VAZIRANI LAND DEVELOPERS P. LTD, MUMBAI V. DCIT CEN CIR 31, MUMBAI

ITA 2168/MUM/2010

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 3508 (ITAT-MUMBAI)
• Duration Of Justice: 9 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-12-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: F
• Assessment Year: 2006-2007
• Appeal Filed On: 18-03-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SUM EET KUMAR
• Assessee Lawyers: JAIDEV
• Keywords: Capital asset; Business income; Business expenditure; Commercial expediency

Judgement Text

1 ITA 2168-69/MUM/10, M/S VAZIANI LAND DEVELOPERS P. LTD. IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES F BEFORE SHRI R.V. EASWAR, PRESIDENT AND SHRI P.M. JA GTAP, A.M. ITA NO. 2168 & 2169/MUM/2010 ASSESSMENT YEARS 2006-07 & 2007-08 M/S VAZIRANI LAND DEVELOPERS P. LTD., LAL ASHISH, PLOT NO. 219, 11 TH ROAD, CHEMBUR, MUMBAI 400 071. PAN AAACV 5072 A VS. ACIT, CENTRAL CIRCLE -31, AAYAKAR BHAWAN, M.K. ROAD, CHURCHGATE, MUMBAI. 20 APPELLANT RESPONDENT APPELLANT BY SHRI JAIDEV RESPONDENT BY SHRI SUMEET KUMAR ORDER PER P.M. JAGTAP, A.M. THESE TWO APPEALS FILED BY THE ASSESSEE AGAINST TWO SEPARATE ORDERS PASSED BY THE LD. CIT(A) -40, MUMBAI DATED 2.12.09 AND 29.1.20120 FOR A.Y. 2006-07 & 2007-08 RESPECTIVELY INVOLVE COMMON ISSUE AND THE SAME THER EFORE HAVE BEEN HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMPOSITE ORDER FOR T HE SAKE OF CONVENIENCE. 2. FIRST, WE SHALL TAKE UP THE APPEAL OF TH E ASSESSEE FOR A.Y. 2006-07 BEING ITA NO. 2168/MUM/10. 3. AT THE OUTSET, WE MAY NOTE THAT THERE IS A DELAY OF 24 DAYS IN FILLING THIS APPEAL BY THE ASSESSEE. IN THIS REGARD, THE ASSESSEE HAS MOVE D AN APPLICATION DTD. 17.3.10 SEEKING CONDONATION OF THE SAID DELAY AND AFTER HAVING CONS IDERED THE REASONS GIVEN THEREIN, WE FIND THAT THERE WAS A SUFFICIENT CAUSE FOR THE SHOR T DELAY OF 24 DAYS IN FILING THIS APPEAL BY 2 ITA 2168-69/MUM/10, M/S VAZIANI LAND DEVELOPERS P. LTD. THE ASSESSEE. THE SAID DELAY THUS HAS BEEN CONDONE D BY US AND THIS APPEAL OF THE ASSESSEE FOR A.Y. 2006-07 IS BEING DISPOSED OF ON MERITS. 4. THE ONLY ISSUE ARISING OUT OF THIS APPEA L RELATES TO THE ADDITION MADE BY THE A.O. AND CONFIRMED BY THE LD. CIT(A) BY WAY OF DISALLOWA NCE OF EXPENSES INCURRED BY THE ASSESSEE ON ACCOUNT OF LEGAL FEES AMOUNTING TO ` 6,84,278/-, INTEREST CHARGES AMOUNTING TO ` 3,27,250/- AND PROCESSING CHARGES AMOUNTING TO ` 63,365/-. 5. THE ASSESSEE IN THE PRESENT CASE IS A COMP ANY WHICH IS ENGAGED IN THE BUSINESS OF LAND DEVELOPMENT AND BUILDING CONSTRUCTION. DURING THE YEAR UNDER CONSIDERATION, THERE WAS, HOWEVER, NO CONSTRUCTION WORK THAT HAS BEEN CA RRIED OUT BY THE ASSESSEE. THE PREMISES OUT OF ITS STOCK IN HAND WAS GIVEN BY THE ASSESSEE ON LEASE TO FEDERAL BANK AND THE LEASE RENT RECEIVED FROM FEDERAL BANK WAS DECL ARED UNDER THE HEAD INCOME FROM HOUSE PROPERTY IN THE RETURN OF INCOME FILED FOR T HE YEAR UNDER CONSIDERATION ON 19.12.06. IN THE SAID RETURN, LOSS OF ` 9,97,371/- WAS SHOWN BY THE ASSESSEE UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION. THE SAID LOSS WAS MAINLY AS A RESULT OF EXPENSES CLAIMED BY THE ASSESSEE ON ACCOUNT OF I NTEREST AMOUNTING TO ` 3,37,250/-, LOAN PROCESSING CHARGES AMOUNTING TO ` 63,365/- AND LEGAL FEES AMOUNTING TO ` 6,84,278/-. DURING THE COURSE OF ASSESSMENT PROCEED INGS, THE ASSESSEE WAS CALLED UPON BY THE A.O. TO JUSTIFY THE SAID EXPENSES CLAIMED BY IT UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION. IN REPLY, IT WAS SUBMITTE D BY THE ASSESSEE THAT A LOAN OF ` 115 LACS WAS TAKEN BY IT FROM CORPORATION BANK AGAINST THE PREMISES GIVEN ON RENT TO FEDERAL BANK AND THE LEGAL CHARGES AND PROCESSING CHARGES IN RELATION TO THE SAID LOAN AS WELL AS INTEREST PAID ON THE SAID LOAN FOR THE YEAR UNDER C ONSIDERATION WERE CLAIMED AS BUSINESS EXPENSES. IT WAS SUBMITTED THAT THE LOAN AVAILED F ROM CORPORATION BANK WAS UTILIZED FOR PURCHASED OF SHARES OF M/S VICTORY FLASK CO. PVT. L TD. AND SINCE THE SAID INVESTMENT WAS MADE BY WAY OF COMMERCIAL EXPEDIENCY, THE EXPENSES INCURRED FOR AVAILING THE LOAN FROM CORPORATION BANK AS WELL AS INTEREST PAID THEREON W ERE ALLOWABLE AS BUSINESS 3 ITA 2168-69/MUM/10, M/S VAZIANI LAND DEVELOPERS P. LTD. EXPENDITURE. RELIANCE IN SUPPORT OF THIS CONTENTIO N WAS PLACED ON BEHALF OF THE ASSESSEE ON THE DECISION OF HONBLE SUPREME COURT IN THE CAS E OF S.A. BUILDERS LTD. VS. CIT 158 TAXMAN 74. THIS STAND TAKEN BY THE ASSESSEE WAS NO T FOUND ACCEPTABLE BY THE A.O. ACCORDING TO HIM, THE ASSESSEE WAS NOT IN THE BUSIN ESS OF MAKING INVESTMENT IN SHARES AND THEREFORE INVESTMENT MADE BY IT IN THE SHARES O F ITS GROUP COMPANY COULD NOT BE SAID TO HAVE BEEN DONE FOR THE PURPOSE OF ITS BUSINESS. HE HELD THAT THERE WAS NO COMMERCIAL EXPEDIENCY IN UTILIZATION OF FUNDS BORROWED BY THE ASSESSEE FROM CORPORATION BANK AND THE INTEREST PAID ON THE SAID BORROWED FUNDS WAS NO T ALLOWABLE AS BUSINESS EXPENDITURE U/S 36-(1)(III). HE ALSO HELD THAT SIMILARLY PROCE SSING CHARGES AND LEGAL CHARGES PAID BY THE ASSESSEE IN CONNECTION WITH AVAILING OF THE SAI D LOAN WERE NOT ALLOWABLE AS BUSINESS EXPENDITURE AS THE SAID LOAN WAS NOT UTILIZED BY TH E ASSESSEE FOR THE PURPOSE OF ITS BUSINESS. HE ALSO DISALLOWED THE INTEREST EXPENDIT URE OF ` 7606/- PAID BY THE ASSESSEE TO FEDERAL BANK ON THE GROUND THAT LOAN FROM FEDERAL B ANK HAD BEEN TAKEN BY THE ASSESSEE FOR THE CONSTRUCTION OF APSARA BUILDING AND THE SAI D PROJECT HAVING BEEN COMPLETED IN THE EARLIER YEAR, INTEREST PAID ON THE FUNDS BORROWED F ROM FEDERAL BANK COULD NOT BE ALLOWED AS BUSINESS EXPENDITURE. THE A.O. THUS DISALLOWED T HE INTEREST EXPENSES, PROCESSING CHARGES AND LEGAL FEES PAID BY THE ASSESSEE IN THE ASSESSMENT COMPLETED U/S 143(3). 6. AGAINST THE ORDER PASSED BY THE A.O. U/S 14 3(3), AN APPEAL WAS FILED BY THE ASSESSEE BEFORE THE LD. CIT(A) CHALLENGING THEREIN INTER ALI A THE DISALLOWANCE MADE BY THE A.O. ON ACCOUNT OF INTEREST EXPENSES, LEGAL FEES AND PROCES SING CHARGES. DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE THE LD. CIT(A), THE SU BMISSIONS MADE BEFORE THE A.O. WERE REITERATED ON BEHALF OF THE ASSESSEE. THE LD. CIT( A), HOWEVER, DID NOT FIND MERIT IN THE SAID SUBMISSIONS AND CONFIRMED THE DISALLOWANCE MAD E BY THE A.O. ON ACCOUNT OF INTEREST EXPENSES, LEGAL FEES AND PROCESSING CHARGES FOR THE FOLLOWING REASONS GIVEN IN PARA 3.2.3:- IN SIMILAR VEIN, I FIND THAT THE APPELLANTS INTERE ST CLAIMS HAVE ALSO BEEN RIGHTLY DISALLOWED. AS I SEE, THE INTEREST TO FEDERAL BANK WAS PAID MUCH AFTER THE COMPLETION OF THE PROJECT AND THE REALIZATION OF TH E SAME PROCEEDS. IN THIS LIGHT, THE 4 ITA 2168-69/MUM/10, M/S VAZIANI LAND DEVELOPERS P. LTD. ASSESSING OFFICER HAS RIGHTLY HELD THAT THE APPELLA NT CANNOT CLAIM THAT BORROWED FUNDS ARE STILL LOCKED IN THE WIP OF THE BUILDING. SIMILARLY, THE INTEREST AND PROCESSING CHARGES PAID FOR LOAN FROM THE CORPORATI ON BANK HAS ALSO BEEN RIGHTLY DISALLOWED. IN THIS RESPECT, I AGREE WITH THE ASSE SSING OFFICER THAT THE APPELLANT BEING A BUILDER AND DEVELOPER IS NOT IN THE BUSINES S OF INVESTMENTS IN SHARES. ACCORDINGLY, IF ANY EXPENDITURE HAS NO CONNECTION W ITH APPELLANTS BUSINESS ACTIVITY OF LAND DEVELOPMENT AND CONSTRUCTION IT CANNOT BE H ELD AS ALLOWABLE UNDER THE HEAD INCOME FROM BUSINESS. THE APPELLANT HAS ARGUED THA T THE INTEREST IS ALLOWABLE U/S 36(1)(III) OF THE ITA IN VIEW OF COMMERCIAL EXPEDIE NCY. THIS ARGUMENT IS MISPLACED, AS DEDUCTION U/S 36 IS ALSO A DEDUCTION FALLING UNDER THE HEAD INCOME FROM BUSINESS ONLY. CLUED INTO THIS, I FIND THAT O NCE AN INCOME IS OUTSIDE THE AMBIT OF PROVISIONS GOVERNING INCOME UNDER THE HEAD INCOM E FROM BUSINESS, ANY DEDUCTION WHICH IS UNIQUELY ALLOWABLE ONLY AGAINST BUSINESS INCOME, CANNOT BE CLAIMED AGAINST AN INCOME WHICH DOES NOT ARISE FROM THE BUSINESS ACTIVITY CARRIED OUT BY THE APPELLANT. TESTED ON THIS, IN THE APPEL LANTS CASE, THE APPELLANT BEING NOT IN THE BUSINESS OF INVESTMENT IN SHARES, CANNOT CLA IM THE INTEREST INCURRED IN THE PROCESS OF PURCHASE OF THE SHARES AS INTEREST ATTRI BUTABLE TO ITS BUSINESS INCOME. IN LINE WITH THE FOREGOING, I FIND THE APPELLANTS REL IANCE ON THE DECISIONS MISPLACED. AS POINTED BY THE ASSESSING OFFICER, IN THE DECISIO N IN THE CASE S.A. BUILDERS VS. CIT, THE ISSUE BEFORE THE HONBLE SUPREME COURT WAS ADVANCE TO A SISTER CONCERN AND NOT LOAN FOR PURCHASE OF A CAPITAL ASSET AS IN THE APPELLANTS CASE. SIMILARLY, THE OTHER DECISIONS QUOTED BY THE APPELLANT ARE ALSO NO T ON THE ALLOWABILITY OF EXPENSES VIS--VIS PARTICULAR HEAD OF INCOME AS IS THE CASE WITH THE APPELLANT. AS MAY BE SEEN, IN THE DECISIONS RELIED UPON BY THE APPELLANT , THE DECISIONS ARE IN THE CONTEXT OF ALLOWABILITY OF THE EXPENSES ON AN INDEPENDENT BASI S AND NOT ON INTER-HEAD BASIS. IN LINE WITH THE FOREGOING, I FIND THE ABOVE DISALLOWA NCES JUSTIFIED. THEY ARE CONFIRMED AND THE GROUND OF APPEAL IS DISMISSED. AGGRIEVED BY THE ORDER OF THE LD. CVIT(A), THE ASSE SSEE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 7. THE LEARNED COUNSEL FOR THE ASSESSEE SUB MITTED THAT IN SO FAR AS THE ISSUE RELATING TO DISALLOWANCE OF INTEREST PAID TO FEDERAL BANK IS CONCERNED, THE SAME IS SQUARELY COVERED BY THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2003-04 DTD. 14.10.08 PASSED IN ITA NO. 3471/MUM/06 WHEREIN A SI MILAR DISALLOWANCE MADE ON ACCOUNT OF INTEREST PAID TO FEDERAL BANK HAS BEEN D ELETED BY THE TRIBUNAL. 8. AS REGARDS THE DISALLOWANCE MADE ON ACCO UNT OF INTEREST PAID BY THE ASSESSEE TO CORPORATION BANK AND PROCESSING CHARGES AND LEGAL F EES PAID IN CONNECTION WITH AVAILING OF THE SAID LOAN, HE SUBMITTED THAT A LOAN OF ` 115 LACS WAS OBTAINED BY THE ASSESSEE FROM 5 ITA 2168-69/MUM/10, M/S VAZIANI LAND DEVELOPERS P. LTD. CORPORATION BANK AGAINST MORTGAGE OF PROPERTY IN TH E YEAR UNDER CONSIDERATION AND THE AMOUNT OF THE SAID LOAN WAS UTILIZED FOR MAKING INV ESTMENT IN THE SHARES OF VICTORY FLASK CO. PVT. LTD. HE SUBMITTED THAT THE SAID INVESTMEN T IN THE SHARES OF A GROUP COMPANY WAS MADE BY THE ASSESSEE WITH THE INTENTION TO ACQU IRE A CONTROLLING INTEREST AND THE LOAN FROM CORPORATION BANK THUS WAS UTILIZED WITH COMMER CIAL EXPEDIENCY. HE CONTENDED THAT THE ACQUISITION OF CONTROLLING INTEREST BY ITS ELF IS A BUSINESS ACTIVITY AND THE LOAN AMOUNT BORROWED FROM CORPORATION BANK THUS WAS UTIL IZED BY THE ASSESSEE FOR BUSINESS PURPOSE. HE CONTENDED THAT INTEREST PAID ON THE SA ID LOAN, THEREFORE, WAS AN ALLOWABLE BUSINESS EXPENDITURE U/S 36(1)(III) AND EVEN THE PR OCESSING CHARGES AND LEGAL FEES PAID FOR AVAILING THE SAID LOAN WERE ALLOWABLE AS BUSINESS E XPENDITURE. IN SUPPORT OF THIS CONTENTION, HE RELIED INTER ALIA ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF S.A. BUILDERS LTD. (SUPRA), MUMBAI BENCH OF ITAT IN THE CASE OF SRISHTI SECURITIES PVT. LTD. VS. JCIT 148 TAXMAN (AT) 49 AND DELHI BENCH OF ITAT IN THE CASE OF DCIT VS. SAMTEL ELECTRON DEVICES LTD. 100 TTJ 706. 9. THE LEARNED D.R., ON THE OTHER HAND, STRONG LY RELIED ON THE ORDERS OF THE AUTHORITIES BELOW IN SUPPORT OF THE REVENUES CASE THAT THE DIS ALLOWANCE MADE ON ACCOUNT OF INTEREST EXPENSES AND OTHER CHARGES IS FULLY SUSTAINABLE. H E CONTENDED THAT ALL THE CASE LAWS CITED BY THE LEARNED COUNSEL FOR THE ASSESSEE IN SUPPORT OF ASSESSEES CASE ON THIS ISSUE ARE DISTINGUISHABLE ON FACTS SINCE THE BORROWED FUNDS I N THOSE CASES WERE FOUND TO BE UTILIZED FOR COMMERCIAL EXPEDIENCY. HE SUBMITTED THAT THE A SSESSEE IN THE PRESENT CASE, HOWEVER, HAS FAILED TO ESTABLISH SUCH COMMERCIAL EXPEDIENCY IN UTILIZATION OF BORROWED FUNDS WHICH JUSTIFY THE DISALLOWANCE MADE ON ACCOUNT OF I NTEREST AS WELL AS OTHER CHARGES. HE SUBMITTED THAT THE ONLY BUSINESS ACTIVITY CARRIED O N BY THE ASSESSEE IS LAND DEVELOPMENT AND BUILDING CONSTRUCTION AND IT IS NOT IN THE BUSI NESS OF MAKING INVESTMENT IN SHARES. HE CONTENDED THAT THE ACQUISITION OF SHARES OR CONTROL LING INTEREST IN OTHER GROUP COMPANY THUS IS NOT THE BUSINESS OF THE ASSESSEE AND SINCE THE BUSINESS OF THE SAID GROUP COMPANY IS ENTIRELY DIFFERENT FROM THE BUSINESS OF THE ASSE SSEE COMPANY, THE INVESTMENT MADE IN THE SHARES OF THE SAID COMPANY CANNOT BE BY WAY OF ANY COMMERCIAL EXPEDIENCY. HE 6 ITA 2168-69/MUM/10, M/S VAZIANI LAND DEVELOPERS P. LTD. CONTENDED THAT THE ASSESSEE HAS FAILED TO ESTABLISH ANY LINK BETWEEN ITS BUSINESS AND THE INVESTMENT MADE IN THE SHARES OF OTHER GROUP COMPAN Y AND IN THE ABSENCE OF SUCH LINK, IT CANNOT BE SAID THAT THE UTILIZATION OF BORROWED FUN DS FOR PURCHASING SHARES OF THE SAID COMPANY WAS FOR THE PURPOSE OF THE BUSINESS OF THE ASSESSEE. 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS OBSERVED THAT IN SO FAR AS THE IN TEREST OF ` 7606/- PAID BY THE ASSESSEE TO FEDERAL BANK IS CONCERNED, THE TRIBUNAL HAS ALLOWED SIMILAR INTEREST EXPENDITURE IN ASSESSEES OWN CASE FOR A.Y. 2003-04 VIDE ITS ORDER DTD. 14.10.08. RESPECTFULLY FOLLOWING THE SAID DECISION OF THE TRIBUNAL, WE DELETE THE DI SALLOWANCE OF ` 7606/- MADE BY THE A.O. AND CONFIRMED BY THE LD. CIT(A) ON ACCOUNT OF INTEREST PAID BY THE ASSESSEE TO FEDERAL BANK. 11. AS REGARDS THE OTHER EXPENSES INCURRED BY THE A SSESSEE ON ACCOUNT OF INTEREST PAID TO CORPORATION BANK AMOUNTING TO ` 3,19,644/-, PROCESSING CHARGES AMOUNTING TO ` 63,365/- AND LEGAL FEES AMOUNTING TO ` 6,84,278/-, IT IS OBSERVED THAT THE SAID EXPENSES INCURRED BY THE ASSESSEE IN RELATION TO LOAN OBTAIN ED FROM CORPORATION BANK WERE CLAIMED AS BUSINESS EXPENDITURE. THE ONUS THEREFORE WAS ON THE ASSESSEE TO ESTABLISH THAT THE LOAN AMOUNT BORROWED FROM CORPORATION BANK WAS UTILIZED BY IT FOR THE PURPOSE OF ITS BUSINESS. IT IS OBSERVED IN THIS REGARD THAT THE E NTIRE LOAN AMOUNT BORROWED FROM CORPORATION BANK WAS UTILIZED BY THE ASSESSEE FOR M AKING INVESTMENT IN SHARES OF OTHER GROUP COMPANY M/S VICTORY FLASK CO. PVT. LTD. ADMIT TEDLY, THE ASSESSEE COMPANY IS IN THE BUSINESS OF LAND DEVELOPMENT AND BUILDING CONST RUCTION AND NOT IN THE BUSINESS OF MAKING INVESTMENT IN SHARES. EVEN M/S VICTORY FLAS K CO. P. LTD. IS APPARENTLY CARRYING SOME OTHER BUSINESS WHICH IS ENTIRELY DIFFERENT FRO M THE BUSINESS OF THE ASSESSEE COMPANY. AS RIGHTLY CONTENDED BY THE LEARNED D.R. IN THIS REGARD, THERE IS NOTHING BROUGHT ON RECORD ON BEHALF OF THE ASSESSEE TO ESTA BLISH ANY LINK BETWEEN ITS BUSINESS AND INVESTMENT MADE IN THE SHARES OF M/S VICTORY FLASK CO. P. LTD. AT THE TIME OF HEARING 7 ITA 2168-69/MUM/10, M/S VAZIANI LAND DEVELOPERS P. LTD. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE HAS MADE AN ATTEMPT TO SUPPORT THE ASSESSEES CASE BY SUBMITTING THAT THE INVESTMENT I N SHARES OF M/S VICTORY FLASK CO. PVT. LTD. WAS MADE WITH AN INTENTION TO ACQUIRE CONTROLL ING INTEREST IN THE SAID COMPANY WHICH CONSTITUTES A BUSINESS ACTIVITY. IT IS, HOWEVER, O BSERVED THAT THE ASSESSEE COMPANY WAS IN THE BUSINESS OF LAND DEVELOPMENT AND BUILDING CONST RUCTION ONLY AND NOT IN THE BUSINESS OF ACQUIRING CONTROLLING INTEREST IN OTHER COMPANIE S. ON THE CONTRARY, AS NOTED BY THE AUTHORITIES BELOW IN THEIR RESPECTIVE ORDERS, THE A SSESSEE COMPANY WAS NOT EVEN IN THE BUSINESS OF MAKING INVESTMENT IN SHARES. IN THESE CIRCUMSTANCES, IT CANNOT BE SAID THAT ACQUIRING CONTROLLING INTEREST IN OTHER COMPANIES W AS ALSO ONE OF THE BUSINESS ACTIVITIES CARRIED ON BY THE ASSESSEE DURING THE YEAR UNDER CO NSIDERATION AND UTILIZATION OF BORROWED FUNDS FOR MAKING INVESTMENT IN SHARES OF OTHER COMP ANIES WAS FOR THE PURPOSE OF THE SAID BUSINESS. 12. IN THE CASE OF SRISHTI SECURITIES PVT. LTD. (SU PRA) CITED BY THE LEARNED COUNSEL FOR THE ASSESSEE, THE ASSESSEE WHICH WAS AN INVESTMENT COMPANY HAD UTILIZED THE BORROWED FUNDS FOR ACQUIRING SHARES BY WAY OF INVESTMENT AND KEEPING IN VIEW THE NATURE OF BUSINESS CARRIED ON BY THE ASSESSEE IN THAT CASE, I T WAS HELD BY THE CO-ORDINATE BENCH OF THIS TRIBUNAL THAT INTEREST PAID ON BORROWED FUNDS WHICH WERE UTILIZED FOR MAKING INVESTMENT IN SHARES FOR THE PURPOSE OF ACQUIRING C ONTROLLING INTEREST IN OTHER COMPANIES WAS DEDUCTIBLE U/S 36(1)(III). THE FACTS INVOLVED IN THE PRESENT CASE, HOWEVER, ARE ENTIRELY DIFFERENT IN AS MUCH AS THE ASSESSEE IS NE ITHER AN INVESTMENT COMPANY NOR IT IS IN THE BUSINESS OF MAKING INVESTMENT IN SHARES FOR THE PURPOSE OF ACQUIRING CONTROLLING INTEREST IN OTHER COMPANY. IN THE CASE OF SAMTEL E LECTRON DEVICES LTD. (SUPRA) CITED BY THE LEARNED COUNSEL FOR THE ASSESSEE, BORROWED FUND S WERE UTILIZED BY THE ASSESSEE FOR INVESTMENT IN MAKING SHARES OF SISTER CONCERNS TO W HOM 75% OF ITS SALES WAS MADE. MOREOVER, IT WAS ALSO ESTABLISHED BY THE ASSESSEE T HAT INTERNAL ACCRUALS WERE SUFFICIENT TO COVER THE SAID INVESTMENT AND BORROWED FUNDS WERE A CTUALLY UTILIZED FOR MAKING ADDITION TO FIXED ASSETS. IN THESE FACTS AND CIRCUMSTANCES INVOLVED IN THAT CASE, IT WAS HELD BY THE DELHI BENCH OF ITAT THAT INTEREST PAID ON BORROWED FUNDS WAS ALLOWABLE U/S 36(1)(III). 8 ITA 2168-69/MUM/10, M/S VAZIANI LAND DEVELOPERS P. LTD. THE FACTS INVOLVED IN THE PRESENT CASE, HOWEVER, AR E ENTIRELY DIFFERENT IN AS MUCH AS THE ASSESSEE HAS FAILED TO ESTABLISH THE BUSINESS EXPED IENCY IN UTILIZATION OF FUNDS BORROWED FROM CORPORATION BANK AND IN THE ABSENCE OF SUCH BU SINESS EXPEDIENCY, WE ARE OF THE VIEW THAT INTEREST PAID ON THE SAID BORROWED FUNDS AS WELL AS LEGAL FEES AND PROCESSING CHARGES PAID FOR AVAILING THE SAID BORROWED FUNDS C ANNOT BE CONSIDERED AS WHOLLY AND EXCLUSIVELY INCURRED BY THE ASSESSEE FOR THE PURPOS E OF ITS BUSINESS. IN THAT VIEW OF THE MATTER, WE FIND NO INFIRMITY IN THE IMPUGNED ORDER OF THE LD. CIT(A) CONFIRMING THE DISALLOWANCE MADE BY THE A.O. ON ACCOUNT OF INTERES T PAID TO CORPORATION BANK AS WELL AS LEGAL FEES AND PROCESSING CHARGES PAID IN CONNEC TION WITH AVAILING OF THE SAID LOAN. 13. AS REGARDS THE APPEAL OF THE ASSESSEE FOR A.Y. 2007-08 BEING ITA NO. 2169/MUM/10, IT IS OBSERVED THAT THE SOLITARY ISSUE INVOLVED THEREIN RELATING TO DISALLOWANCE MADE BY THE A.O. AND CONFIRMED BY THE LD. CIT(A) ON ACCOUNT OF ASSESSEES CLAIM FOR DEDUCTION ON ACCOUNT OF INTEREST PAID TO CORPORATION BANK IS SIMILAR TO THE ONE INVOLVED IN A.Y. 2006-07 WHICH HAS ALREADY BEEN DEC IDED BY US IN THE FORGOING PORTION OF THIS ORDER. SINCE ALL THE MATERIAL FACTS RELEVA NT TO THE SAID ISSUE AS INVOLVED IN A.Y. 2007-08 ARE SIMILAR TO THAT OF A.Y. 2006-07,, WE FO LLOW OUR DECISION RENDERED IN A.Y. 2006-07 AND UPHOLD THE IMPUGNED ORDER OF THE LD. CI T(A) CONFIRMING THE DISALLOWANCE MADE BY THE A.O. ON ACCOUNT OF INTEREST PAID TO COR PORATION BANK. 14. IN THE RESULT, APPEAL OF THE ASSESSEE FOR A.Y. 2006-07 IS PARTLY ALLOWED WHEREAS APPEAL OF THE ASSESSEE FOR A.Y. 2007-08 IS DISMISSE D. ORDER PRONOUNCED ON 31 ST DECEMBER, 2010. SD/- SD/- (R.V. EASWAR) (P.M. JAGTAP) PRESIDENT A CCOUNTANT MEMBER MUMBAI, DATED 31 ST DECEMBER , 2010. 9 ITA 2168-69/MUM/10, M/S VAZIANI LAND DEVELOPERS P. LTD. RK COPY TO 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 40 - MUMBAI 4. THE CIT- CENTRAL II, MUMBAI 5. THE DR BENCH, F 6. MASTER FILE // TUE COPY// BY ORDER DY/ASSTT. REGISTRAR ITAT, MUMBAI 10 ITA 2168-69/MUM/10, M/S VAZIANI LAND DEVELOPERS P. LTD. DATE INITIALS 1. DRAFT DICTATED 29.12.10 SR.P.S./P.S. 2. DRAFT PLACED BEFORE AUTHOR 30.12.10 SR.P.S./P.S. 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER. - J.M./A.M. 4.DRAFT DISCUSSED/ APPROVED BY SECOND MEMBER. J.M./A.M. 5. APPROVED DRAFT COMES TO THE SR.P.S./P.S. SR.P.S./P.S. 6. KEPT FOR PRONOUNCEMENT ON SR.P.S./P.S. 7. FILE SENT TO THE BENCH CLERK SR.P.S./P.S. 8. DATE OF WHICH FILE GOES TO THE HEAD CLERK. 9. DATE OF DISPATCH OF ORDER.