Anil Dayalal Oswal, Pune V. Income-tax Officer,

ITA 2218/PUN/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 9233 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 5 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2008-2009
• Appeal Filed On: 26-09-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MUKESH JHA
• Keywords: Capital asset; Business expenditure

Judgement Text

- IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH SMC , PUNE , BEFORE MS. SUSHMA CHOWLA, JM . / ITA NO. 2218 /P U N/201 6 / ASSESS MENT YEAR : 20 0 8 - 09 MR. ANIL DAYALAL OSWAL, SHAH KHANDELWAL JAIN & ASSOCIATES, CHARTERED ACCOUNTANTS, LEVEL 3, BUSINESS BAY, PLOT NO.84, WELLESLEY ROAD, NEAR RTO, PUNE - 411001 . / APPELLANT PAN: A ACPO4729Q VS. THE INCOME TAX OFFICER , WA RD 4 ( 5 ), PUNE . / RESPONDENT / APPELLANT BY : SHRI RAJIV THAKKAR / RESPONDENT BY : S HRI MUKESH JHA / DATE OF HEARING : 15 . 0 2 .201 8 / DATE OF PRONOUNCEMENT : 28 . 0 2 .201 8 / ORDER PER SUSHMA CHOWLA, J M : TH E APPEAL FILED BY THE ASSESSEE IS AGAINST THE ORDER OF CIT (A) , PUNE - 5 , DATED 2 9 . 0 6 .20 1 6 RELATING TO ASSESSMENT YEAR 20 0 8 - 09 AGAINST ORDER PASSED UNDER SECTION 1 4 3(3) OF THE INCOME - TAX ACT , 1961 ( IN SHORT THE ACT) . ITA NO. 2218 /P U N/20 1 6 MR. ANIL DAYALAL OSWAL 2 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 1. ON FACTS AND CIRCUMSTANCES PREVAILING IN THE CASE AND IN LAW, THE LD. CIT(A) WAS NOT JUSTIFIED IN THE SUSTAINING THE ADDITION OF RS. 1,54,521/ - MADE BY THE AO ON ACCOUNT OF INTEREST EXPENDITURE CLAIMED AS DEDUCTION U/S 57(III) OF I.T. ACT. THE ADDITION MADE BY THE AO AND THAT SUSTAINED BY THE 1 ST APPELLATE AUTHORITY BE DELETED. THE APPELLANT BE GRANTED JUST AND PROPER RELIEF IN THIS RESPECT. 2. WITHOUT PREJUDICE TO THE GROUND 1, ON FACTS & IN CIRCUMSTANCES PREVAILING IN THE CASE AND AS PER THE PROVISIONS OF LAW, IT BE HELD THAT THE INTEREST EXPENDITURE INCURRED FOR FINANCING OF HOUSING PROJECT AS PER MOU BY THE APPELLANT BE ALLOWED AS BUSINESS EXPENDITURE. 3. THE ASSES SEE IN THE PRESENT APPEAL IS AGGRIEVED BY THE ADDITION OF 1,54,521/ - MADE ON ACCOUNT OF DISALLOWANCE OF INTEREST EXPENDITURE CLAIMED AS DEDUCTION UNDER SECTION 57(III) OF THE ACT. 4. BRIEFLY, IN THE FACTS OF THE CASE, THE ASSESSING OFFICER ON VERIFICATION NOTED THAT THE ASSESSEE HAD MADE INVESTMENT IN PURCHASE OF PLOT AT 1,20,50,000/ - . THE SOURCE OF THE SAME WAS CLAIMED TO BE LOAN AVAILED FROM M/S. SA TYAM CONSTRUCTION AND WITHDRAWAL FROM THE CAPITAL ACCOUNT OF THE ASSESSEE. THE ASSESSEE HAD PAID INTEREST OF 1,54,521/ - ON LOAN OF 50 LAKHS FROM M/S. K.D. CONSTRUCTION. THE ASSESSING OFFICER ALSO NOTED THAT THE SAID INTEREST WAS ADJUSTED AGAINST INTEREST RECEIVED OF 9,10,170/ - DECLARED AS INCOME FROM OTHER SOURCES. THE ASSESSING OFFICER OBSERVED THAT INTEREST PAID TO M/S. SATYAM CONSTRUCTION ON LOAN OF 50 LAKHS WAS NOT ALLOWABLE AS THE SAID LOAN WAS UTILIZED FOR PURCHASE OF CAPITAL ASSET. THE ASSESSING OFFICER SHOW CAUSED THE ASSESSEE IN THIS REGARD. ON PERUSAL OF BALANCE SHEET, IT TRANSPIRED THAT THE ASSESSEE HAD MADE AN INVESTMENT OF 2.70 CRORES, OUT OF ITA NO. 2218 /P U N/20 1 6 MR. ANIL DAYALAL OSWAL 3 WHICH, INVESTMENTS IN IMMOVABLE PROPERTIES WERE AT 2.16 CRORES. THE ASSESSEE IN RESPONSE THERETO, FURNISHED REVISED BALANCE SHEET REGROUPING THE INVESTMENT AT 54,09,701/ - AND 3.89 CRORES AS CURRENT ASSETS AS AGAINST EARLIER BALANCE SHEET IN WHICH INVESTMENTS WERE SHOWN AT 2.70 CRORES AND CURRENT ASSETS AT 1.73 CRORES. THE ASSESSING OFFICER HELD THE SAID BALANCE SHEET TO BE AN AFTERTHOUGHT AND DISALLOWED INTEREST OF 1,54,521/ - . 5. BEFORE THE CIT(A), THE ASSESSEE FURNISHED MEMORANDUM OF UNDERSTANDING (MOU) FOR THE PROPOSITION THAT HE HAD INCURRED INTEREST EXPENDITURE WITH AN INTENTION TO EARN INCOME FROM ADVANCES GIVEN TO MR. ABHAY N. BHOSALE AND MR. NITIN PATIL. THE SAID INTEREST EXPENDITURE WAS THUS, CLAIMED AS DEDUCTION UNDER SECTION 57(III) OF THE ACT. THE CIT(A) ON PERUSAL OF MOU OBSERVED THAT THE INTENTION OF PARTIES WAS TO EARN COMMERCIAL PROFITS AND NOT INTEREST INCOME. FURTHER, REFERENCE WAS MADE TO MOU, WHEREIN THE ASSESSEE WAS DESCRIBED AS PURCHASER AND THE OTHER PARTY AS VE NDOR. REFERENCE WAS ALSO MADE TO OTHER CLAUSE OF MOU AND THE CIT(A) HELD THAT THE ASSESSEE WAS NOT INDULGING IN TRANSACTION TO EARN INTEREST AND HENCE, TRANSACTION WAS HELD TO BE AN ADVENTURE IN THE NATURE OF TRADE AND COMMERCE AND THE LOAN HAVING BEEN UT ILIZED FOR PURCHASE OF CAPITAL ASSET , THE INTEREST HAD TO BE CAPITALIZED TO THE COST OF ASSET. 6. THE ASSESSEE IS IN APPEAL AGAINST THE ORDER OF CIT(A). 7. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT MOU WAS ENTERED INTO IN MA RATHI LANGUAGE, COPY OF WHICH IS PLACED AT PAGES 6 TO 11 OF PAPER BOOK. HE FURTHER POINTED OUT THAT AN ENGLISH TRANSLATION OF MOU ITA NO. 2218 /P U N/20 1 6 MR. ANIL DAYALAL OSWAL 4 WAS FILED BEFORE THE ASSESSING OFFICER AND CIT(A), WHICH IS PLACED AT PAGES 12 TO 18 OF PAPER BOOK. HOWEVER, A MISTAKE HAD C REPT IN THE SAID AN ENGLISH TRANSLATION OF MOU WHICH WAS RECTIFIED LATER ON AND THE COPY OF RECTIFIED ENGLISH TRANSLATION OF MOU IS PLACED AT PAGES 19 TO 24 OF PAPER BOOK. ATTENTION WAS FIRST DRAWN TO CLAUSES OF ENGLISH TRANSLATION OF MOU AT PAGE 12 OF PA PER BOOK, WHEREIN THE PARTIES WERE MENTIONED AS VENDORS AND PURCHASERS AND THEN TO PAGE 19 OF PAPER BOOK, WHEREIN THE PARTIES WERE MENTIONED AS FIRST PARTY AND SECOND PARTY TO THE MOU FOR CARRYING ON SOME DEVELOPMENT. HE THUS, STATED THAT INVESTMENT WAS I NCORRECTLY SHOWN AS PURCHASE OF AN ASSET, WHEREAS IT WAS AN INVESTMENT IN BUSINESS AND INTEREST EXPENDITURE INCURRED ON THE SAID LOAN WAS TO BE ALLOWED AS BUSINESS EXPENDITURE. 8. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE ON THE OTHER HAND, POINTED OUT THAT EARLIER TRANSACTION WHICH WAS GIVEN BY ASSESSEE AND ONCE THE TERMS OF SAID MOU HAVE BEEN INTERPRETED AND APPLIED, THEN THERE IS NO MERIT IN REVISED TRANSLATION OF MARATHI DOCUMENT BEING FILED BY THE ASSESSEE BEFORE THE TRIBUNAL. 9. ON PER USAL OF RECORD AND AFTER HEARING BOTH THE LEARNED AUTHORIZED REPRESENTATIVES, THE ISSUE WHICH ARISES IN THE PRESENT APPEAL IS LINKED TO A DOCUMENT WHICH WAS EXECUTED BETWEEN THE PARTIES IN MARATHI. AS PER THE SAID DOCUMENT IN MARATHI BEFORE THE ASSESSING OFFICER AND CIT(A), THE ASSESSEE HA D FILED AN ENGLISH TRANSLATION OF SAID MARATHI DOCUMENT. HOWEVER, LATER ON REVISED MOU WAS FILED, UNDER WHICH THE ASSESSEE CLAIMS THAT ITS RIGHTS WERE FOR THE DEVELOPMENT OF PROPERTY AND NOT FOR PURCHASE OF PROPERTY. TH E CASE OF REVENUE ON THE OTHER HAND, WAS THAT THE LOAN WHICH HAS BEEN RAISED AS PER ITA NO. 2218 /P U N/20 1 6 MR. ANIL DAYALAL OSWAL 5 MOU HAS BEEN UTILIZED BY THE ASSESSEE FOR PURCHASE OF AN ASSET AND HENCE, INTEREST EXPENDITURE INCURRED WA S TO BE ADDED TO THE COST OF ASSET SO INTENDED TO BE PURCHASED. HOWEVER, THE CASE OF ASSESSEE IS THAT IT HAD ENTERED INTO AN UNDERSTANDING TO DEVELOP THE PLOT AND HENCE, LOAN AMOUNT WAS ADVANCED TO THE PARTIES UNDER MOU. THE SAID ADVANCEMENT OF LOAN WAS FOR THE PURPOSE OF CARRYING ON OF BUSINESS AND CONSEQUENTLY, INTEREST EXPENDITURE WAS ALLOWABLE. 10. ON PERUSAL OF DOCUMENT, THE FIRST STEP WHICH NEEDS TO BE APPLIED IS THE TRUE AND CORRECT TRANSLATION OF DOCUMENT EXECUTED IN MARATHI. THE PARTIES HAD COM E TO AN UNDERSTANDING AND RECORDED THE SAME IN WRITING, WHICH IS DULY AVAILABLE ON RECORD. THE FIRST ENGLISH TRANSLATION OF SAID DOCUMENT TALKED ABOUT VENDOR AND VENDEE I.E. TRANSACTION BETWEEN THE TWO PARTIES BEING OF SELLER AND PURCHASER OF PROPERTY . H OWEVER, IN THE SECOND DOCUMENT, THE INTENTION OF PARTIES WAS TO ENTER INTO MOU FOR THE DEVELOPMENT OF PROPERTY. IF IT IS FOR THE DEVELOPMENT OF PROPERTY, THEN IT IS BUSINESS TRANSACTION AND ANY LOAN TAKEN BY THE ASSESSEE, WHICH IN TURN, IS UTILIZED FOR TH E SAID PURPOSE, THEN INTEREST EXPENDITURE IS ALLOWABLE AS BUSINESS EXPENDITURE. HOWEVER, IN CASE THE AMOUNT HAS BEEN UTILIZED FOR MAKING CAPITAL INVESTMENT, THEN INTEREST COST IS TO BE ATTRIBUTED TO THE COST OF ASSET AND NOT TO BE ALLOWED AS DEDUCTION. B UT , THIS NEEDS VERIFICATION AT THE LEVEL OF ASSESSING OFFICER. ACCORDINGLY, THE ISSUE IS REMITTED BACK TO THE FILE OF ASSESSING OFFICER TO DECIDE THE SAME AFTER GOING THROUGH THE CLAUSES OF RELEVANT DOCUMENT. THE ASSESSEE SHALL PRODUCE THE DOCUMENT AND I TS CERTIFIED ENGLISH TRANSLATION BEFORE THE ASSESSING OFFICER FOR VERIFICATION, WHO IN TURN, SHALL DECIDE THE ISSUE IN LINE WITH ABOVE DIRECTIONS . ITA NO. 2218 /P U N/20 1 6 MR. ANIL DAYALAL OSWAL 6 THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE THUS, ALLOWED FOR STATISTICAL PURPOSES. 1 1 . IN THE RESULT, APPEAL OF ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THIS 28 TH DAY OF FEBRUARY , 201 8 . SD/ - (SUSHMA CHOWLA) / JUDICIAL MEMBER / PUNE ; DATED : 28 TH FEBRUARY , 201 8 . GCVSR / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT ; 2. / THE RE SPONDENT; 3. ( ) / THE CIT(A) , PUNE - 5, PUNE ; 4. THE PR. CIT , PUNE - 4, PUNE ; 5. 6. , , , - / DR SMC , ITAT, PUNE; / GUARD FILE . / BY ORDER , // TRUE COPY // / SR. PRIVATE SECRETARY , / ITAT, PUNE