Naresh Kumar Aggarwal, Ludhiana V. ITO, W-II(2), Ludhiana

ITA 1696/CHANDI/2017

• Counselvise Citation: [2018] 124 COUNSELVISE.COM (IT) 9999 (ITAT-CHANDIGARH)
• Duration Of Justice: 8 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-09-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Appeal Filed On: 21-12-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Keywords: Capital asset; Capital expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCHB, CHANDIGARH BEFORE SHRI. SANJAY GARG, JUDICIAL MEMBER AND DR. B.R.R. KUMAR, ACCOUNTANT MEMBER ITA NO.1696/CHD/2017 ASSESSMENT YEAR: 2012-13 SHRI. NARESH KUMAR AGGARWAL VS. THE ITO PROP. ABHISHEK TRADING CO. WARD-II(2) B-VII-1097/5A, VIKAS NAGAR LUDHIANA CLOCK TOWER LUDHIANA(PUNJAB) PAN NO. ABKPA3058P (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI. VIBHOR GARG REVENUE BY : SHRI. MANJIT SINGH DATE OF HEARING : 23/08/2018 DATE OF PRONOUNCEMENT : 17/09/2018 ORDER PER DR. B.R.R. KUMAR, A.M: THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE A GAINST THE ORDER OF THE LD. CIT(A)-I, LUDHIANA DT. 23/11/2017. 2. IN THE PRESENT APPEAL ASSESSEE HAS RAISED THE FO LLOWING GROUNDS OF APPEAL: 1. BECAUSE THE ACTION IS UNDER CHALLENGE ON FACTS & LA W, FOR UPHOLDING THE CLAIM & ALLOWANCE OF INTEREST FOR AN AMOUNT OF RS. 4,60,552/- UNDER SECTION36(1)(III), WHILE GIVING NARROW INTERPRETATI ON TO THE WORD BUSINESS, BUSINESS EXPEDIENCY, COMMERCIAL EXIGENCY WHICH ARE BASED ON THE PRINCIPLES OF NEXUS, CHARACTER & PURPOSE. 2. BECAUSE ALTERNATIVELY & WITHOUT PREJUDICE TO GR OUND NO. 1 (SUPRA), THE CLAIM & ALLOWANCE FOR INTEREST OF RS. 4,60,552/- IS ELIGIBLE FOR DEDUCTION UNDER SECTION 57 R.W.S 59(1) ALONGWITH SET OFF OF THE EXP ENDITURE UNDER SECTION 70,71 & 72 OF THE INCOME TAX ACT, 1961. 3. BECAUSE THE APPELLANTS PRAYER IS FOR KINDLY ALL OWING ANY ADDITION, MODIFICATION, ALTERATION IN THE GROUNDS OF APPEAL BEFORE THE DISP OSAL OF THE SAME ALONGWITH THE PRAYER TO GRANT ANY CONSEQUENTIAL RELIEF ARISING IN THE CASE PROCEEDINGS. 3. THE ONLY EFFECTIVE GROUND TAKEN IN THE PRESENT A PPEAL BY THE ASSESSEE PERTAINS TO DISALLOWANCE OF INTEREST OF AN AMOUNT O F RS. 4,60,552/- UNDER SECTION 36(1)(III). 2 4. THE ASSESSEE RAISED A LOAN OF RS. 50,00,000/- FR OM KOTAK MAHINDRA BANK LTD. WHICH WAS INDUCTED INTO CAPITAL ACCOUNT. THE A SSESSING OFFICER NOTED THAT AFTER BRINGING THE AMOUNT INTO CAPITAL ACCOUNT THE ASSESSEE HAS UTILIZED THE AMOUNT OF RS. 44,18,914/- FOR PURCHASE OF LAND. HEN CE ASSESSING OFFICER HELD THAT THE AMOUNT OF INTEREST PAID ON THE BORROWED LOAN WA S NOT ALLOWABLE AS THE LOAN WAS UTILIZED FOR ACQUIRING CAPITAL ASSET AND THUS I TS A CAPITAL EXPENDITURE. 5. BEFORE US, THE LD. AR ARGUED THAT THE AMOUNT WAS BROUGHT AS LOAN IN HIS PROPRIETORSHIP BUSINESS FOR EARNING INCOME FROM BUS INESS AND PROFESSION AND THEREFORE THE INTEREST INCURRED ON THE SAID LOAN SH OULD BE ALLOWED AS DEDUCTION FROM INCOME UNDER THE HEAD BUSINESS AND PROFESSION. 5.1 IT WAS ALSO ARGUED THAT NO DISALLOWANCE WAS MAD E FROM THE SAME INTEREST PAID TO THE BANK IN THE SUBSEQUENT ASSESSMENT YEAR WAS ALLOWED BY THE REVENUE. LD. AR ARGUED THAT THE CAPITAL ACCOUNT OF THE ASSESSEE AS ON 31/03/2012 AS A CLOSING BALANCE OF RS. 68,87,883/- AND AS ON 31/03/2011 THE AMOUNT WAS RS. 55,96,081/-. ARGUED THAT SINCE THE AMOUNT OF THE LOAN AVAILED IS LESS THAN THE AMOUNT AVAILABLE IN THE CAPITAL ACCOU NT AS FOR THE ESTABLISHED JUDGMENTS NO DISALLOWANCE IS CALLED FOR. 6. LD. DR ON THE OTHER HAND ARGUED THAT EVEN AS THE CASH FLOW CLEARLY PROVES THAT THE AMOUNT OF THE LOAN HAS BEEN UTILIZE D FOR PURCHASE OF LAND WHICH IS A CAPITAL ASSET, AND HENCE NO BENEFIT OF INTERES T CLAIMED SHOULD BE ACCORDED TO THE ASSESSEE. 7. WE HAVE HEARD THE ARGUMENTS OF BOTH THE PARTIES, THE ISSUE STANDS ADJUDICATED BY VARIOUS PRECEDENTS BY THIS TRIBUNAL BASED ON THE VARIOUS PRONOUNCEMENT OF THE JURISDICTIONAL HIGH COURTS. WH EN THE ASSESSEE HAS GOT OWN FUNDS AVAILABLE AT THEIR DISPOSAL NO DISALLOWAN CE IS CALLED FOR AS ENUNCIATED IN VARIOUS JUDGMENTS. IN THE CASE OF BRIGHT ENTERPR ISES PVT. LTD. VS. CIT(PUNJAB & HARYANA HIGH COURT IN ITA NO. 224/2013 DT. 24/07/20 15 IT WAS HELD THAT IF THERE ARE INTEREST FREE FUNDS AVAILABLE THEN IT WILL BE P RESUMED THAT THESE HAVE BEEN MADE OUT OF INTEREST FREE FUNDS. SIMILAR VIEW WAS H ELD IN THE CASE OF CIT VS. KAPSONS ASSOCIATES INVESTMENT PVT. LTD. [2015] 381 ITR 204 (P&H) WHEREIN, THE HONBLE COURT HAS HELD THAT INTEREST ON INVESTMEN T IN OTHER PROPERTIES NOT FOR BUSINESS PURPOSE CANNOT BE DISALLOWED IF THE ASSESS EE IS HAVING SUFFICIENT INTEREST FREE FUNDS AT ITS DISPOSAL. HENCE, RESPECTFULLY FOL LOWING THE RATIO LAID DOWN BY THE 3 VARIOUS JUDICIAL PRONOUNCEMENTS, THE DISALLOWANCE M ADE ON ACCOUNT OF INTEREST IS HEREBY DELETED. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (SANJAY GARG) (DR. B.R.R. KUM AR) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 17/09/2018 AG COPY TO: 1. THE APPELLANT, 2.THE RESPONDENT, 3.THE CIT,4. TH E CIT(A), 5.THE DR