M/s.Sangeeth Hospital, Kochi V. The ACIT, Kochi

ITA 155/COCH/2020

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 0798 (ITAT-COCHIN)
• Duration Of Justice: 3 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-06-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2007-2008
• Appeal Filed On: 08-03-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B SAJJIVE
• Assessee Lawyers: VEDANGA R PRABHU
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFOR E SHRI GEORGE GEORGE K., JUDICIAL MEMBER I.T.A. NO .155/ COCH/20 20 ASSESSM ENT YEAR : 20 07 - 08 SANGEETH NURSING HOME, 5/1496, SOUTH CHERLAI, KOCHI - 682 002. [PAN: A AKFS 8278G] VS. THE ASSISTANT COMMISSIONER OF INCOME - TAX, NON CORPORATE, KOCHI. (ASSESSEE - APPELLANT) (REVENUE - RESPONDENT) ASSESSEE BY SHRI VEDANGA R. PRABHU, CA REVENUE BY SHRI B. SAJJIVE, SR. DR DATE OF HEARING 10/06/2020 DATE OF PRONOUNCEMENT 11 TH / 06/2020 O R D E R PER GEORGE GEORGE K.,JUDICIAL MEMBER: THIS APPEA L AT THE INSTANCE OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE CIT(A) - 2, DATED 24/01/2020. THE RELEVANT ASSESSMENT YEAR IS 2007 - 08. 2. THE GROUNDS RAISED READ AS FOLLOWS: 1) DISALLOWANCE OF INTEREST ON CAPITAL 2) THE LEARNED CIT HAS DIRECTED TO RECTIFY THE ASSESSMENT OF PARTNERS, BY TAXING INTEREST ALLOWED FOR THE FIRM ONLY IN THE HANDS OF PARTNERS. BUT THE PARTNERS ARE ASSESSED BY DIFFERENT OFFICERS AND IT WILL BE DIFFICULT TO RECTIFY THE ASSESSMENTS AS THE MATTER RELATES TO AY 2007 - 08. I.T.A. NO. 155/ COCH/20 20 2 3) RE VENUE NEUTRAL. BOTH THE FIRM AND PARTNERS ARE ASSESSED AT SAME RATE WHICH IS MAXIMUM RATE. 3. THE BRIEF FACTS OF THE CASE ARE AS FOLLOWS: THE ASSESSEE IS A FIRM, DERIVING INCOME FROM HOUSE PROPERTY AND OTHER SOURCES. FOR THE ASSESSMENT YEAR 20 07 - 08, THE ASSESSEE FILED RETURN OF INCOME ON 31/10/2007 DECLARING INCOME OF RS. 21 ,00,590/ - . THE ASSESSMENT WAS COMPLETED U/S. 143(3) OF THE I.T. ACT VIDE ORDER DATED 04/12/2009 AT RS.25,44,668/ - . IN THE SAID ASSESSMENT ORDER COMPLETED U/S. 143(3) OF TH E I.T. ACT, THE ASSESSING OFFICER HAD DISALLOWED RS.2,89,957/ - OUT OF THE INTEREST PAID TO THE PARTNERS OF THE ASSESSEE FIRM. THE RELEVANT FINDINGS OF THE ASSESSING OFFICER WITH REGARD TO DISALLOWANCE OF INTEREST PAYMENT TO PARTNERS READ AS FOLLOWS: THE ASSESSEE HAD CLAIMED AN AMOUNT OF RS.3,78,042 AS INTEREST ON CAPITAL TO PARTNERS. AT THE TIME OF HEARING IT WAS REQUESTED TO EXPLAIN THE CALCULATION OF INTEREST, THE ASSESSEE STATED THAT INTEREST IS CALCULATED ON THE BALANCE AS ON 01.04.2006 AT THE RATE O F 12%. BUT ON PERUSAL OF THE CAPITAL ACCOUNT IT IS SEEN THAT DR. SARANGH R. PRABHU AND DR. GEETHA S. PRABHU HAD WITHDRAWN AN AMOUNT OF RS.14,03,398 AND RS.10,12,898 DURING THE YEAR RESPECTIVELY. THE OPENING CAPITAL OF THE PARTNERS IS WORKED OUT AS UNDER: FIXED CAPITAL RS.20,00,000 CURRENT A/C. BALANCE RS.11,50,343 TOTAL RS.31,50,343 THE TOTAL INCOME WITHDRAWN BY THE TWO PARTNERS DR. SARANGH R. PRABHU AND DR. GEETHA S. PRABHU IS RS.24,16,296. THERE IS NO CREDIT DURING THE AY 2007 - 08 OTHER THAN THE INCOME EARNED THROUGH THE FIRM OF RS.32,27,636. THEREFORE, THE INTEREST ON CAPITAL IS RECOMPUTED AS UNDER: I.T.A. NO. 155/ COCH/20 20 3 OPENING CAPITAL OF THE PARTNERS RS.31,50,343 LESS: WITHDRAWAL DURING THE YEAR RS.24,16,296 BALANCE RS. 7,34,047 INTEREST THEREON RS. 88,085 INTEREST DISALLOWED RS. 2,89,957 4. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER, THE ASSESSEE FILED APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. THE CIT(A) DISMISSED THE APPEAL OF THE ASSESSEE ON THIS ISSUE. HOWEVER, THE CIT(A) DIRECTED THE ASSESSI NG OFFICER TO ALLOW CORRESPONDING RELIEF TO THE PARTNERS IN THE RETURNS FILED BY THEM AS PER LAW. THE RELEVANT FINDING OF THE CIT(A) READS AS FOLLOWS: THE ARGUMENTS OF THE LEARNED AR ARE CONSIDERED. ON PERUSAL OF THE PARTNERSHIP DEED, IT IS OBSERVED THAT THERE IS NO CLAUSE FOR PAYMENT OF INTEREST TO PARTNERS ON THE BASIS OF OPENING BALANCE OF THE CAPITAL. THEREFORE, THE ASSESSING OFFICER IS RIGHT IN COMPUTING THE INTEREST ALLOWABLE TO PARTNERS BASED ON CONTINUING BALANCE OF THE CAPITAL. HENCE, THE DISAL LOWANCE OF RS.2,89,957 IS CONFIRMED AND THE GROUND RAISED ON THIS ISSUE IS DISMISSED. HOWEVER, THE ASSESSING OFFICER IS DIRECTED TO ALLOW CORRESPONDING RELIEF TO THE PARTNERS IN THE RETURNS FILED (IF FILED AS PER LAW) BY THEM AS PER LAW. 5. AGGRIEV ED BY THE ORDER OF THE CIT(A), THE ASSESSEE HAS FILED THE PRESENT APPEAL BEFORE THE TRIBUNAL. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT SINCE THE PARTNERS OF THE ASSESSEE FIRM ARE ASSESSED BY DIFFERENT OFFICERS, IT IS NOT PRACTICABLE TO FILE RECTIFI CATION APPLICATIONS IN THE CASE OF THE PARTNERS AND GET CORRESPONDING RELIEF IN THE HANDS OF THE PARTNERS. IT WAS SUBMITTED THAT THE FIRM AND THE PARTNERS ARE ASSESSED AT THE MAXIMUM RATE, AS SUCH THE ACTION WOULD BE REVENUE NEUTRAL. FURTHER, THE LD. CO UNSEL FOR THE ASSESSEE HAS SUBMITTED I.T.A. NO. 155/ COCH/20 20 4 DETAILS OF CAPITAL/CURRENT ACCOUNTS AND INTEREST PAID FOR THE AY 2003 - 04 TO AY 2009 - 10 . IT WAS SUBMITTED BY THE LD. AR THAT INTEREST WAS CALCULATED IN THE RESPECTIVE ASSESSMENT YEARS AY 2003 - 04 TO AY 2009 - 10 ON OPENING BALANCES OF EACH YEAR. THEREFORE, IT WAS SUBMITTED THAT IT IS RE VENUE NEUTRAL AND THE ENTIRE EXERCISE OF THE A SSESSING OFFICER WOULD BE FRUITLESS. 6. THE LD. DR STRONGLY SUPPORT ED THE ORDERS PASSED BY THE ASSESSING OFFICER AND THE CIT(A). 7. I HAVE HEARD THE RIVAL SUBMISSIONS. I HAVE GONE THROUGH THE DETAILS OF CAPITAL AND CURRENT ACCOUNTS , ADDITIONS/WITHDRAWALS, INTEREST ON CAPITAL, REMUNERATION AND SHARE OF SURPLUS FROM AY 2003 - 04 TO AY 200 9 - 10 . FRO M THE DETAILS FURNISHED, IT IS CLEAR T HAT THE ASSESSEE HA S BEEN CONSIST ENTLY CALCULAT ING INTEREST AT THE RATE OF 12% ON THE OPENING BALANCES OF EACH OF THE ABOVE ME NTIONED ASSESSMENT YEARS. THEREFORE, THE E NTIRE EXERCISE OF THE ASSESSI NG OFFICER WOULD BE REVENUE NEUTRAL WHEN THE ASSESSING OFFICER CALCULAT ED T HE INTEREST AT THE RATE OF 12% ONLY FOR THE ASSESSMENT YEAR 2007 - 08 FOR THE B A LANCE OUTSTANDING AS ON 31/03/2007. MOREOVER, I NOTICE THAT THE PARTNERS OF THE ASSESSEE FIRM HAD DECLARED INTEREST RECEIV ED FROM THE ASSESSEE FIRM IN THE RETURN S OF INCOME S FI LED AND ACCORDINGLY, THE ASSESSMENTS WERE COMPLETED IN THE HANDS OF THE PARTNERS. THIS TANTAMOUNTS TO DOUBLE TAXATION OF THE SAME INCOME BOTH IN THE HANDS OF THE PARTNERS AS WELL AS IN THE HANDS OF THE ASSESS EE FIRM. THOUGH THE CIT(A) I.T.A. NO. 155/ COCH/20 20 5 HAS DIRECTED THE ASSESSING OFFICER TO RECTIFY THE ASSESSMENTS IN THE HANDS OF THE PARTNERS, THIS EXERCISE MAY NOT BE PRACTICAL SINCE THE ASSESSMENT ORDER CONCERNED IS PERTAINING TO ASSESSMENT YEAR 2007 - 08. SINCE THE ENTIRE EXERCIS E DONE BY THE ASSESSING OFFICER IN THE FACTS AND CIRCUMSTANCES OF THE CASE IS REVENUE NEUTRAL, I AM OF THE VIEW THAT INTEREST PAID TO THE PARTNERS BASED ON THE OPENING BALANCES IS TO BE GRANTED DEDUCTION. IT IS ORDERED ACCORDINGLY. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 11 TH JUNE, 2020 SD/ - (GEORGE GEORGE K.) JUDICIAL MEMBER PLACE: KOCHI DATED: 11 TH JUNE , 20 20 GJ COPY TO: 1 . SANGEETH NURSING HOME, 5/1496, SOUTH CHERLAI, KOCHI - 682 002. 2. THE ASSISTANT COMMISSIONER OF INCOME - TAX, NON - CORPORATE, KOCHI. 3. THE COMMISSIONER OF INCOME - TAX (AP P EALS) - 2, KOCHI. 4. THE PR. COMMISSIONER OF INCOME - TAX, KOCHI. 5. D. R., I.T.A.T., COCHIN BENCH, COCHIN. 6 . GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) I.T.A.T., COCHIN I.T.A. NO. 155/ COCH/20 20 6 DATE 1. DRAFT ORDER DICTATED ON 10 /0 6 /2020 SR.PS 2. DRAFT ORDER PLACED BEFORE AUTHOR /0 6 /2020 AM 3. APPROVED DRAFT COMES BACK SR. PS 4. FAIR ORDER PLACED BEFORE THE AUTHOR . A M 5. FAIR ORDER PLACED BEFORE THE SECOND MEMBER FOR SIGNATURE JM 6. P RONOUNCEMENT ON 7. FILE SENT TO THE BENCH CLERK 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER.