D.K. Rungta & Sons (HUF), Kolkata V. ITO, Ward - 51(4), Kolkata, Kolkata

ITA 1915/KOL/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 48140 (ITAT-KOLKATA)
• Duration Of Justice: 7 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2007-2008
• Appeal Filed On: 13-10-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: P KOLHE THIS APPEAL FILED AS
• Assessee Lawyers: R SALARPURIA
• Section: 143(3)

Judgement Text

, . .. . . .. . -- , , IN THE INCOME-TAX APPELLATE TRIBUNAL, SMC-C BENCH : KOLKATA [ () , , [BEFORE HONBLE SHRI MAHAVIR SINGH, JUDICIAL MEMBER ] / ITA NO. 1915/KOL/2010 !' #$ !' #$ !' #$ !' #$/ // / ASSESSMENT YEAR : 2007-08 D. K. RUNGTA & SONS (HUF) -VS.- INCOME TAX OFFICER/WARD-51(4) KOLKATA [PAN : AABHD 7086 C] KOLKATA. [ &' /APPELLANT ] [ )*&'/ RESPONDENT ] &' / FOR THE APPELLANT : SHRI R. SALARPURIA )*&' / FOR THE RESPONDENT : SHRI P. KOLHE THIS APPEAL FILED BY ASSESSEE, IS EMANATI NG OUT OF ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-XXXII, KOLKATA, IN APPEAL NO.125/CITA)-XX XII/09-10/51(4)/KOL DATED 30.06.2010. THE ASSESSMENT WAS FRAMED BY ITO, WARD -51(4), KOLKATA FOR ASSESSMENT YEAR 2007-08 U/S. 143(3) OF THE INCOME-TAX ACT, 1961 (HE REINAFTER REFERRED TO AS THE ACT) VIDE HIS ORDER DATED 15.12.2009. 2. THE ONLY ISSUE IN THIS APPEAL OF THE ASSESSEE AG AINST THE ORDER OF CIT(A) CONFIRMING THE ACTION OF ASSESSING OFFICER IN DISALLOWING INTEREST PAID ON LOANS. 3. BRIEF FACTS LEADING TO THE ABOVE ISSUE ARE THAT DURING THE RELEVANT ASSESSMENT YEAR, ASSESSEE EARNED INCOME FROM COMMISSION, INTEREST AN D OTHER RECEIPTS ASSESSED AS INCOME FROM OTHER SOURCES. THE ASSESSEE CLAIMED BEFORE THE LABO UR AUTHORITIES AS WELL AS BEFORE US THAT IT IS ENGAGED IN THE BUSINESS OF REAL ESTATE BUSINESS. THE ASSESSEE CLAIMED THAT IT IS MAINTAINING BOOKS OF ACCOUNT SUPPORTED BY VOUCHERS AND BANK STA TEMENT. DURING THE RELEVANT ASSESSMENT YEAR, ASSESSEE CLAIMED INTEREST AT RS.8,36,296/- PA ID ON BORROWED CAPITAL FOR BUSINESS PURPOSES. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ASSESS ING OFFICER DISALLOWED INTEREST OF RS.4,33,291/- BY HOLDING THE SAME AS PRINCIPAL AMOU NT RELATED TO CAPITAL INVESTMENT. FOR THIS FINDING, ASSESSING OFFICER GAVE FOLLOWING REASONS I N PARA-6 AS UNDER:- ITA NO. 1915/KOL/2010 D. K. RUNGTA & SONS (HUF), AY 07-08 2 IN VIEW OF THE FOREGOING DISCUSSION IT IS HE LD THAT THE EXPLANATION OF THE ASSESSEE IS NOT ACCEPTABLE AND CONCLUDED AS FOL LOWS- A) PURCHASE AND SALE OF FLAT IS NOT THE BUSINESS OF THE ASSESSEE. (B) FLAT AT 3B, RAM MOHAN MULLICK GARDEN LANE, KO LKATA-L0 WAS BOOKED FOR PERSONAL USE AND NOT WITH AN INTENTION T O SALE AT A PROFIT. HENCE, IT IS A CAPITAL INVESTMENT. (C) INTEREST PAID IS ALLOWABLE TO THE AMOUNT OF INTEREST EARNED. (D) THEREFORE, INTEREST PAYMENT TO THE TUNE OF RS.433,291/- (RS.4,33,291/-) IS ADDED WITH THE TOTAL INCOME OF THE ASSESSEE AS T HE PRINCIPAL AMOUNT RELATED TO THIS INTEREST PAYMENT IS CAPITAL INVESTMENT OF T HE ASSESSEE. 4. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE CIT (A) AND HE CONFIRMED ACTION OF ASSESSING OFFICER BY GIVING FOLLOWING FINDING :- I HAVE CAREFULLY CONSIDERED THE ASSESSMENT ORD ER AND THE SUBMISSIONS OF THE ASSESSEE. THE CONTENTION OF THE ASSESSEE MAI NLY RELATES AROUND THE CLAIM THAT IT WAS ALSO IN THE REAL ESTATE BUSINESS WHIC H IT STARTED IN THE ASSESSMENT YEAR 2000-01. FROM THE FACTS OF THE CASE THE CLAIM OF THE ASSESSEE APPEARS TO BE DEVOID OF ANY MERITS. THE ASSESSEE HAD BOOKED A FLAT WITH M/S. SIDDHA GRIHA NIRMAN PVT. LTD. AT A CONSIDERATION OF RS.37,50,000 /- VIDE AN AGREEMENT DATED 14.05.1999. AFTER THAT THERE HAS NOT BEEN A SINGLE ACTIVITY IN REAL ESTATE BY THE ASSESSEE TILL THE PERIOD RELEVANT TO THE ASSESS MENT YEAR UNDER CONSIDERATION. THE QUESTION TO BE ADDRESSED HERE IS WHETHER THE SI NGLE BOOKING OR A FLAT BY THE ASSESSEE IN THE FINANCIAL YEAR 1999-2000 SHALL CONS TITUTE AN ADVENTURE IN THE NATURE OF TRADE SO AS TO QUALIFY TO BE TREATED AS B USINESS ACTIVITY. FOR AN ACTIVITY TO BE TERMED AS BUSINESS THERE SHALL BE AN ORGANIZED ACTIVITY, CONTINUOUS INVOLVEMENT REQUIRING EFFORTS ON THE PAR T OF THE ASSESSEE. A SINGLE TRANSACTION WILL NOT BE A TRADING ADVENTURE UNLESS IT BEARS CLEAR INDICIA OF TRADE AS LORD CLYDE L.P. OBSERVED IN BALGOWNIE LA ND TRUST LTD. VS- IR (14 TC 684) : A SINGLE PLUNGE MAY BE ENOUGH PROVIDED IT IS SHOWN TO THE SATISFACTION OF THE COURT THAT THE PLUNGE IS MADE I N THE WATERS OF TRADE; BUT THE SALE OF A PIEE OF PROPERTY IF THAT IS ALL THAT IS INVOLVED IN THE PLUNGE MAY EASILY FALL SHORT OF ANYTHING IN THE NATURE OF TRAD E. TRANSACTIONS OF SALE ARE CHARACTERISTIC OF TRADE BUT THEY ARE NOT NECESSARIL Y DISTINCTIVE OF IT; MUCH DEPENDS ON THE CIRCUMSTANCES. WHERE THE PURCHASE OF ANY ARTICLE OR OF ANY CAPITAL INVESTMENT, E.G. SHARES, SECURITIES OR LAND, IS MADE WITHOUT THE INT ENTION TO RESELL AT A PROFIT, A RESALE UNDER CHANGED CIRCUMSTANCES WOULD ONLY BE A REALIZATION OF CAPITAL AND WOULD NOT STAMP THE TRANSACTION WITH A BUSINESS CHA RACTER (CIT V. P.K.N. 60 I.T.R. 65(SC) ITA NO. 1915/KOL/2010 D. K. RUNGTA & SONS (HUF), AY 07-08 3 IN C.I.T. V. SAIRAM (242 I.T.R. 104), THE MADRAS HI GH COURT HELD THAT THERE IS NO PRESUMPTION IN LAW THAT ALL AGREEMENTS TO PURCHASE OR ACTUAL PURCHASE OF IMMOVABLE PROPERTY AND ANY SUBSEQUENT S ALES OF IMMOVABLE PROPERTY ARE TO BE REGARDED AS ADVENTURE IN THE NAT URE OF TRADE. THE INTENTION OF THE ASSESSEE CONSIDERED ALONG WITH ALL OTHER REL EVANT CIRCUMSTANCES WILL HAVE TO PROVIDE THE ANSWER TO THE QUESTION AS TO WH ETHER THE TRANSACTION IS ONE OF INVESTMENT OF ADVENTURE IN THE NATURE OF TRADE. IN THE INSTANT CASE THE AGREEMENT TO PURCHASE A FLA T ENTERED INTO DURING THE FINANCIAL YEAR 1999-2000 BY THE ASSESSEE WAS AN ISOLATED TRANSACTION. THERE IS NO SUBSTANTIAL EVIDENCE ADDUCED BY THE ASS ESSEE IN SUPPORT ITS CLAIM THAT SUCH INVESTMENT MADE BY ASSESSEE WAS FOR THE P URPOSE OF TRADING IN THE SAME. THEREFORE, THE CLAIM OF THE ASSESSEE THAT IT WAS IN THE BUSINESS ACTIVITY OF REAL ESTATE IS NOT ESTABLISHED AND THEREFORE, HAS NO MERITS. AS REGARDS THE QUANTUM OF THE INTEREST DISALLOWED B Y THE A.O., THE ASSESSEES ASSERTION THAT THE INTEREST RELATABLE TO THE AMOUNT OF LOAN INVESTED WAS LOWER THAN THE AMOUNT DISALLOWED BY THE A.O. IS NOT SUPPORTED BY ANY EVIDENCE, THEREFORE, THE SAME IS NOT ACCEPTABLE. AC CORDINGLY, I DO NOT FIND ANY INFIRMITY IN THE DISALLOWANCE MADE BY THE A.O. IN T HE ASSESSMENT ORDER. 5. WE HAVE HEARD RIVAL CONTENTIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. THE ASSESSEE BEFORE US ARGUED THAT THE CIT(A) ERRED IN HOLDING THAT NO BUSINESS OF REAL ESTATE WAS CARRIED ON BY THE ASSESSEE EVEN THOUGH THE FACT S ARE THAT THE INTEREST PAYABLE ON LOAN WAS IN FACT BORROWED FOR FLAT ADVANCE. HE STATED THAT FAC TUALLY ALSO THE CIT(A) OVERLOOKED THE FACT THAT THE ASSESSEE HAD BORROWED RS.30 LAC WHEREAS AC TUALLY HE HAS BORROWED RS.20 LACS IN MAKING ADVANCE TOWARDS FLAT BOOKING FOR CARRYING ON REAL ESTATE BUSINESS. HE NARRATED THE FACT THAT THE ASSESSEE HAD NOT DISCONTINUED HIS REAL EST ATE BUSINESS AND HAS REALIZED FLAT ADVANCE IN FULL AS WELL AS FURTHER COMPENSATION OF RS.5 LACS F OR LOSS OF EARNING FROM BUSINESS. HE ARGUED THAT BOTH THE AUTHORITIES BELOW HAVE ERRED IN HOLDI NG THAT LOAN WAS BORROWED ONLY FOR EARNING INTEREST. FINALLY HE STATED THAT BOTH THE AUTHORIT IES BELOW HAVE REACHED TO A CONCLUSION THAT THE ASSESSEE HAS NOT SOLD THE FLAT AND BOOKED ANY OTHER FLAT EXCEPT THE ONE. WE FIND THAT THE ASSESSEE HAS BOOKED A FLAT WITH SIDDHA GRIHA NIRMAN PVT. LTD. FOR A TOTAL CONSIDERATION OF RS.37.50 LACS VIDE AGREEMENT DATED 14.5.1999. WE F IND FROM THE RECORDS THAT THE ASSESSEE HAS NOT CARRIED OUT ANY BUSINESS ACTIVITY OF REAL ESTAT E TILL THE PERIOD RELEVANT TO THIS ASSESSMENT YEAR. THE ASSESSEE HAS MADE ONLY A SINGLE BOOKING OF FLAT IN F.Y.1999-2000. WHETHER THIS SINGLE BOOKING OF FLAT CONSTITUTES BUSINESS OR NOT? THIS SINGLE TRANSACTION BOOKED AND FLAT RETAINED BY THE ASSESSEE TILL DATE, WHICH IS AN ISO LATED TRANSACTION, CANNOT BE TERMED AS REAL ESTATE BUSINESS ACTIVITY OF THE ASSESSEE. WE ARE I N FULL AGREEMENT, THAT EVEN THOUGH THE ITA NO. 1915/KOL/2010 D. K. RUNGTA & SONS (HUF), AY 07-08 4 POSSESSION OF THE FLAT BOOKED WAS NOT RECEIVED AND ASSESSEE CAN OR CANNOT SALE THE FLAT AND EARN PROFIT THEREFROM, WITH THE CIT(A) HOLDING THAT THIS CANNOT BE A BUSINESS TRANSACTION BY VIRTUE OF ITS NATURE. ACCORDINGLY, WE CONFIRM THE ORDERS OF THE LOWER AUTHORITIES AND DISMISS THIS ISSUE OF APPEAL OF THE ASSESSEE. 6. AS REGARDS TO THE QUANTUM OF BORROWED MONEY I.E. RS.20 LACS OR RS.30 LACS, THIS ISSUE NEEDS VERIFICATION AND AO AFTER VERIFYING THIS FACT WILL MAKE DISALLOWANCE OF INTEREST ACCORDINGLY. 7. IN THE RESULT, APPEAL OF ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 31.5.2011 SD/- [ , ] [MAHAVIR SINGH] JUDICIAL MEMBER (+,) DATED : 31ST MAY, 2011. -. / )0 1-0#/ COPY OF THE ORDER FORWARDED TO 1. &' / M/S. D.K. RUNGTA & SONS (HUF), FD 140, SALT LAKE CITY, KOLKATA-700 106. 2. )*&' / INCOME TAX OFFICER/WARD-51(4), 169, A.J.C. BOSE R OAD, 9 TH FLOOR, KOLKATA-700 014. 4. ( .! ) / CIT(A)- KOLKATA 5. .!/ CIT- KOLKATA 6. 23 )!/ D.R., I.T.A.T., KOLKATA. [*0 )/ TRUE COPY] -.!5/ BY ORDER, 6 / DEPUTY/ASSISTANT REGISTRAR [KKC 78 !96 : /SR.PS] I.T.A.T., KOLKATA.