Sri Saravana Financiers & Chit Funds, Pollachi V. ITO, Pollachi

ITA 1602/CHNY/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 8134 (ITAT-CHENNAI)
• Duration Of Justice: 2 year(s) 6 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-02-2016
• Appeal Filed By: Assessee
• Bench Allotted: D
• Next Hearing Date: 04-01-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 29-07-2013
• Court: TRIBUNAL
• Department Lawyers: N MADHAVAN
• Assessee Lawyers: G BASKAR

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH : CHENNAI . . . , . !' , # $ % [ BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ] ./ I.T.A.NO.1602/MDS/2013 / ASSESSMENT YEAR : 2008-09 SRI SARAVANA FINANCIERS & CHIT FUNDS R.P TOWERS 88 COIMBATORE ROAD POLLACHI 642 002 VS. THE INCOME TAX OFFI CER WARD I(2) POLLACHI [PAN AAIFS 6975 Q ] ( &' / APPELLANT) ( ()&' /RESPONDENT) / APPELLANT BY : SHRI G BASKAR, ADVOCATE /RESPONDENT BY : SHRI N MADHAVAN, JCIT / DATE OF HEARING : 04 - 01 - 2016 ! / DATE OF PRONOUNCEMENT : 05 - 0 2 - 2016 / O R D E R PER N.R.S.GANESAN, JUDICIAL MEMBER THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-II, COIMB ATORE, DATED 12.6.2013 AND PERTAINS TO ASSESSMENT YEAR 2008-09. 2. THE ONLY ISSUE ARISES FOR CONSIDERATION IS DISALLOW ANCE OF CLAIM OF INTEREST WHILE COMPUTING INCOME FROM HOUSE PROPERTY. ITA NO.1602/13 :- 2 -: 3. SHRI G BASKAR, LD. COUNSEL FOR THE ASSESSEE SUBMIT TED THAT THE ASSESSEE-FIRM HAD TAKEN OVER THE LIABILITIES O F M/S R.P CONSTRUCTION AND PAID INTEREST ON THE BORROWED FUNDS WHICH WERE USED FOR CONSTRUCTION OF THE BUILDING. ACCORDING TO THE LD . COUNSEL, M/S R.P CONSTRUCTION RECEIVED VARIOUS DEPOSITS FROM MORE TH AN 200 PERSONS AND PAID INTEREST. THE DEPOSITS WERE USED FOR CONS TRUCTION OF THE BUILDING. THE RENTAL INCOME FROM THE BUILDING WAS OFFERED FOR TAXATION BY THE ASSESSEE UNDER THE HEAD INCOME FROM HOUSE PROPERTY. THE ASSESSEE CLAIMED THE INTEREST PAID TO THE DEPOSITOR S AS DEDUCTION WHILE COMPUTING THE RENTAL INCOME. ACCORDING TO THE LD. COUNSEL, THERE WAS A CLEAR NEXUS FOR USING THE BORROWED FUNDS IN THE C ONSTRUCTION OF THE BUILDING, THEREFORE, THE INTEREST PAID BY THE ASSE SSEE HAS TO BE DEDUCTED WHILE COMPUTING THE TAXABLE INCOME FROM HO USE PROPERTY. 4. ON THE CONTRARY, SHRI N MADHAVAN, LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE ASSESSEE HAS DIS CLOSED GROSS RENT OF ` 18,55,086/- UNDER THE HEAD INCOME FROM HOUSE PROP ERTY AND CLAIMED INTEREST PAYMENT TO THE EXTENT OF ` 6,19,082.43. THE ASSESSEE EXPLAINED BEFORE THE ASSESSING OFFICER THAT THE FIR M PAID INTEREST DURING THE YEAR UNDER CONSIDERATION TO THE EXTENT O F ` 6,19,082.43 ON THE BORROWED FUNDS FOR CONSTRUCTION OF THE BUILDING . IN FACT, THE DEPOSITS WERE RECEIVED BY M/S R. P CONSTRUCTION AND NOT BY THE ASSESSEE. THE ASSESSEE-FIRM TOOK OVER THE LIABILI TIES OF M/S R.P ITA NO.1602/13 :- 3 -: CONSTRUCTION SUBSEQUENTLY. THEREFORE, THERE WAS NO NEXUS BETWEEN THE DEPOSITS RECEIVED BY M/S R.P CONSTRUCTION AND T HE CONSTRUCTION MADE BY THE ASSESSEE-FIRM, HENCE, THE ASSESSING OF FICER FOUND THAT THE INTEREST PAYMENT CANNOT BE ALLOWED AS DEDUCTION WHILE COMPUTING THE INCOME FROM HOUSE PROPERTY. THE LD. DR FURTHE R CLARIFIED THAT THE DEPOSITS WERE MADE FOR GETTING INTEREST AND NOT FOR MAKING INVESTMENT IN THE HOUSE PROPERTY. IN THE ABSENCE OF ANY NEXUS BETWEEN THE DEPOSITS ACCEPTED FROM PUBLIC AND THE CONSTRUCTION OF THE PROPERTY, THE ASSESSING OFFICER DISALLOWED THE CLAIM OF THE ASSE SSEE. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ASSESSEE EARNS INCOME FROM BROKERAGE AND CHIT CANVASSING. IN THE COURSE OF ITS CHIT CANVASSING BUSINESS, IT APPEARS THAT THE ASSESSEE C ONSTRUCTED BUILDING. IN FACT, M/S R.P. CONSTRUCTION RECEIVED DEPOSITS FR OM MORE THAN 200 PERSONS AND PAID INTEREST. THE ASSESSEE-FIRM TOOK OVER THE LIABILITIES OF M/S R.P CONSTRUCTION ALONGWITH ITS DEPOSITS. TH EREFORE, THE PAYMENT OF INTEREST TO THE DEPOSITORS BECOMES THE L IABILITY OF THE ASSESSEE. THE QUESTION ARISES FOR CONSIDERATION IS WHEN THE ASSESSEE TOOK OVER THE LIABILITIES OF M/S R. P CONSTRUCTION ALONGWITH ITS DEPOSITS WHETHER THE PAYMENT OF INTEREST ON THE DEPOSITS REC EIVED BY M/S R.P CONSTRUCTION IS AN ALLOWABLE EXPENDITURE WHILE COMP UTING INCOME FROM HOUSE PROPERTY? THIS TRIBUNAL IS OF THE CONSIDERE D OPINION THAT M/S ITA NO.1602/13 :- 4 -: R.P CONSTRUCTION RECEIVED DEPOSITS AND NOT BY THE ASSESSEE. NO MATERIAL IS AVAILABLE ON RECORD TO SHOW THAT THE DE POSITS RECEIVED BY M/S R.P. CONSTRUCTION WERE USED FOR CONSTRUCTION. THEREFORE, AS RIGHTLY SUBMITTED BY THE LD. DR, THERE IS NO NEXUS BETWEEN THE PAYMENT OF INTEREST ON THE DEPOSITS AND CONSTRUCTION OF THE BU ILDING, HENCE, THE INTEREST CLAIMED BY THE ASSESSEE TO THE EXTENT OF ` 6,19,082/- CANNOT BE ALLOWED WHILE COMPUTING THE INCOME FROM HOUSE PR OPERTY. IN VIEW OF THE ABOVE, THIS TRIBUNAL DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LOWER AUTHORITY. ACCORDINGLY, THE SAM E IS CONFIRMED. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 5 TH FEBRUARY, 2016, AT CHENNAI. SD/- SD/- ( . !' ) (A. MOHAN ALANKAMONY) # / ACCOUNTANT MEMBER ( . . . ' ) (N.R.S. GANESAN) / JUDICIAL MEMBER #$ / CHENNAI %& / DATED: 5 TH FEBRUARY 2016 RD &' ()*) / COPY TO: 1 . / APPELLANT 4. + / CIT 2. / RESPONDENT 5. ),- . / DR 3. +/' / CIT(A) 6. -01 / GF