M/s. Giri buildwell Pvt. Ltd., New Delhi V. ITO, New Delhi

ITA 1976/DEL/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 5166 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 4 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-08-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 23-05-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 03-04-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P DAM KANUNJA
• Assessee Lawyers: BL GUPTA
• Keywords: Business income; Capital expenditure
• Section: 143(3)

Judgement Text

INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C : NEW DELHI BEFORE SHRI PRASHANT MAHARISHI , ACCOUNTANT MEMBER AND SHRI K.N. CHARY, JUDICIAL MEMBER I TA NO . 1976/DEL/2014 (ASSESSMENT YEAR: 2009 - 10 ) GIRI BUILDWELL PVT. LTD, LG - 1& 3, R - 23, NEHRU ENCLAVE, NEW DELHI VS. ITO, WARD - 12(1), NEW DELHI (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. BL GUPTA, AR REVENUE BY: SH. P DAM KANUNJA, SR. DR DATE OF HEARING 23/05/ 2017 DATE OF PRONOUNCEMENT 18 / 08 / 2017 O R D E R PER PRASHANT MAHARISHI , A . M . 1. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LD CIT(A) - XV, NEW DELHI DATED 09.02.2014 FOR THE ASSESSMENT YEAR 2009 - 10. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT(A) WAS INCORRECT AND UNJUSTIFIED IN A. IN SUSTAINING THE ADDITION OF RS. 3467185/ - OUT OF TOTAL DISALLOWANCE OF RS. 3997067/ - MADE BY THE AO. B. SUSTAINING THE ADDITION OF RS. 3467185/ - ON THE GROUND THAT THE AMOUNT OF LOAN FROM THE BANK WAS UTIL IZED FOR PURPOSES OR ADVANCE GIVEN FOR THE PURCHASE OF PROPERTIES EVEN THOUGH THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF REAL ESTATE. C. SUSTAINING THE ADDITION OF RS. 3467185/ - EVEN WHEN SUCH INTEREST WAS ALLOWED IN THE EARLIER YEAR. D. SUSTAINING THE ADDITION EVEN WITHOUT PROVING THAT THE ADVANCES WERE NOT FOR THE PURPOSES OF BUSINESS. E. SUSTAINING THE ADDITION EVEN THOUGH THE LOAN AMOUNT WAS USED FOR THE PURPOSE OF THE BUSINESS. F. HOLDING THAT THE AMOUNT OF RS. 159690/ - WAS A CAPITAL EXPENDITURE E VEN THOUGH INCURRED FOR BUSINESS PURPOSES. 3. THE BRIEF FACTS OF THE CASE IS THAT THE ASSESSEE IS A PRIVATE LIMITED COMPANY MAINLY DERIVED RENTAL INCOME AND PROFIT ON SALE OF SHARES. DURING THE YEAR IT FILED ITS RETURN OF INCOME ON 29.09.2009 DECLARED LOSS OF RS. 1901830/ - AS PER AIR INFORMATION IT WA S FOUND THAT RENT RECEIVED SHOWN IN THE BOOKS OF ACCOUNT WAS RS. 3790140/ - WHEREAS THE RENT PAID TO THE ASSESSEE BY THE TAX PAGE 2 OF 4 DEDUCTOR AS PER TDS CERTIFICATE WAS RS. 4069568/ - . SIMILARLY DISALLOWANCE OF RS. 3977067/ - WAS ALSO MADE ON ACCOUNT OF INTEREST AND BANK CHARGES FOR THE REASON THAT ASSESSEE HAS SHOWN INCOME FROM HOUSE PROPERTY AND CAPITAL GAINS. IT WAS FURTHER STATED THAT AS PER BALANCE SHEET THE ASSESSEE HAS BORROWED FROM THE BANKS AND HAS ALSO PURCHASED UNDER CONSIDERATION. THE ASSESSEE IS NOT FOLLO WING THE PERCENTAGE COMPLETION METHOD AND FURTHER NO INCOME WAS OFFERED FROM SUCH PURCHASE THE ABOVE INTEREST AND BANK CHARGES OF RS. 3977067/ - WAS DISALLOWED. THE ASSESSEE PREFERRED APPEAL BEFORE THE LD CIT(A), WHO CONSIDERED THE WHOLE ASPECT AND ALLOWED THE SUM OF RS. 475625/ - AND CONFIRM THE DISALLOWANCE OF RS. 3467185/ - . THEREFORE THE ASSESSEE IS IN APPEAL BEFORE US. 4. THE LD AR SUBMITTED THAT THE LOAN IS TAKEN FOR BUSINESS PURPOSE AND ALSO USED FOR THE BUSINESS PURPOSES. THE CLAIM OF THE INTEREST EXPENS ES HAS BEEN ALLOWED TO THE ASSESSEE FROM ASSESSMENT YEAR 2008 - 09 TO ASSESSMENT YEAR 2013 - 14 AND ONLY IN THIS YEAR THE DISALLOWANCE HAS BEEN MADE. HE SUBMITTED THAT EXEMPT IN ASSESSMENT YEAR 2010 - 11 THAT THE ASSESSMENT HAVE BEEN COMPLETED U/S 143(3) OF THE ACT. IT WAS FURTHER SUBMITTED THAT THERE IS NO CHANGE IN LAW AS WELL AS FACT AND PROVISIONS OF SECTION 36(1)(III) PROVIDES FOR SUCH DEDUCTION. HE FURTHER RELIED ON THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF 2DTL ONLINE 306 (DEL)AS WELL AS DECISION OF THE COORDINATE BENCH IN THE IN ITA NO. 782/ CHD/2016 DATED 08.12.2016. 5. THE LD DR VEHEMENTLY CONTESTED THAT WHEN THE ASSESSEE IS SHOWING INCOME FROM HOUSE PROPERTY AND CAPITAL GAINS THERE IS NO REASON THAT INTEREST IS ALLOWABLE TO THE ASSESSEE. 6. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS HAVE ALSO PERUSED THE RELEVANT ORDERS OF THE LOWER AUTHORITIES. ON PERUSAL OF THE PROFIT AND LOSS ACCOUNT OF THE ASSESSEE IT IS NOTED THAT ASSESSEE HAS OPENING STOCK AS WELL AS ADDITION DURING THE YEAR AN D CONSEQUENTLY CLOSING STOCK OF THE IDENTICAL AMOUNT. ON PERUSAL OF THE COMPUTATION OF TOTAL INCOME IT IS NOTED THAT THE ASSESSEE HAS BORROWED OTHER BUSINESS INCOME IT IS AT LOSS OF RS. 4554928/ - DURING THE YEAR. ABOVE LOSS HAS BEEN DISTURBED BY THE AO HOL DING THAT ASSESSEE IS NOT CARRYING ON THE BUSINESS. IN VIEW OF THIS IT IS APPARENT THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF PROFIT OR LOSS FROM SUCH INCOME IS CHARGEABLE TO TAX UNDER THE HEAD BUSINESS INCOME. IT IS ALSO AN ACCEPTED FACT THAT THE ASS ESSEE IS A DEALER IN REAL ESTATE AND THEREFORE HAS GIVEN PAGE 3 OF 4 ADVANCES FOR VARIOUS PROPERTIES. THE ASSESSEE HAS SHOWN THE VARIOUS PROPERTIES WHICH ARE SHOWN UNDER THE HEAD INVENTORY IS AT PAGE NO. 84 OF THE PAPER BOOK. FURTHERMORE AT PAGE NO. 82 THE ASSESSEE HA S ALSO GIVEN THE DETAILS OF ITS PROJECT TARIK PLAZA. NOW THE ISSUE ARISES THAT WHETHER IN THE ABOVE FACTS AND CIRCUMSTANCES THE ASSESSEE SHOULD HAVE BEEN GRANTED DEDUCTION OF INTEREST EXPENDITURE OR NOT. THE LD AO HAS WRONGLY CONSIDERED THAT ASSESSEE HAS N OT SHOWING INCOME UNDER THE PERCENTAGE COMPLETION METHOD. INFACT THE ASSESSEE IS NOT INFACT IN THE BUSINESS OF CONSTRUCTION OR REAL ESTATE DEVELOPMENT. IT PURCHASED THE PROPERTIES AND SALES THEM OR RENT THEM OUT. IN THE PRESENT CASE THE LD CIT(A) HAS HELD THAT INTEREST EXPENDITURE WITH RESPECT OF ADVANCES AMOUNTING TO RS. 2.31 CORES ARE FOR THE PROPERTY WHICH ARE YET TO BE DEVELOPED AS THE LAND ITSELF HAS NOT BEEN ACQUIRE DURING THE CURRENT YEAR. THEREFORE, INTEREST EXPENDITURE TO THAT ACCOUNT IS REQUIRED T O BE CAPITALIZED IN THE PROVISION OF SECTION 36(1)(III) OF THE ACT. IN THE PRESENT CASE IT IS APPARENT THAT THE ASSESSEE HAS NOT PAY INTEREST IN ACQUIRING OF ASSET BUT IS INCURRING INTEREST EXPENDITURE FOR THE PURPOSE OF ACQUIRING ITS INVENTORY. THE PROV ISO TO SECTION 36(1)(III) APPLIES ONLY TO THE INTEREST AMOUNT WITH RESPECT TO BORROWINGS FOR THE ACQUISITION OF ASSETS AND NOT INVENTORY. FURTHERMORE, INTEREST PAID FOR PAYMENT OF INCOME TAX IS NOT ALLOWABLE AS EXPENDITURE. THEREFORE, ACCORDING TO US EXCEP T DISALLOWANCE OF RS. 277920/ - THE OTHER EXPENDITURE OF INTEREST ARE ALLOWABLE TO THE ASSESSEE. THE LD CIT(A) HAS ERRED IN HOLDING THAT INTEREST EXPENDITURE IS CAPITAL IN NATURE. ACCORDING TO US INTEREST EXPENDITURE HAS BEEN INCURRED FOR THE PURPOSE OF BUS INESS OF THE ASSESSEE ON CAPITAL BORROWED FOR THE PURPOSE OF THE BUSINESS. IN VIEW OF THIS EXCEPT DISALLOWANCE TO THE EXTENT OF RS. 27790/ - THE OTHER DISALLOWANCE OF RS. 3467185/ - REQUIRED TO BE DELETED. HENCE, WE DIRECT THE AO TO DELETE THE DISALLOWANCE O F RS. 34395/ - ON ACCOUNT OF INTEREST EXPENDITURE. WITH RESPECT TO DISALLOWANCE OF RS. 159690/ - CONSIDERED AS CAPITAL EXPENDITURE BY THE LD CIT(A) THE ASSESSEE DID NOT SUBMIT ANY ARGUMENT AND THEREFORE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD CI T(A). 7. IN THE RESULT GROUND NO. A TO E OF THE APPEAL OF THE ASSESSEE ARE ALLOWED AND GROUND NO. F OF THE APPEAL IS CONSEQUENTIAL IN NATURE AND THEREFORE SAME DISMISSED. 8. IN THE RESULT APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. PAGE 4 OF 4 ORDER PRONOUNCED IN THE OPEN COURT ON 1 8 / 08 / 2017 . - S D / - - S D / - ( K.N.CHARY ) (PRASHANT MAHARISHI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 1 8 / 08 / 2017 A K KEOT COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI