Shri Sameer Suneja, New Delhi V. ACIT, New Delhi

ITA 190/DEL/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 2720 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 5 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-06-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2013-2014
• Appeal Filed On: 11-01-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SURENDER PAL SENIOR
• Assessee Lawyers: K V S GUPTA SHRI PANKAJ KHANNA
• Keywords: Capital asset; Set aside
• Section: 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH F : NEW DELHI) BEFORE HONBLE VICE PRESIDENT, SHRI G.D. AGRAWAL AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO.190/DEL./2017 (ASSESSMENT YEAR : 2013-14) SHRI SAMEER SUNEJA, VS. ACIT, CIRCLE 31 (1), C/O DR. R.K. SUNEJA, NEW DELHI. 48, NORTH WEST AVENUE, CLUB ROAD, PUNJABI BAGH EXTENSION, NEW DELHI 110 026. (PAN : AATPS1322E) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI K.V.S. GUPTA, ADVOCATE SHRI PANKAJ KHANNA, CA REVENUE BY : SHRI SURENDER PAL, SENIOR DR DATE OF HEARING : 13.06.2019 DATE OF ORDER : 14.06.2019 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER : APPELLANT, SHRI SAMEER SUNEJA (HEREINAFTER REFERRE D TO AS THE ASSESSEE) BY FILING THE PRESENT APPEAL SOUGHT TO SET ASIDE THE IMPUGNED ORDER DATED 29.11.2016 PASSED BY THE COMMI SSIONER OF INCOME-TAX (APPEALS)-11, NEW DELHI QUA THE ASSESSME NT YEAR 2013-14 ON THE GROUNDS INTER ALIA THAT :- 1) THE ACTION OF LD CIT(A) IN UPHOLDING THE ACTIO N OF LD AO IN DISALLOWING A SUM OF RS5,34,191/- U/S 36(1)(III) IS ILLEGAL, ITA NO.2581/DEL./2016 2 ARBITRARY, UNWARRANTED, UNCALLED FOR AND AGAINST TH E FACTS AND CIRCUMSTANCES OF THE CASE. 2) THE ACTION OF LD CIT(A) IN UPHOLDING THE ACTION OF LD AO IN DISALLOWING A SUM OF RS 5,34,191/- U/S 36(1)(III ) INSPITE OF FACT THAT THE ASSESSEE HAD SUFFICIENT AMOUNT OF INTEREST FREE FUND IN THE FORM OF OWN CAPITAL WHICH FAR EXCEEDS AMOUNT OF INV ESTMENT IN ASSETS IS ILLEGAL, ARBITRARY, UNWARRANTED, UNCALLED FOR AND AGAINST THE FACTS AND CIRCUMSTANCES OF THE CASE. 3) THE ACTION OF LD CIT(A) IN ADOPTING A METHOD FOR COMPUTING AMOUNT OF DISALLOWANCE OF INTEREST AMOUNT ED TO RS.5,34,191/- IS NOT PRESCRIBED UNDER THE INCOME TA X ACT, 1961 OR RULES MADE THERE UNDER IS ILLEGAL, ARBITRARY, UNWAR RANTED, UNCALLED FOR AND AGAINST THE FACTS AND CIRCUMSTANCES OF THE CASE. 4) THE ACTION OF LD CIT(A) IN UPHOLDING ACTION OF L D AO THAT THE ASSETS IN THE FORM OF ADVANCES AGAINST OFFICE S PACE HAVE NOT BEEN PUT TO USE ATTRACTING SECTION 36(1)(III) IS IL LEGAL, ARBITRARY, UNWARRANTED, UNCALLED FOR AND AGAINST THE FACTS AND CIRCUMSTANCES OF THE CASE. 5) THAT WITHOUT PREJUDICE TO ABOVE GROUNDS OF APPEA L, DISALLOWANCE OF INTEREST AMOUNTED TO RS.5,34,191/- MAY IN THE ALTERNATIVE BE ALLOWED U/S 37 OF THE INCOME TAX ACT , 1961. 6) THAT THE ABOVE GROUNDS OF APPEAL ARE WITHOUT PRE JUDICE TO EACH OTHER. 2. BRIEFLY STATED THE FACTS NECESSARY FOR ADJUDICAT ION OF THE CONTROVERSY AT HAND ARE : ASSESSEE DECLARED INCOME OF RS.79,79,720/- DURING THE YEAR UNDER ASSESSMENT ON THE BASIS OF INCOME DERIVED FROM SALARY, BUSINESS OR PROFESSION, HOUSE PROPERTY AND INCOME FROM OTHER SOURCES AND ASSESSEE IS ALSO ENGAGED IN PROVIDING FINANCIAL AND MANAGEMENT CONSULTANCY DURI NG THE YEAR UNDER ASSESSMENT. FROM THE PROFIT & LOSS ACCOUNT, ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS CLAIMED INTER EST EXPENDITURE OF RS.7,84,867/- ON ACCOUNT OF INTEREST PAID TO BAN K ON LOAN TAKEN FROM CITI BANK, WHICH WAS UTILIZED FOR BOOKING OF S EVERAL OFFICE ITA NO.2581/DEL./2016 3 SPACES SHOWN IN HIS INVESTMENT DETAILS. HOWEVER, D ECLINING THE CONTENTIONS RAISED BY THE ASSESSEE, AO INVOKED THE PROVISO TO SECTION 36(1)(III) OF THE INCOME-TAX ACT, 1961 (FOR SHORT THE ACT) AND DISALLOWED THE INTEREST AND THEREBY MADE AN ADD ITION OF RS.7,84,867/- BY WAY OF DISALLOWANCE MADE U/S 36(1) (III) OF THE ACT. 3. ASSESSEE CARRIED THE MATTER BY WAY OF AN APPEAL BEFORE THE LD. CIT (A) WHO HAS RESTRICTED THE ADDITION MADE BY THE AO TO RS.5,34191/- BY PARTLY ALLOWING THE APPEAL. FEELING AGGRIEVED, THE ASSESSEE HAS COME UP BEFORE THE TRIBUNAL BY WAY OF FILING THE PRESENT APPEAL. 4. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVES OF THE PARTIES TO THE APPEAL, GONE THROUGH THE DOCUMENTS R ELIED UPON AND ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN T HE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE. 5. BEFORE PROCEEDING FURTHER, WE WOULD LIKE TO EXTR ACT THE PROVISIONS CONTAINED U/S 36(1)(III) AND PROVISO FOR READY PERUSAL AS UNDER :- SECTION 36(1) IN THE INCOME- TAX ACT, 1995 (1) THE DEDUCTIONS PROVIDED FOR IN THE FOLLOWING CLAUSE S SHALL BE ALLOWED IN RESPECT OF THE MATTERS DEALT WITH THEREI N, IN COMPUTING THE INCOME REFERRED TO IN SECTION 28- (III) THE AMOUNT OF THE INTEREST PAID IN RESPECT OF CAPITAL BORROWED FOR THE PURPOSES OF THE BUSINESS OR PROFESSION. ITA NO.2581/DEL./2016 4 [PROVIDED THAT ANY AMOUNT OF THE INTEREST PAID IN R ESPECT OF CAPITAL BORROWED FOR ACQUISITION OF AN ASSET (WHETHER CAPIT ALIZED IN THE BOOKS OF ACCOUNT OR NOT); FOR ANY PERIOD BEGINNING FROM T HE DATE ON WHICH THE CAPITAL WAS BORROWED FOR ACQUISITION OF THE ASS ET TILL THE DATE ON WHICH SUCH ASSET WAS FIRST PUT TO USE, SHALL NOT BE ALLOWED AS DEDUCTION.] EXPLANATION.- RECURRING SUBSCRIPTIONS PAID PERIODIC ALLY BY SHAREHOLDERS, OR SUBSCRIBERS IN MUTUAL BENEFIT SOCI ETIES WHICH FULFILL SUCH CONDITIONS AS MAY BE PRESCRIBED, SHALL BE DEEM ED TO BE CAPITAL BORROWED WITHIN THE MEANING OF THIS CLAUSE. 6. UNDISPUTEDLY, ASSESSEE HAS AVAILED OF A LOAN FRO M CITI BANK ON WHICH HE HAS PAID THE INTEREST OF RS.7,84,867/- WHICH HAS BEEN CLAIMED AS EXPENDITURE. IT IS ALSO NOT IN DISPUTE THAT THAT EVEN DURING THE COURSE OF ARGUMENT, THE LD. AR FOR THE A SSESSEE WAS NOT CLEAR ENOUGH AS TO FOR WHICH PURPOSE THE LOAN WAS A VAILED OF. AO PROCEEDED TO DISALLOW THE INTEREST ON THE PREMISE T HAT THE BORROWED MONEY HAS BEEN USED BY THE ASSESSEE FOR INVESTMENT AND AS SUCH UNDER PROVISO TO SECTION 36(1)(III), THE SAME IS NO T ALLOWABLE EXPENDITURE. IT IS ALSO NOT IN DISPUTE THAT THAT PROVISO FOR EXTENSION OF EXISTING BUSINESS INSERTED W.E.F. 1.4.2004 TO SE CTION 36(1)(III) IS APPLICABLE TO THE FACTS AND CIRCUMSTANCES OF THE CA SE. 7. THE LD. AR FOR THE ASSESSEE CONTENDED INTER ALIA THAT THE DETAIL OF INVESTMENT SHOWS THAT A TOTAL OF RS.2,63, 87,111/- WAS INVESTED OUT OF WHICH A SUM OF RS.31,04,845/- WAS I NVESTED DURING THE YEAR UNDER ASSESSMENT AND BALANCE SUM OF RS.2,3 2,82,266/- WAS INVESTED PRIOR TO THE ASSESSMENT; THAT ADVANCE FOR A PROPERTY GIVEN IS AN ASSET/CAPITAL ASSET; THAT IN THE EARLIE R YEARS ALSO, ITA NO.2581/DEL./2016 5 INVESTMENT WAS MADE BUT NO DISALLOWANCE WAS MADE BY THE REVENUE; THAT INVESTMENT HAS BEEN MADE BY THE ASSES SEE WITH INTENTION FOR EXTENSION OF HIS BUSINESS; THAT THE A SSESSEE HAS NOT GOT THE POSSESSION OF THE PROPERTY GOT BOOKED BUT HAS A LL THE OWNERSHIP RIGHT AND THE INTEREST IS PAID IN RESPECT OF CAPITA L BORROWED; THAT INVESTMENT WAS MADE WITH THE MIXED POOL OF FUNDS AS THE ASSESSEE WAS HAVING SUFFICIENT INTEREST BEARING AND INTEREST FREE FUNDS AT ITS DISPOSAL WHICH ARE FAR MORE THAN INVESTMENT MADE AN D RELIED UPON THE DECISIONS OF CIT V. ABHISHEK INDUSTRIES (2006) 286 ITR 1 (P&H); SHEETAL DRAPE (INDIA) LTD. I.T.A NO. 1323/MU M/2012; CIT VS. RELIANCE UTILITIES & POWER LTD 313 ITR 340 (BOM); ITO VS. ATUL ANAND AY 2009-10 ITA NO 446/DE1/2013 DT 19 .02.2014 (DELHI TRIBUNAL); CIT VS. ABHISHEK INDUSTRIES LTD. (2016) 380 ITR 652 (P&H); CIT VS. MICRO LABS LTD. (2016) 383 I TR 490 (KAR); HDFC BANK LTD VS. DCIT & OTHERS (2016) 383 I TR 529 (BOM); CIT VS. MODI RUBBER LTD (2015) 378 ITR 128 ( DELHI); CIT VS. SRF LTD. (2015) 372 ITR 425 (DELHI); SIEMEN S NIXDORF INFORMATION SYSTEMS GMBH VS. DDIT (INT'L TAXATION) 2(1)(MUM) [2016] 158 ITD 480 (MUMBAI-TRIB.); GODREJ & BOYCE MANUFACTURING CO. LTD (2017) 394 ITR 117 AND CIT VS . MAX INDIA LTD. (2016) 388 ITR 81 (P&H). ITA NO.2581/DEL./2016 6 8. HOWEVER, ON THE OTHER HAND, LD. DR FOR THE REVEN UE CONTENDED INTER ALIA THAT PROVISO TO SECTION 36(1)( III) IS ABSOLUTE ONE WHICH STARTS WITH THE WORD SHALL; THAT THE AS SESSEE HAS NEVER PUT TO USE THE ASSET ALLEGED TO HAVE BEEN BOOKED AN D RELIED UPON THE ORDER PASSED BY THE LD. CIT (A). 9. WHEN WE EXAMINE THE PROVISO TO SECTION 36(1)(III ), ITS OPENING LINES ARE ANY AMOUNT OF INTEREST PAID IN R ESPECT OF CAPITAL BORROWED FOR ACQUISITION OF ASSET SHALL NOT BE ALLO WED AS DEDUCTION. IN THIS CASE, FIRST OF ALL, ASSESSEE H AS FAILED TO EXPLAIN THE PURPOSE FOR AVAILING THE LOAN FROM THE CITI BAN K. SECONDLY, THOUGH THE ASSESSEE HAS BOOKED VARIOUS SPACES FOR O FFICE USE BUT HE HAS NEVER TAKEN POSSESSION THEREOF AND AS SUCH PROV ISO TO SECTION 36(1)(III) IS ATTRACTED. MOREOVER, WHEN IT IS UNDI SPUTED FACT THAT THE ASSESSEE HAS INVESTED BORROWED MONEY ALONG WITH HIS OWN FUNDS IN VARIOUS OFFICE PROPERTIES IN ORDER TO EXTEND ITS BU SINESS BUT THE SAME WAS NEVER PUT TO USE DURING THE YEAR UNDER ASS ESSMENT, NO DEDUCTION IS ALLOWABLE. 10. THE CONTENTION OF THE LD. AR FOR THE ASSESSEE T HAT SECTION 36(1)(III) DOES NOT SPEAK ABOUT IMMOVABLE PROPERTIE S RATHER SPEAKS OF ASSETS ONLY IS ALSO NOT SUSTAINABLE BECAUSE ASSE SSEE CANNOT BE ALLOWED TO BLOW HOT AND COLD IN THE SAME BREATH AS THE ASSESSEE HAS TRIED TO PROVE ON RECORD THAT HE HAS INVESTED THE B ORROWED MONEY ITA NO.2581/DEL./2016 7 FOR EXTENSION OF THE OFFICE I.E. OFFICE SPACE WHICH ARE CERTAINLY AN IMMOVABLE PROPERTY/ASSET BUT THE SAME HAS NEVER BEE N PUT TO USE FOR BUSINESS PURPOSE. IN THESE CIRCUMSTANCES, CASE LAWS RELIED UPON BY THE ASSESSEE ARE NOT APPLICABLE TO THE FACT S AND CIRCUMSTANCES OF THE CASE. 11. SO FAR AS QUESTION OF HAVING INTEREST BEARING A ND INTEREST FREE FUNDS AVAILABLE AT THE DISPOSAL OF THE ASSESSEE WHI CH ARE FAR MORE THAN AMOUNT OF LOAN AVAILED OF IS CONCERNED, WE ARE OF THE CONSIDERED VIEW THAT THE LD. CIT (A) HAS VALIDLY AN D LEGALLY DEALT WITH THIS ISSUE IN PARA 5.2.2 BY EXTENDING THE PART RELIEF TO THE ASSESSEE BY WAY OF DISALLOWANCE OF INTEREST ON PRO- RATA BASIS AND HAS REACHED THE CONCLUSION THAT THE REMAINING AMOUN T OF RS.5,34,191/- IS REQUIRED TO BE DISALLOWED UNDER TH E PROVISO TO SECTION 36(1)(III) OF THE ACT. 12. IN VIEW OF WHAT HAS BEEN DISCUSSED ABOVE, FINDI NG NO ILLEGALITY OR PERVERSITY IN THE IMPUGNED ORDER PASS ED BY THE LD. CIT (A), APPEAL FILED BY THE ASSESSEE IS HEREBY DISMISS ED. ORDER PRONOUNCED IN OPEN COURT ON THIS 14 TH DAY OF JUNE, 2019. SD/- SD/- (G.D. AGRAWAL) (KULDIP SINGH ) VICE PRESIDENT JUDICIAL MEMBER DATED THE 14 TH DAY OF JUNE, 2019/TS ITA NO.2581/DEL./2016 8 COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-11, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.