Vasantha Subramanian Hospitals (P) Ltd., Chennai V. ACIT, Corporate Circle 3(2), Chennai

ITA 2312/CHNY/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 7438 (ITAT-CHENNAI)
• Duration Of Justice: 9 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-07-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2013-2014
• Appeal Filed On: 21-09-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N GOPI KRISHNA
• Assessee Lawyers: M KARUNAKARAN
• Keywords: Revenue expenditure; Capital expenditure

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI . . . , !' .$%$&, ( ') BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER ./ ITA NO.2312/CHNY/2017 & +& / ASSESSMENT YEAR : 2013-14 M/S VASANTHA SUBRAMANIAN HOSPITALS (P) LTD., 13/7, EAST SPUR TANK ROAD, CHENNAI - 600 031. PAN : AACCV 2462 L V. THE ASSISTANT COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 3(2), CHENNAI - 600 034. (-./ APPELLANT) (/0-./ RESPONDENT) -. 1 2 / APPELLANT BY : SHRI M. KARUNAKARAN, ADVOCATE /0-. 1 2 / RESPONDENT BY : SHRI N. GOPIKRISHNA, JCIT 3 1 4( / DATE OF HEARING : 21.06.2018 56+ 1 4( / DATE OF PRONOUNCEMENT : 03.07.2018 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER: THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) -11, CHENNAI, DATED 29.06.2017 AND PERTAINS TO ASSESSMENT YEAR 2013-14. 2. THE ONLY ISSUE ARISES FOR CONSIDERATION IS DISAL LOWANCE OF INTEREST PAYMENT OF 35,47,273/-. 2 I.T.A. NO.2312/CHNY/17 3. SHRI M. KARUNAKARAN, THE LD.COUNSEL FOR THE ASSE SSEE, SUBMITTED THAT THE ASSESSEE IS RUNNING A HOSPITAL. DURING TH E YEAR UNDER CONSIDERATION, ACCORDING TO THE LD. COUNSEL, THE AS SESSEE BORROWED 7 CRORES FROM HDFC BANK FOR CONSTRUCTION OF ANOTHER H OSPITAL AT HALLS ROAD, CHENNAI. ON THIS LOAN, THE ASSESSEE HAS PAID INTEREST OF 35,47,273/- DURING THE YEAR UNDER CONSIDERATION AND CLAIMED THE SAME AS REVENUE EXPENDITURE. ACCORDING TO THE LD. COU NSEL, THE ASSESSING OFFICER FOUND THAT THE PROJECT AT HALLS ROAD WAS NO T COMMENCED DURING THE YEAR UNDER CONSIDERATION, THEREFORE, HE DISALLO WED THE CLAIM OF THE ASSESSEE. THE CIT(APPEALS) ALSO CONFIRMED THE DISA LLOWANCE ON THE GROUND THAT THE EXPENDITURE ON PAYMENT OF INTEREST IS CAPITAL IN NATURE. ACCORDING TO THE LD. COUNSEL, THE ASSESSEE IS IN TH E BUSINESS OF RUNNING HOSPITAL. TO EXPAND ITS EXISTING BUSINESS, A LOAN WAS BORROWED FROM HDFC BANK AND INTEREST WAS PAID AS BUSINESS EXPENDI TURE. WHEN THE LOAN WAS BORROWED FOR EXPANSION OF EXISTING BUSINES S, ACCORDING TO THE LD. COUNSEL, IT CANNOT BE SAID THAT THE INTEREST IS A CAPITAL EXPENDITURE. 4. WE HEARD SHRI N. GOPIKRISHNA, THE LD. DEPARTMENT AL REPRESENTATIVE, ALSO. ACCORDING TO THE LD. D.R., T HE PROJECT AT HALLS ROAD, CHENNAI IS A NEW PROJECT, THEREFORE, UNLESS I T COMMENCES ITS OPERATION, THE EXPENDITURE CANNOT BE ALLOWED. MORE OVER, IT WAS ALSO NOT ESTABLISHED WHETHER THE BORROWED FUNDS WERE INVESTE D IN THE HALLS ROAD 3 I.T.A. NO.2312/CHNY/17 PROJECT. THEREFORE, ACCORDING TO THE LD. D.R., THE CIT(APPEALS) HAS RIGHTLY CONFIRMED THE ORDER OF THE ASSESSING OFFICE R. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE ASSESSING OFFICER AT PARA 4 OF HIS ORDER HAS FOUND THAT THE ASSESSEE BORROWED LOAN OF 7 CRORES FROM HDFC BANK FOR CONSTRUCTION OF ANOTHER H OSPITAL BUILDING AT HALLS ROAD, CHENNAI AND PAID INTEREST ON THAT LOAN TO THE EXTENT OF 35,47,273/-. THEREFORE, THE CONTENTION OF THE LD. D.R. THAT THE ASSESSEE HAS NOT ESTABLISHED THE INVESTMENT OF LOAN FOR CONS TRUCTION OF BUILDING AT HALLS ROAD IS NOT CORRECT. IN FACT, THE ASSESSING OFFICER HIMSELF ADMITTED THAT THE LOAN WAS FOR THE PURPOSE OF CONSTRUCTION O F ANOTHER HOSPITAL AT HALLS ROAD. MOREOVER, THE ASSESSEE IS IN THE BUSIN ESS OF HOSPITAL. THEREFORE, THE CONSTRUCTION OF ANOTHER HOSPITAL BUI LDING IS ONLY AN EXTENSION OF EXISTING BUSINESS. HENCE, THE LOAN BO RROWED FROM HDFC BANK IS FOR THE PURPOSE OF BUSINESS, THEREFORE, THE EXPENDITURE OF PAYMENT OF INTEREST TO THE EXTENT OF 35,47,273/- IS ONLY A REVENUE EXPENDITURE. HENCE, WE ARE UNABLE TO UPHOLD THE OR DERS OF BOTH THE AUTHORITIES BELOW. ACCORDINGLY, ORDERS OF BOTH THE AUTHORITIES BELOW ARE SET ASIDE AND THE ADDITION MADE BY THE ASSESSING OF FICER TO THE EXTENT OF 35,47,273/- IS DELETED. 6. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. 4 I.T.A. NO.2312/CHNY/17 ORDER PRONOUNCED ON 3 RD JULY, 2018 AT CHENNAI. SD/- SD/- ( !' .$%$&) ( . . . ) (ABRAHAM P. GEORGE) (N.R.S. GANES AN) ( / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 8 /DATED, THE 3 RD JULY, 2018. KRI. 1 /49: ;:+4 /COPY TO: 1. -. /APPELLANT 2. /0-. /RESPONDENT 3. 3 <4 () /CIT(A)-11, CHENNAI-34 4. PRINCIPAL CIT-3, CHENNAI 5. := /4 /DR 6. >& ? /GF.