANK REVEALED THAT DURING THE YEAR UNDER APPEAL THE ASSESSEE HAD MADE TOTAL WITHDRAWAL OF RS.39.30 CRORES,THAT THE B ANK HAD DEBITED TOTAL INTEREST OF RS. 3.99 CRORES,THAT OUT OF THE TOTAL WITHDRAWALS RS.10 CROR ES WAS ADVANCED TO FHMPL,THAT BALANCE AMOUNT WAS GIVEN A ADVANCES TOWARDS PURCHASE OF PRO PERTY, THAT RS.1.34 CRORES,BEING DIFFERENCE OF INTEREST,WAS CAPITALISED TO THE PROPERTY ACCOUNT , THAT THE PURPOSE OF BALANCE WITHDRAWAL OF RS. 29.30 CRORES WAS NOT KNOWN,THAT UTILISATION OF THE SAME HAD NOT BEEN EXPLAINED BY THE ASSESSEE, THAT INTEREST EXPENSES IN RESPECT OF SUCH AMOUNT WA S OTHERWISE ALSO NOT ALLOWABLE AS SAME WAS NOT INCURRED FOR THE PURPOSE OF BUSINESS.REFERRING TO THE PROVISIONS OF SECTION 43B(E) READ WITH EXPLANATION 3D OF THE ACT, THE AO HELD THAT THE ASS ESSEE HAD NOT ACTUALLY PAID THE INTEREST AND SAME HAD BEEN CONVERTED INTO LOAN/ADVANCED BY THE B ANK, THAT THE INTEREST EXPENDITURE WOULD NOT 1470-1979-1982/M/13 LITOLIER (08-09)(09-10) 3 QUALIFY FOR DEDUCTION.FINALLY,HE DISALLOWED INTERES T OF RS. 57.29 LAKHS AND ADDED BACK TO THE INCOME OF THE ASSESSEE. 4. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE PREF ERRED AN APPEAL BEFORE THE FAA. BEFORE HIM,IT WAS ARGUED THAT THERE WAS SOME ERROR IN THE SUBMISSIONS MADE BEFORE THE AO, THAT THE CHEQUES WERE ISSUED FROM THE CURRENT-ACCOUNT AND NO T FROM THE OVERDRAFT ACCOUNT,THAT THE CURRENT-ACCOUNT WAS FUNDED BY RS.10 CRORES ON 16/10 /2007, THAT THE ASSESSEE COURT SANCTION OF JOINT TERM LOAN/OVERDRAFT OF RS. 45 CRORES AT AN IN TEREST RATE OF 12.50%, THE AMOUNT WAS SANCTION TO BE USED BY SIX ENTITIES NAMELY LITOLIER PROPERTI ES PRIVATE LTD, ASHOK MITTAL HUF, LITOLIER INTERIOR PRIVATE LTD.,MULTIPLEX INVESTMENT PRIVATE LTD,FREEPORT INVESTMENT AND TRADING COMPANY PRIVATE LTD AND ASHOK MITTAL AND CO., THAT THE SHORT-TERM LOAN GIVEN BY THE ASSESSEE WAS FUNDED TO THE EXTENT OF RS. 5 CRORES BY TRANSFE RRING FUNDS FROM OVERDRAFT ACCOUNT AND PARTLY FROM THE PRE-MATURED DEPOSIT OF RS.3 CRORES, THAT B ALANCE 3 CRORES WERE RECEIVED AS UNSECURED LOAN FROM ASHOK MITTAL,THAT THERE WAS JOINT OVERDRA FT BALANCE OF RS. 36.43 CRORES BEFORE THE DATE OF ISSUE OF LOAN, THAT DIRECTLY/INDIRECT THE OVERDR AFT PROCEEDS WERE USED FOR THE PURPOSE OF ISSUING OF THE LOAN AND THE ASSESSEE HAD EARNED INTEREST ON THE LOAN GIVEN AND THE INTEREST INCOME WAS ASSESSED AS INCOME FROM OTHER SOURCES, THAT IT WAS ENTITLED FOR DEDUCTION OF PROPORTIONATE INTEREST EXPENSES AMOUNT FROM THE INTEREST INCOME U/S.57, TH AT THE RATE OF INTEREST CHARGED ON THE LOAN WAS AT THE RATE OF 13.5% WHICH WAS 1% MORE THAN THE 40 INTEREST RATE OF 12.5%. BEFORE THE FAA,THE ASSESSEE HAD PRODUCED CERTAIN ADDITIONAL EVIDENCES, SO,HE DIRECTED THE AO TO FILE A REMAND REPORT IN THAT REGARD. 4.1. AFTER CONSIDERING THE REMAND REPORT AND REJOINDER T O THE REPORT, THE FAA HELD THAT ASSESSEE HAD CLAIMED INTEREST EXPENDITURE OF RS.57.29 LAKHS, THAT IT HAD TRIED TO SET IT OFF AGAINST INTEREST INCOME OF RS. 61.87 LAKHS,THAT IT HAD CLAIMED THAT A TERM LOAN OF RS.10 CRORES WAS ADVANCED TO FHMPL ON WHICH INTEREST INCOME OF RS. 61.87 LAKHS W AS EARNED, THAT THE ASSESSEE HAD ALSO CLAIMED THAT THE OVERDRAFT OF RS.10 CRORES WAS FINA NCED FROM OVERDRAFT ACCOUNT, THAT IN THE REMAND REPORT THE AO HAD FOUND THAT THE ASSESSEE HA D ADVANCED LOAN OF MOVIES 864.50 LAKHS AND RS.135.50 LAKHS ON 16/10/2007 FROM ITS CURRENT-ACCO UNT CA GN26545 ON WHICH INTEREST WAS PAID BY THE ASSESSEE,THAT IT HAD NOT MADE ANY INTER EST ON THE LOANS ADVANCED I.E. RS. 10 CRORES, THAT THE ASSESSEE HAD NOT INCURRED AN INDIRECT EXPE NSES TO ALL INTEREST OF RS. 61.87 LAKHS, THAT IT HAD FAILED TO PROVE ANY DIRECT NEXUS BETWEEN THE IN TEREST OF RS. 68 1.87 LAKHS(PAID ON THE OVERDRAFT ACCOUNT NO. TERM LOAN DRT 1), THAT THERE WERE TWO DIFFERENT AND DISTINCT ACCOUNTS THAT 1470-1979-1982/M/13 LITOLIER (08-09)(09-10) 4 WERE USED FOR ADVANCING INTEREST-BEARING LOAN TO FH MPL, THAT THE INTEREST INCOME OF RS. 61.87 LAKHS HAD NOT BEEN EARNED OUT OF THE OVERDRAFT ACCO UNT OF THE ASSESSEE (ACCOUNT NUMBER TERM LOAN DRT-1), THAT THE INTEREST EXPENSE OF RS. 57.29 LAKH S WAS NOT INCURRED TO EARN INTEREST OF RS. 61, 87,500/-. FINALLY, HE UPHELD THE ORDER OF THE AO. 5. AFTER CONSIDERING THE REMAND REPORT AND REJOINDER T O THE REPORT, THE FAA HELD THAT ASSESSEE HAD CLAIMED INTEREST EXPENDITURE OF RS.57.29 LAKHS, THA T IT HAD TRIED TO SET IT OFF AGAINST INTEREST INCOME OF RS. 61.87 LAKHS, THAT IT HAD CLAIMED THAT A TERM LOAN OF RS.10 CRORES WAS ADVANCED TO FHMPL ON WHICH INTEREST INCOME OF RS.61.87 LAKHS WA S EARNED,THAT THE ASSESSEE HAD ALSO CLAIMED THAT THE OVERDRAFT OF RS.10 CRORES WAS FINA NCED FROM OVERDRAFT ACCOUNT, THAT IN THE REMAND REPORT THE AO HAD FOUND THAT THE ASSESSEE HA D ADVANCED LOAN OF MOVIES 864.50 LAKHS AND RS.135.50 LAKHS ON 16/10/2007 FROM ITS CURRENT-ACCO UNT CA-GN26545 ON WHICH INTEREST WAS PAID BY THE ASSESSEE, THAT IT HAD NOT MADE ANY INTE REST ON THE LOANS ADVANCED I.E. RS. 10 CRORES, THAT THE ASSESSEE HAD NOT INCURRED AN INDIRECT EXPE NSES TO ALL INTEREST OF RS. 61.87 LAKHS, THAT IT HAD FAILED TO PROVE ANY DIRECT NEXUS BETWEEN THE IN TEREST OF RS. 61.87 LAKHS(PAID ON THE OVERDRAFT ACCOUNT NO.TERM LOAN DRT 1), THAT THERE WERE TWO DI FFERENT AND DISTINCT ACCOUNTS THAT WERE USED FOR ADVANCING INTEREST-BEARING LOAN TO FHMPL, THAT THE INTEREST INCOME OF RS. 61.87 LAKHS HAD NOT BEEN EARNED OUT OF THE OVERDRAFT ACCOUNT OF THE ASSESSEE (ACCOUNT NUMBER TERM LOAN DRT-1), THAT THE INTEREST EXPENSE OF RS.57.29 LAKHS WAS NOT INCURRED TO EARN INTEREST OF RS.61,87,500/-. FINALLY,HE UPHELD THE ORDER OF THE AO. 6. DURING THE COURSE OF HEARING BEFORE US, THE AR ARGU ED THAT THE LOAN OF RS.3 CRORES WAS GIVEN TO THE ASSESSEE ON BEHALF OF ASHOK MITTAL OUT OF CURRE NT ACCOUNT NUMBER 26630 BELONGING TO BELLAMY INVESTMENTS AND TRADING COMPANY PRIVATE LTD .,THAT ASHOK MITTAL WAS ONE OF THE DIRECTORS OF THE SAID COMPANY, THAT RS. 3 CRORE WER E WITHDRAWN AGAINST COMMON OVERDRAFT FACILITY ENJOYED BY HIM AS PER SANCTION LETTER OF DENA BANK. HE REFERRED TO PAGES 8,59,111 AND 121 OF THE PAPER BOOK AND STATED THAT AS ON 31/03/2008 THE UNS ECURED LOAN GIVEN BY ASHOK MITTAL TO THE ASSESSEE WAS RS.14.82 CRORES,THAT THE AO AND THE FA A HAD NOT DEALT WITH THIS ASPECT AT ALL.THE DR ARGUED THAT THE FAA HAD CONSIDERED THE SUBMISSIO NS OF THE ASSESSEE AND HAD PASSED A REASONED ORDER AFTER CONSIDERING ALL THE MATERIAL. 7 .WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED TH E MATERIAL BEFORE US.WE FIND THAT THE ISSUE OF AVAILABILITY OF FUND AND ADVANCING OF FUNDS FROM THE ACCOUNT OF ASHOK MITTAL TO THE ASSESSEE 1470-1979-1982/M/13 LITOLIER (08-09)(09-10) 5 HAVE NOT BEEN VERIFIED PROPERLY.WE HAVE ADMITTED AD DITIONAL EVIDENCES THAT WERE NOT AVAILABLE TO THE LOWER AUTHORITIES,BUT THEY THROW LIGHT ON THE D ISPUTE BEFORE US.FROM THE BANK STATEMENT IT IS CLEAR THAT AT LEAST RS.3 CRORES WERE ADVANCED ON BE HALF OF ASHOK MITTAL.IT IS ALSO A FACT THAT DENA BANK HAD EXTENDED LOAN FACILITY IN FAVOUR OF SIX EN TITIES.IN OUR OPINION,THE AO/FAA HAD NOT DELIBERATED UPON THE SAID ISSUE AS THE ASSESSEE HAD NOT FURNISHED THE NECESSARY DETAILS BEFORE THEM.THEREFORE,WE ARE OF THE OPINION THAT IN THE IN TEREST OF JUSTICE,MATTER SHOULD BE RESTORED BACK TO THE FILE OF THE AO FOR FRESH ADJUDICATION,WHO WO ULD DECIDE THE ISSUE AFRESH AFTER AFFORDING A REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE.E FFECTIVE GROUND OF APPEAL(GOA 1-3)IS DECIDED IN FAVOUR OF THE ASSESSEE,IN PART. ITA.S./1979 & 1982/MUM/2013-AY.S.2008-09 & 2009-10 8. SOLITARY GROUND OF APPEAL,RAISED BY THE AO IN BOTH THE AY.S.,IS ABOUT DISALLOWANCE OF INTEREST/DISCOUNTING CHARGES OF RS.1.71 CRORES.IT W AS BROUGHT TO OUR NOTICE BY THE AR THAT THE STANDS DECIDED AGAINST THE AO BY THE ORDERS FOR THE EARLIER YEARS.THE DR STATED THAT MATTER COULD BE DECIDED ON MERITS.WE FIND THAT THE TRIBUNAL FOR THE AY.2001-02(ITA/5223/MUM/03,DTD.21. 09.2006),AY.2002-03(ITA/685/MUM/2006,DTD.29.05.2008 ),AY.2005-06(ORDER DTD.31.08.2009) AY.2006-07(ORDER DTD.07.03.12),HAD DISMISSED THE AP PEAL FILED BY THE AO.THE HONBLE BOMBAY HIGH COURT HAD DISMISSED THE APPEAL FILED BY THE DE PARTMENT ON 8.8.2011 FOR THE AY. 2005-06. THE DEPARTMENT HAD APPROACHED THE HONBLE APEX COUR T.BUT,THE SLP FILED BY IT WAS DISMISSED. CONSIDERING THESE FACTS THE FAA DECIDED THE ISSUE I N FAVOUR OF THE ASSESSEE.IN OUR OPINION,THERE IS NO LEGAL OR FACTUAL INFIRMITY IN THE ORDER OF TH E FAA.SO,CONFIRMING THE SAME,WE DECIDE EFFECTIVE GROUND OF APPEAL AGAINST THE AO FOR BOTH THE AY.S. AS A RESULT,APPEAL OF THE ASSESSEE IS PARTLY ALLOWE D AND APPEALS OF THE AO STAND DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH MARCH, 2017. 17 , 2017 SD/- SD/- ( /SANJAY GARG) ( / RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; /DATED : 17.03.2017. JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 1470-1979-1982/M/13 LITOLIER (08-09)(09-10) 6 5. DR E BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.