DCIT, Circle-1(1), Hyderabad, Hyderabad V. Andhra Pradesh State Housing Corporation Ltd., Hyderabad, Hyderabad

ITA 1499/HYD/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 2469 (ITAT-HYDERABAD)
• Duration Of Justice: 6 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-05-2017
• Appeal Filed By: Department
• Bench Allotted: B
• Next Hearing Date: 17-05-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 07-11-2016
• Court: TRIBUNAL
• Department Lawyers: K J RAO
• Keywords: Depreciation
• Section: 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B, HYDERABAD BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER I.T.A. NO. 1499/HYD/2016 ASSESSMENT YEAR: 2011-12 DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-1(1), HYDERABAD VS M/S. AP STATE HOUSING CORPORATION LTD., HYDERABAD [PAN: AABCA7206L] (APPELLANT) (RESPONDENT) FOR REVENUE : SRI K.J. RAO, DR FOR ASSESSEE : NONE DATE OF HEARING : 22-05-2017 DATE OF PRONOUNCEMENT : 26-05-2017 O R D E R PER B. RAMAKOTAIAH, A.M. : THIS IS AN APPEAL BY REVENUE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-9, HYDERABAD, DATED 15-06-2016 ON THE ISSUE OF ALLOWING THE INTEREST ON L OANS. 2. BRIEF FACTS OF THE CASE ARE THAT ASSESSEE-COMPANY IS AN UNDERTAKING BY THE GOVERNMENT OF ANDHRA PRADESH(THEN) AND ENGAGED IN THE CONSTRUCTION OF SUBSIDIZED HOUSING FOR THE WEAKER SECTIONS OF SOCIETY. ASSESSEE-COMPANY FILED ITS RETUR N OF INCOME FOR THE AY. 2011-12 ON 28-09-2011 DECLARING A LOSS OF RS . I.T.A. NO. 1499/HYD/2016 M/S. AP STATE HOUSING CORPORATION LTD., :- 2 - : 6,31,37,66,308/-. ASSESSMENT WAS COMPLETED U/S. 144 OF THE INCOME TAX ACT [ACT], DETERMINING THE TOTAL INCOME AS NI L. 3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AS SESSING OFFICER (AO) FOUND THAT ASSESSEE-COMPANY HAD FILED I TS RETURN OF INCOME BASED ON PROVISIONAL ACCOUNTS. AO HAS NOT CON SIDERED THE FINAL ACCOUNTS AND THE RETURN OF INCOME WAS TREATED AS DEFECTIVE RETURN. BUT IN THE COURSE OF SCRUTINY,THE FOLLOWING A DDITIONS WERE MADE: I. DISALLOWANCE OF DEPRECIATION RS. 1,55,72,450/- ; II. DISALLOWANCE OF INTEREST ON LOANS RS. 5,76,41,59,107 /- ; III. DISALLOWANCE OF EXPENDITURE RS. 11,29,40,582/- -------------------------- RS. 5,8 9,26,72,139/- -------------------------- 3.1. THE ISSUE IN PRESENT APPEAL RELATES TO THE DISAL LOWANCE OF INTEREST ON LOANS OF RS. 5,76,41 ,59,107/-. AO OBSER VED THAT ASSESSEE IS INVOLVED IN CONSTRUCTION OF LOW COST HOUS ING FOR ELIGIBLE BENEFICIARIES BELONGING TO THE WEAKER SECTIONS OF SOC IETY. THE PROJECTS ARE FUNDED BY SUBSIDIES AND GRANTS FROM THE G OVERNMENT, LOAN FROM BANKS AND FINANCIAL INSTITUTIONS AND CONTRIB UTION FROM BENEFICIARIES. THE LOAN AMOUNT FOR WHICH THE GOVERN MENT STANDS AS THE GUARANTOR IS DISBURSED TO BENEFICIARIES AT NORMA L RATE OF INTEREST AND RECOVERIES FROM THEM ARE SHOWN AS LIABILI TY. THE REPAYMENT OF PRINCIPAL AND INTEREST FOR SUCH LOANS IS MADE BY THE GOVERNMENT ON BEHALF OF THE CORPORATION AND THE SAME I S TREATED AS LOANS GIVEN TO THE CORPORATION. IN THE CASE UNDER C ONSIDERATION, THE INTEREST IS BEING PAID BY THE GOVERNMENT ON BEHALF OF THE CORPORATION AND THE ASSESSEE IS NOT OFFERING THE RECOV ERIES FROM I.T.A. NO. 1499/HYD/2016 M/S. AP STATE HOUSING CORPORATION LTD., :- 3 - : BENEFICIARIES AS INCOME. THE AO OPINED THAT THE INTERES T ON LOANS CANNOT BE CLAIMED AS EXPENDITURE IN THE HANDS OF THE A SSESSEE AND THE SAME IS TO BE DISALLOWED. 4. LD.CIT(A) CONSIDERING THE SUBMISSIONS OF ASSESSE E STATED THAT A SIMILAR ISSUE HAD BEEN ADJUDICATED UPON BY THE ITAT IN ITS ORDER IN ITA NO.376 TO 381/HYD/2010, FOR THE A.YS. 2002-03 TO 2006-07 AND HELD AS UNDER: 6.3. I HAVE CAREFULLY GONE THROUGH THE SUBMISSIONS OF THE ASSESSEE AND FACTS OF THE CASE. I HAVE ALSO PERUSED THE ORDE R OF ITAT HYDERABAD, ORDER DATED 21.01.2011 IN ITA NO. 376 TO 381/HYD/20 10, FOR THE A.YS 2002-03 TO 2006-07 AND THE RELEVANT PORTION IS REPR ODUCED AS FOLLOWS: 5. WE HAVE CONSIDERED THE SUBMITTED OF BOTH THE PA RTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE LD. C OUNSEL FOR THE ASSESSEE CLEARLY PROVED THAT THE ASSESSEE COMPANY IS NOT IN THE BUSINESS OF CONSTRUCTION OF HOUSES. HENCE, THERE IS NO QUESTION OF OFFERING INCOME FROM THE CONSTRUCTION ACTIVITY. WE FIND THAT THE INCOME OF THE ASSESSEE CORPORATION ONLY COMPRISES OF ADMISSION FEES, SUPER VISION CHARGES, INTEREST, DIFFERENTIAL COST OF CEMENT AND OTHER MATERIAL AND MANAGERIAL SUBSIDY FROM THE STATE GOVERNMENT. WE FIND MERIT IN THE ARGUMENT OF THE LD. COUNSEL FOR THE ASSESSEE THAT, DUE TO THE G.O'S ISSUED BY THE S TATE GOVERNMENT FROM TIME TO-TIME FOR ONE TIME SETTLEMENT OF DUES OR WAI VER OF INTEREST, THE ASSESSEE CORPORATION HAS NOT COLLECTED ANY INTEREST FROM THE BENEFICIARIES AND ALSO THE PRINCIPAL AMOUNT IN SEVERAL CASES. HOW EVER, IT IS FACT THAT SAME ARE SHOWN AS 'RECOVERIES FROM THE BENEFICIARIES' IN THE BALANCE SHEET. THERE IS NO DISPUTE WITH REGARD TO THE PAYMENT OF INTEREST T O THE BANK AND FINANCIAL INSTITUTIONS. THE DEPARTMENT DISALLOWED THE ENTIRE INTEREST PAYMENT MADE BY THE ASSESSEE CORPORATION ONLY ON THE GROUND THAT TH E ASSESSEE HAS NOT OFFERED ANY INCOME ON INTEREST RECOVERED FROM ITS B ENEFICIARIES. AFTER CONSIDERING THE TOTALITY OF FACTS AND THE CIRCUMSTA NCES OF THE CASE, WE ARE OF THE VIEW THAT THE LOWER AUTHORITIES ARE NOT CORRECT IN DISALLOWING THE INTEREST PAYMENT TO VARIOUS COMMERCIAL BANKS AND FINANCIAL I NSTITUTIONS. HENCE, WE ALLOW THE GROUNDS RAISED BY THE ASSESSEE ON THIS IS SUE. HOWEVER, WE DIRECT THE ASSESSEE CORPORATION TO FURNISH THE DETAILS OF INTERESTS RECEIVED FROM ITS BENEFICIARIES FOR ALL THE ASSESSMENT YEARS UNDER CO NSIDERATION AND WE DIRECT THE ASSESSING OFFICER TO TREAT THE SAID INTEREST RE CEIPTS AS THE INCOME OF THE ASSESSEE CORPORATION IN THE RESPECTIVE ASSESSMENT Y EARS. ACCORDINGLY, THE GROUND RAISED BY THE ASSESSEE IS PARTLY ALLOWED AS INDICATED ABOVE.' I.T.A. NO. 1499/HYD/2016 M/S. AP STATE HOUSING CORPORATION LTD., :- 4 - : 6.4 THE AUTHORIZED REPRESENTATIVE ALSO SUBMITTED TH AT THE ASSESSING OFFICER HAS MADE ENQUIRIES FOR THE ASSESS MENT YEARS COVERED BY THE ITAT ORDER AND SINCE THE APPELLANT HAD BEEN UNABLE TO SUBMIT THE INFORMATION FOR 23 DISTRICTS OF ANDHRA PRADESH, THE ASSESSING OFFICER HAD ESTIMATED THE INCOME FROM INTEREST @ 15% OF THE REC OVERY AMOUNT VIDE ORDER DT. 31.01.2013. 6.5 FURTHER, THE CIT(A) VIDE HER ORDER IN ITA NOS. 461 AND 404, FOR THE ASST. YEARS 2008-09 AND 2009-10, HAS DIRECTED T HE ASSESSING OFFICER TO TAX THE INCOME FROM INTEREST AT 15% OF THE RECOV ERY AMOUNT. THE HON'BLE IT AT VIDE ORDER DATED 07-05-2014 IN ITA NOS. 1646 & 1647/HYD/13 HAS UPHELD THE CIT(A)'S ORDER. 6.6 HENCE, FOLLOWING THE RATIO LAID DOWN BY THE HON 'BLE ITAT, HYDERABAD IN THE ASSESSEE'S OWN CASE FOR THE PRECED ING ASSESSMENT YEARS, THE ASSESSING OFFICER IS DIRECTED TO OBTAIN ALL THE DETAILS OF INTEREST RECEIVED AND IF THE ASSESSEE IS UNABLE TO SUBMIT AL L THE DETAILS, THE ASSESSING OFFICER MAY BRING TO TAX THE INTEREST INC OME @ 15% OF THE RECOVERY AMOUNT OF RS. 5,76,41,59,107/-. AS SUCH, THIS GROUND IS PARTLY ALLOWED. 5. REVENUE IS AGGRIEVED AND HAS COME UP IN APPEAL. 6. LD.DR RELYING ON THE REPORT OF AO, SUBMITTED THAT THE ORDERS OF THE ITAT IN EARLIER YEAR HAVE NOT BEEN ACCEPTED BY THE DEPARTMENT AND FURTHER APPEALS WERE PREFERRED BEFORE T HE HON'BLE HIGH COURT OF ANDHRA PRADESH AND TELANGANA AND IN TU NE WITH THE DEPARTMENTAL POLICY TO KEEP THE MATTERS ALIVE, THE GROUND HAS BEEN RAISED BEFORE THE ITAT. 7. NONE APPEARED ON BEHALF OF ASSESSEE. CONSIDERIN G THAT THE ISSUE IS COVERED IN FAVOUR OF ASSESSEE, THE CASE IS DECIDED EX-PARTE RESPONDENT -ASSESSEE . 8. CONSIDERING THE FACTS ON RECORD AND ORDERS IN EAR LIER YEAR, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE CIT(A), WHO HAS FOLLOWED THE ORDERS OF THE ITAT IN EARLIER YEARS. SINCE FACTS ARE I.T.A. NO. 1499/HYD/2016 M/S. AP STATE HOUSING CORPORATION LTD., :- 5 - : SIMILAR AND DIRECTIONS ARE CONSISTENT WITH THE DIRECTIONS GIVEN IN EARLIER YEARS, WE DO NOT FIND ANY MERIT IN REVENUE CO NTENTIONS. ACCORDINGLY, THE GROUNDS ARE REJECTED. 9. IN THE RESULT, APPEAL OF REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 26 TH MAY, 2017 SD/- SD/- (D. MANMOHAN) (B. RAMAKOTAIAH) VICE PRESIDENT ACCOUNTANT MEMB ER HYDERABAD, DATED 26 TH MAY, 2017 TNMM COPY TO : 1. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-1( 1), HYDERABAD. 2. M/S. AP STATE HOUSING CORPORATION LTD., H.NO. 3- 6-184, STREET NO. 17, URDUGALLY, HIMAYAT NAGAR, HYDERABAD. 3. CIT (APPEALS)-9, HYDERABAD. 4. CIT (EXEMPTIONS)-HYDERABAD. 5. D.R. ITAT, HYDERABAD. 6. GUARD FILE.