Aditya Developers, Pune V. ACIT, Range-3, Pune

ITA 2168/PUN/2012

• Counselvise Citation: 216824514 RSA 2012
• Duration Of Justice: 1 year(s) 4 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-03-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 02-11-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P L PATHADE
• Keywords: Business expenditure; Rule of consistency

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI R.S. PADVEKAR, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO. 2168/PN/2012 (ASSESSMENT YEAR 2008-09) ADITYA DEVELOPERS, 619, MAYANAGARI, BAJIRAO ROAD, SADASHIV PETH, PUNE-411030 .. APPELLANT PAN NO.AACFA0856C VS. ADDL.CIT, RANGE-3, PUNE .. RESPONDENT ASSESSEE BY : SHRI SUHAS P. BORA REVENUE BY : SHRI P.L. PATHADE DATE OF HEARING : 20-03-2014 DATE OF PRONOUNCEMENT : 21-03-2014 ORDER PER R.K. PANDA, AM : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 06-07-2012 OF THE CIT(A)-II, PUNE RELATING TO ASSES SMENT YEAR 2008-09. 2. ALTHOUGH A NUMBER OF GROUNDS HAVE BEEN TAKEN BY THE ASSESSEE THEY ALL RELATE TO THE DISALLOWANCE OF INTEREST EXP ENDITURE OF RS.3,87,696/- BY THE ASSESSING OFFICER TREATING THE SAME AS NON-BUSINESS EXPENDITURE WHICH HAS BEEN UPHELD BY THE CIT(A). 2.1 FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSES SEE IS A FIRM ENGAGED IN THE BUSINESS OF CONSTRUCTION UNDER THE NAME AND STY LE OF M/S. ADITYA DEVELOPERS. DURING THE COURSE OF ASSESSMENT PROCEE DINGS THE ASSESSING OFFICER OBSERVED FROM THE PROFIT AND LOSS ACCOUNT T HAT THE ASSESSEE HAS DEBITED AN AMOUNT OF RS.3,87,696/- TOWARDS INTEREST PAID. HE, THEREFORE, 2 ASKED THE ASSESSEE TO EXPLAIN AS TO WHY THE INTERES T PAID BE NOT TREATED AS BUSINESS EXPENDITURE IN THE DEVELOPMENT AND CONSTRU CTION BUSINESS OF THE ASSESSEE. 2.2 IN ITS REPLY, THE ASSESSEE SUBMITTED THAT THE S AID INTEREST IS DEBITED TO THE PROFIT AND LOSS ACCOUNT AND CLAIMED AS DEDUC TION SINCE THE MONEY HAS BEEN UTILISED FOR THE PURPOSE OF EARNING THE IN TEREST INCOME. HOWEVER, THE ASSESSING OFFICER WAS NOT SATISFIED WI TH THE EXPLANATION GIVEN BY THE ASSESSEE. HE OBSERVED FROM THE INTERE ST PAID ACCOUNT SUBMITTED BY THE ASSESSEE THAT THE INTEREST PAYMENT HAS BEEN MADE TO THE PRIVATE PARTIES WHO WERE FRIENDS AND RELATIVES OF THE PARTNERS OF THE ASSESSEE FIRM. FURTHER, THE NEXUS FOR UTILISATION OF FUNDS BORROWED FROM THESE PARTIES HAS NOT BEEN PROVED TO SHOW THAT THE SAME HAVE BEEN USED EXCLUSIVELY FOR THE PURPOSE OF EARNING INTEREST INC OME. REJECTING THE VARIOUS EXPLANATIONS GIVEN BY THE ASSESSEE THE ASSE SSING OFFICER TREATED THE INTEREST AMOUNT DEBITED TO THE PROFIT AND LOSS ACCOUNT OF RS.3,87,696/- AS NON-BUSINESS EXPENDITURE. HE AC CORDINGLY MADE ADDITION OF THE SAID AMOUNT TO THE TOTAL INCOME OF THE ASSESSEE WHICH WAS UPHELD BY THE CIT(A). 2.3 AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASS ESSEE IS IN APPEAL BEFORE US. 3. THE LD. COUNSEL FOR THE ASSESSEE STRONGLY CHALLE NGED THE ORDER OF THE CIT(A) ON THIS ISSUE. HE SUBMITTED THAT THE AS SESSEE IS A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF CONSTRUCTION, TRANS PORT, RENTING OF PROPERTY AND OTHER ALLIED BUSINESS. IT HAS DIFFERE NT DIVISIONS SUCH AS (A) KKN DIVISION (FUNDING DIVISION), (B) RENTAL DIVISIO N (C) TRANSPORT 3 DIVISION, (D) BALEWADI DIVISION (E) COMMERIAL DIVIS ION (F) KKT DIVISION (F) SRR DIVISION. THE ASSESSEE FIRM MAINT AINS BOOKS OF ACCOUNT FOR EACH DIVISION SEPARATELY AND ALSO PREPA RES PROFIT AND LOSS ACCOUNT FOR EACH DIVISION AND GETS ITS ACCOUNTS AUD ITED U/S.44AB. REFERRING TO THE CHART FILED AT PARA 3 OF THE WRITT EN SUBMISSION (FACTS SHEET) HE SUBMITTED THAT THE DEPARTMENT IN THE PAST AND SUBSEQUENT YEARS HAS ACCEPTED THE INTEREST INCOME AS INCOME FROM BU SINESS IN SCRUTINY ASSESSMENT EXCEPT FOR A.Y. 2011-12 AND 2012-13 WHIC H WAS ACCEPTED U/S.143(1), THE DETAILS OF WHICH ARE AS UNDER : HE ACCORDINGLY SUBMITTED THAT FOLLOWING THE RULE OF CONSISTENCY ITSELF THE ASSESSING OFFICER SHOULD NOT HAVE DISALLOWED THE IN TEREST. FOR THIS PROPOSITION, HE RELIED ON THE DECISIONS OF THE HON BLE SUPREME COURT IN THE CASE OF RADHASOAMI SATSANG SAOMI BAGH VS. CIT R EPORTED IN 193 ITR 321 AND IN THE CASE OF BURGER PAINTS INDIA LTD. VS. CIT REPORTED IN 266 ITR 99. 4. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAND STRONGLY SUPPORTED THE ORDER OF THE CIT(A). A.Y. NET INTEREST INCOME PAGE NUMBER OF PAPER BOOK 2004-05 1871142.16 149 TO 179 2005-06 218651.00 142 TO 155 2006-07 627846.00 135 TO 138 2007-08 12039278.15 126 TO 129 2008-09 46638004.56 2009-10 86744297.22 103 TO 107 2010-11 22795469.12 95 TO 98 2011-12 2242161.48 88.143(1) 2012-13 10552042.88 88.143(1) 4 5. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAV E ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. THE ONLY DISPUT E TO BE ADJUDICATED IN THIS APPEAL IS REGARDING THE TREATMENT OF THE INTER EST EXPENDITURE AS BUSINESS EXPENDITURE AS CLAIMED BY THE ASSESSEE O R NON-BUSINESS EXPENDITURE AS HELD BY THE ASSESSING OFFICER AND U PHELD BY THE CIT(A). FROM THE DETAILS FURNISHED BY THE ASSESSEE, WE FIND THE ASSESSEE MAINTAINS SEPARATE BOOKS OF ACCOUNT FOR EACH DIVISI ON AND PREPARES PROFIT AND LOSS ACCOUNT AND BALANCE SHEET FOR EACH DIVISIO N. THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE DEPARTMEN T IN THE PAST FOR A.YRS. 2004-05 TO 2007-08 AND A.YRS. 2009-10 TO 201 2-13 HAS ACCEPTED THE INCOME FROM KKN DIVISION (INTEREST) AND NET INT EREST HAS BEEN TAXED UNDER THE HEAD INCOME FROM BUSINESS AND PROFESSION COULD NOT BE CONTROVERTED BY THE LD. DEPARTMENTAL REPRESENTATIVE . THEREFORE, WE FIND MERIT IN THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT FOLLOWING THE RULE OF CONSISTENCY ALONE THE INTERES T DEBITED TO THE PROFIT AND LOSS ACCOUNT SHOULD BE ALLOWED AS BUSINESS EXPE NDITURE. 5.1 THE HONBLE SUPREME COURT IN THE CASE OF RADHAS OAMI SATSANG SAOMI BAGH (SUPRA) HAS HELD AS UNDER : WE ARE AWARE OF THE FACT THAT, STRICTLY SPEAKING, RE S JUDICATA DOES NOT APPLY TO INCOME-TAX PROCEEDINGS. AGAIN, EACH ASSESSMENT YEAR BEING A UNIT, WHAT IS DECIDED IN ONE YEAR MAY NOT APPLY IN T HE FOLLOWING YEAR BUT WHERE A FUNDAMENTAL ASPECT PERMEATING THROUGH THE DI FFERENT ASSESSMENT YEARS HAS BEEN FOUND AS A FACT ONE WAY OR THE OTHER AND PARTIES HAVE ALLOWED THAT POSITION TO BE SUSTAINED BY N OT CHALLENGING THE ORDER, IT WOULD NOT BE AT ALL APPROPRIATE TO ALLOW THE POSITION TO BE CHANGED IN A SUBSEQUENT YEAR. 5 5.2 SINCE THE DEPARTMENT WAS CONSISTENTLY ACCEPTING THE INTEREST INCOME OF THE KKN DIVISION AS INCOME FROM BUSINESS , THEREFORE, WE DO NOT FIND ANY REASON ON THE PART OF THE ASSESSING OFFICER TO DISALLOW THE INTEREST EXPENDITURE OF RS.3,87,696/- FOR THE I MPUGNED ASSESSMENT YEAR TREATING THE SAME AS NON-BUSINESS EXPENDITURE . IN THIS VIEW OF THE MATTER, WE SET-ASIDE THE ORDER OF THE CIT(A) AND DI RECT THE ASSESSING OFFICER TO DELETE THE ADDITION. 6. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 21-03-2014. SD/- SD/- (R.S. PADVEKAR) (R.K. PAN DA) JUDICIAL MEMBER ACCOUN TANT MEMBER PUNE DATED: 21 ST MARCH, 2014 SATISH COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. DEPARTMENT 3. CIT(A)-II, PUNE 4 CIT-II, PUNE 5. THE D.R, A PUNE BENCH 6. GUARD FILE BY ORDER // TRUE COPY // SENIOR PRIVATE SECRETARY ITAT, PUNE BENCHES, PUNE