Shri Purshottam B. Pitroda, Ahmedabad V. The ACIT, Circle-12, Ahmedabad

ITA 2376/AHD/2015

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 5621 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 1 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-10-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2010-2011
• Appeal Filed On: 11-08-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: L P JAIN
• Assessee Lawyers: A C SHAH
• Keywords: Capital asset; Business expenditure; Cost of acquisition; Set aside
• Section: 143(3); 40(a)(ia); 194C; 201; 64; 15

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH BEFORE: SHR I RAJPAL YADAV , JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER PURSHOTTAM B. PITRODA, PROP. M/S. J.P. FABRICATORS OPP. AMBALAL EST A TE, NR. CADILA BARI DGE, GHODASAR, AHMEDABAD PAN: ABWPM6274B (APPELLANT) VS THE ACIT , CIRCLE - 12 , AHMEDABAD (RESPONDENT) REVENUE BY : S H RI L.P. JAIN , SR. D . R. ASSESSEE BY: SHRI A.C. SHAH , A.R. DATE OF HEARING : 16 - 07 - 2 019 DATE OF PRONOUNCEMENT : 01 - 10 - 2 019 / ORDER P ER : AMARJIT SINGH, ACCOUNT ANT MEMBER : - THIS ASSESSEE S APPEAL FOR A.Y. 2010 - 11 , ARI SES FROM ORDER OF THE CIT(A) - 6, DATED 06 - 01 - 2 015 , IN PROCEEDINGS UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT . 2. THE ASSESSEE HAS FILED RETURN OF INCOME ON 25 TH SEP, 2010 DECLARING TOTAL INCOME AT RS. 138810/ - . THE CASE WAS SUBJECT TO SCRUTINY. ASSESSMENT ORDER U/S. 143(3) OF THE ACT WAS PASSED ON 28 TH FEB, 2013. IN THE INSTANT I T A NO . 2376 / A HD/20 15 A SS ESSMENT YEAR 2010 - 11 I.T.A NO. 2 3 76 /AHD/20 15 A.Y. 201 0 - 11 PAGE NO PURSHOTTAM B. PITRODA VS. ACIT 2 APPEAL, THE ASSESSEE HAS CONTESTED THE FOLLOWING ADDITIONS MADE BY THE ASSESSING OFFICER AND SUSTAINED BY THE LD. CIT(A). (I) DISALLOWANCE OF INTEREST OF RS. 17 , 35 , 912/ - U/S. 36(1)(III) (II) DISALLOWANCE OF RS. 1 , 01 , 574/ - U/S. 40(A)(IA) OF THE ACT (III) DISALLOWANCES OF INTEREST OF RS. 1 , 25 , 93 ,747/ - PAID FOR ACQUISITION OF LAND (IV) ADDITION AS I NCOME FROM SELF - OCCUPIED PROPERTY OF RS. 62 , 307/ - (V) DISALLOWANCE OF REPAIR EXPENDITURE OF RS. 6,62,345/ - THE FACT PERTAINING TO ALL THE ADDITIONS MADE BY THE ASSESSING OFFICER ARE DISCUSSED AS UNDER: - (I) DISALLOWANCE OF INTEREST OF RS. 17 , 35 , 912/ - U/S . 36(1)(III) 3. DURING THE COURSE OF ASSESSMENT, T HE ASSESSING OFFICER OBSERVED THAT AS S ESSEE HAS ADVANCED RS. 80 , 89 , 066/ - INTEREST FREE AND FURT HER ADVANCED RS . 63 , 76 , 877/ - AS INTEREST FREE FUND FOR PURCHASE OF LAND THER EFORE THE ASSESSING OFFICER AS K ED THE ASSESSEE TO EXPLAIN WHY AMOUNT OF RS. 17 , 35 , 912/ - @ 12% PER ANNUM ON AMOUNT OF RS. 1 , 44 , 65 , 937/ - SHOULD NOT BE ADDED U/S. 36(1)(III) OF THE ACT. THE ASSESSEE EXPLAINED THAT MAJOR PART OF THE LOAN ADVANCED WAS BROUGHT FORWARD FROM THE EARLIER YEAR AND THERE WAS SUFFICIENT AMOUNT OF INTEREST FREE FUNDS AND PROFIT GENERATED DURING THE YEAR AND NO INTEREST BEARING FUND HAS BEEN USED FOR THE SAID ADVANCES. THE A SSESSING OFFICER HAS NOT ACCEPTED THE EXPLANATION OF THE ASSESSEE STATING THAT THE ASSESSEE HAS NOT DERIVED ANY BENEFIT OUT OF THE INTEREST FREE ADVANCES, T HEREFORE, THE ASSESSING OFFI CER HAS ADDED THE DEEMED INTEREST @ 12% OF THE ADVANCES TO THE AMOUNT OF RS. 17 , 35 , 912/ - TO THE TOTAL INCOME OF THE ASSESSEE. THE ASSESSEE HAS FILED APPEAL BEFOR E THE LD. CIT(A). T HE LD. CIT(A) HAS PARTLY ALLOWED T HE APPEAL I.T.A NO. 2 3 76 /AHD/20 15 A.Y. 201 0 - 11 PAGE NO PURSHOTTAM B. PITRODA VS. ACIT 3 OF THE ASSESSEE AFTER FOLLOWING THE DECISION OF LD. CIT(A) FOR EARLIER ASSESSMENT YEARS. 4. WE HAVE HEARD THE RIVAL CONTENTION AND PERUSED THE MATERIAL ON RECORD . THE ASSESSEE HAS EXPLA INED THAT OUT OF TOTAL ADVANCE OF RS. 80,89,700/ - THERE WAS OPENING BALANCE OF RS. 56,89,000/ - AND DURING THE YEAR FURTHER ADVANCE OF RS. 24 , 00 , 000 WAS PROVIDE D . IN RESPECT OF OTHER INTEREST FREE ADVANCE OF R S. 63,9 6 , 877/ - THE ASSESSEE HAD ALSO EXPLAINED THAT THERE WAS OPENING BALANCE OF R S. 43,76,877/ - AND FURTHER ADVANCE OF ONLY RS. 20,00 , 000/ - WAS PROVIDED DURING THE YEAR. THE ASS ESSSEE HAS ALSO SUBMITTED THAT HE WAS HAVING TOTAL INTEREST FREE FUND TO THE AMOUNT OF R S. 44554690/ - AND ALSO THERE WAS P ROFIT OF RS. 84 , 27 , 511/ - GENERATED DURING THE YEAR . THE ASSESSING OFFICER HAS REPORTED THESE UNDISPUTED MATERIAL FACT S AT PAGE 2 TO 4 OF THE ASSESSMENT ORDER. THE ASSESSEE HAS ALSO SUBMITTED DETAILS BEF O R E THE ASSESSING OFFICER THAT FOR ASSETS LIKE P LANT AND MACHINERY VEHICLES ETC. HE HAS OBTAINED SECURED LOAN FROM THE BANK AND FINANCIAL INSTITUTIONS. THE LD. COUNSEL HAS ALSO CONTENDED THAT T HE ITAT AHME D AB A D FOR ASSESSMENT YEAR 2008 - 09 VIDE ITA NO . 80/AHD/2012 DATED 31 - 07 - 2017 IN THE CASE OF THE ASS ESSEE ON THE SIM ILAR ISSUE ON THE IDENTICAL FACTS HAS DECIDED THE MATER IN FAVOUR OF THE ASSESSEE. THE LD. COUNSEL HAS PLACED COPY OF THE REFERRED ORDER AT PAGE NO. 36 TO 39 OF THE PAPER BOOK. WITH THE ASSISTANCE OF THE LD. REPRESENTATIVES, WE HAVE PERUSED THE ORDER OF THE ITAT AS CITED ABOVE AND THE RELEVANT PART IS REPRODUCED AS UNDER: - 10. AS EXHIBITED AT PAGE 61 OF THE PAPER BOOK, THUS, IT CAN BE SEEN THAT IN ADDITION TO THE OWN CAPITAL OF 22.54 CRORES, THE ASSESSEE H A D INTEREST FREE BORROWIN GS OF 8.62 CRORES WHICH MEANS THAT T H E ASSESSEE HAD ABOUT 31 CRORES OF INTEREST FREE FUNDS AVAILABLE WITH HIM. THEREFORE, IN OUR CONSIDERED OPINION, THE INTEREST FREE ADVANCES TO THE TUNE OF RS. 3.63 CRO RES CAN BE SAFELY CONCLUDED TO HAVE COME OUT FROM T H E INTEREST FREE FUNDS . THEREFORE, NO DISALLOWANCE IS WARRANTED. I.T.A NO. 2 3 76 /AHD/20 15 A.Y. 201 0 - 11 PAGE NO PURSHOTTAM B. PITRODA VS. ACIT 4 WE ACCORDINGLY, SET ASIDE THE FINDINGS OF THE LD. CIT(A) AND DIRECT THE ASSESSING OFFICER TO DELETE THE DISALLOWANCE OF RS. 36,71, 548/ - . GROUND NO. 1 AND ALL ITS SUB - GROUNDS ARE ALLOWED. AFTER CONSIDERING THAT THERE WAS ADEQUATE INTEREST FREE FUNDS AVAILABLE WITH THE ASSESSEE , THEREFORE , RESPECTFULLY FOLLOWING THE DECISION OF TH E CO - ORDINATE BENCH AS SUPRA TH IS GROUND OF APPEAL OF THE ASSESEE IS ALLOWED. II) DISALLOWANCE OF RS. 1,01,574/ - U/S. 40(A)(IA) OF THE ACT 5 . DURING ASSESSMENT, THE ASSESSING OFFICER OBSERVED THAT ASSESSEE HAS CREDITED/PAID CONTRACTUAL PAYMENT OF RS. 1,01, 5 7 4/ - TO VARIOUS PARTIES WITHOUT DEDUCTION OF TAX AT SOURCE U/S. 19 4C OF THE ACT. THE ASSESSEE EXPLAINED THAT PR OVISION OF SECTION 194C WAS NOT APPLICABLE SINCE PAYMENT MADE TO EACH PARTY WA S LESS THAN 20,000/ - PER ENTRY. H OWEVER , THE ASSESSING OFFICER WAS OF THE VIEW THAT ALL THE CREDIT ENTRIES W E RE LESS THAN RS. 20,000 / - BUT THE ASSESSEE HAD MADE PAYMENT OF RS. 2 0,000/ - IN A SINGLE DAY. THEREFORE, THE ASSESSING OF FICER HAS DISALLOWED AMOUNT OF RS . 1 , 01 , 574/ - FOR NOT DEDUCTING TAX U/S. 40(A)(IA) AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. THE ASSESSEE HAS FILED APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) HAS DISM ISSED THE APPEAL OF THE ASSESSEE. 6. WE HAVE HEARD THE RIVAL CONTENTIONS ON THIS ISSUE AND PERUSED THE MA TE R IAL ON RECORD. TH E LD. COUNSEL HAS CONTENDED THAT IN NONE OF THE TH R E E CASES TH E CREDIT ENTRY WAS EXCEEDED TO R S. 20 , 0 0 0/ - AND THE AGGREGATE AMOU NT OF PAYMENT WAS ALSO NOT EXCEEDED RS. 50,000/ - . IN THIS REGARD, THE LD. COUNSEL HAS REFERRED PAGES 43 TO 45 OF THE PAPER BO O K PERTAINED TO THE LEDGER ACCOUNT OF THE PAYEES WHICH WAS ALSO FURNISHED AT THE TIME OF ASSESSMENT PROCEEDINGS. THE LD. COUNSEL HAS REFERRED SECTION 194C(1) OF T HE I.T.A NO. 2 3 76 /AHD/20 15 A.Y. 201 0 - 11 PAGE NO PURSHOTTAM B. PITRODA VS. ACIT 5 ACT THAT THE ASSESSEE IS REQUIRED TO DEDUCT TAX AT SOURCE AT TIME OF CREDIT OF SUCH SUM OR AT THE TIME OF MAKING PAYMENT WHICHEVER IS EARLIER. WE OBSERVE THAT THE LOWER AUTHORITIES HAS NOT GIVEN ANY SPECIFIC FINDINGS ON THE ABOVE REFERRED COPIES OF THE LEDGER ACCOUNT FILED BY THE ASSESSEE, THEREFORE, WE RESTORED THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR ADJUDICATING AFRESH AFTER EXAMINATION OF THE SUPPORTING MATERIAL FURNISHED BY THE ASSESSEE. (III) DISALLOW ANCES OF INTEREST OF RS. 1,25,93,747/ - PAID FOR ACQUISITION OF LAND 7 . DURING ASSES SMENT, THE ASSESSING OFFICER NOTICED THAT ASSESSEE HAS CLAIMED SHORT TERM CAPITAL L OSS OF RS. 1 , 48 , 37 , 847/ - . THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAD SOLD LAN D AT RS. 6 , 00 , 00 , 000/ - WHICH WAS PURCHASED AT THE COST OF RS. 6,15,56,785/ - , THEREFORE, THE ASSESSEE WAS ASKED TO EXPLAIN WHY THE CAPITAL LOSS SHOULD NOT BE REDUCED TO RS. ( - 1556,780/ - ). THE ASSESSEE HAS EXPLAINED THAT THE COST OF THE LAND ALSO INCLUDED THE AMOUNT OF INTEREST OF RS. 1 , 25 , 93 , 747/ - AS THE SAME WAS DIRECTLY TAKEN FOR THE PURCHASE OF THE LAND WHICH WAS SOLD. THE INTEREST WAS PAID ON THE AMOUNT BORROWED FROM KALUPUR COMMERCIAL BANK FOR ACQUIRING THE SOLD LAND. THE ASSESSING OFFICER WAS OF THE VIEW THAT INTEREST EXPENDITURE INCURRED TO ACQUIRE CAPITAL ASSET CANNOT BE ADDED WHILE CALCULATING CAPITAL GAIN U/S. 48 OF IN ACCORDANCE WITH LAW. THEREFORE, THE ASSESSING OFFICER HAS DISALLOWED THE SHORT TERM CAPITAL LOSS AMOUNTING TO RS. 1 , 25 , 93 , 747/ - . THE LD. CIT(A) HAS DISMISSED THE APPEAL OF THE ASSESSEE STATING THAT ASSESSEE HAS NOT SUBSTANTIATED THE CONTENTION THAT INTEREST PAID OF RS. 1 , 25 , 93 , 747/ - WAS IN CONNECTION WITH THE ACQUISITION OF THE LAND IN 2008 WHICH WAS SOLD IN THE YEAR UNDER CONSIDERATIO N. THE LD. CIT(A) FURTHER ST A TED THAT ASSESSEE HAS I.T.A NO. 2 3 76 /AHD/20 15 A.Y. 201 0 - 11 PAGE NO PURSHOTTAM B. PITRODA VS. ACIT 6 ALSO NOT FURNISHED EVIDENCE TO SHOW THAT THE SAID INTEREST EXPENDITURE WAS NOT CLAIMED AS BUSINESS EXPENDITURE IN THE PRECEDING YEARS. 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIA L ON RECORD. DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE US THE LD. COUNSE L HAS REFERRED PAGES 40 TO 63 OF THE PAPER BOOK PERTAINING TO THE LEDGER ACCOUNT OF LAND, LEDGER ACCOUNT OF INTEREST PAID TO KCC B AND THE COPY OF BANK PASS BOOK ALONG WITH BAN K BOOK OF THE KALUPUR COMMERCIAL CO - OPERATIVE BANK LTD. T HE LD. COUNSEL HAS ALSO REFERRED JUDICIAL PRONOUNCEMENT I. E . GAYATRI MAHESHWA RI VS. ITO (2017) 187 TTJ 33 (JODH PUR) ITAT WHERE IN IT IS HELD THAT WHERE PROPERTY WAS PURCHASED FROM BORROWED FUNDS INTER EST PAID ON WHI CH BORROWING WOULD BE PART OF CO ST OF ACQUISITIONS . THE LD. COUNSEL HAS ALSO PLACED OTHER JUDICIAL PRONOUNCEMENTS IN THE PAPER BOOK. IN THE LIGHT OF THE ABOVE FACTS, WE ARE OF THE VIEW THAT IF THE IMPUGNED LAND OF THE ASSESSEE WAS PURCHASE D FROM THE BORROWED FUNDS OF KCCB THEN THE CLAIM OF THE INTEREST ON SUCH BORROWING WOULD BE ALLOWED TO BE PART OF THE COST OF ACQUISITIONS OF THE SOLD LAND PROVIDED THAT SUCH INTEREST EXPENDITURE WAS NOT CLAIMED AS BUSINESS EXPENDITURE IN THE PRECEDING YEA RS. WE C OULD NOT FIND ANY S PECIFIC FINDINGS ON THE FACT TH AT SUCH EXPENDITURE WAS NOT CLAIMED AS BUSINESS EXPENDITURE IN THE PRECEDING YEARS, THEREFORE, WE RESTORE THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER TO AL LOW THE CLAIM OF THE ASSESSEE AFTER EXAMIN ATION THAT ASSESSEE HAS PURCHASED THE SOLD LAND THROUGH LOAN A MOUNT AND THE INTEREST EXPEN SES INCURRED ON THE LOAN A MOUNT INCLUDED IN THE COST OF ACQUISITION OF THE SOLD LAND WAS NOT CLAIMED AS BUSINESS EXPENDITURE IN THE EARLIER YEAR. THEREFORE, THIS GROUN D OF APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. I.T.A NO. 2 3 76 /AHD/20 15 A.Y. 201 0 - 11 PAGE NO PURSHOTTAM B. PITRODA VS. ACIT 7 (IV) ADDITION AS INCOME FROM SELF - OCCUPIED PROPERTY OF RS. 62,307/ - 9 . THIS GROUND OF APPEAL WAS NOT PRESSED, THEREFORE, THE SAME STANDS DISMISSED. (V) DISALLOWANCE OF REPAIR EXPENDITUR E OF RS. 6,62,345/ - 10 . THE AS SESSI NG OFFICER NOTICED THAT ASSESSEE HAS CLAIMED REPAIRING EXPENSES AMOUNTING TO RS. 6 , 62 , 345/ - INCURRED ON THE COLD STORAGE. T HE ASSESSING OFFICER OBSERVED THAT ASSESSEE HAS ALREADY SHOWN THE INCOME EARNED FROM COLD STOR AGE UNDER THE HEAD SELF PROPERTY AFTER CLAIMING 30% STANDARD DEDUCTION, T HEREFORE, ASSESSEE CANNOT CLAIM SEPARATELY REPAI R EXPEND ITURE IN HIS P & L ACCOUNT. T HEREFO RE, THE ASSESSING OFFICER HAS DISALLOWED THE CLAIM OF REPAIR EXPENSES OF RS. 6 , 62 , 345/ - . T HE ASSESSEE HAS FILED APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) HAS DISMISSED THE APPEAL OF THE ASSESSEE . 11. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD ON THIS ISSUE. THE LD. COUNSEL HAS CONTENDED THA T THE COLD STORAG E WAS LET OUT ONLY U P TO 30 - 09 - 2010 AN D THEREAFTER IT WAS USED FOR THE PURPOSE OF BU S I N ES S. THE LD. COUNSEL HAS REFERRED PAGE NO. 64 TO 97 PLACED IN THE PAPER BOOK COM PRISING OF LET T ER OF TENNAN T, LEDGER ACCOUNT OF RENT RECEIVED FROM TENANT, LEDGER ACCOUNT OF THE COLD STORAGE REPAIRING EXPENDITURE ETC. IT IS CLAIMED THAT THE COLD STORAGE WAS VACANT AFTER 30 TH SEP, 2009 AND THE ENTIRE REPAIRING EXPENDITURE HAS BEEN INCURRED AFTER 30 TH SEP, 2009. AFTER PERUSAL OF THE MATERIAL PLACED IN THE PAPER BOOK, WE OB SERVED THAT THE LOWER AUTHORITIES HAD NOT CONSIDERED THE VARIOUS MATERIAL AND SUBMISSION OF THE ASSESSEE IN THEIR FINDINGS , THEREFORE , WE RE STORE THIS ISSUE ALSO TO THE FILE OF I.T.A NO. 2 3 76 /AHD/20 15 A.Y. 201 0 - 11 PAGE NO PURSHOTTAM B. PITRODA VS. ACIT 8 THE ASSESSING OFFICER TO EXAMINE THAT THE VARIOUS SUBMISSION S AND MATERIAL S FURNI SHED BY THE ASSESSEE THAT AFTER 30 - 09 - 2009 THE COLD STORAGE WAS USED FOR BUSINESS PURPOSE AND ALSO EXAMINED THAT REPAIR EXPENSE S WERE INCURRED FOR BUSINESS PURPOSES. THEREFORE, THIS GROUND OF APPEAL OF THE ASSES SEE IS ALSO ALLOWED FOR STATISTICAL PURPOSES . 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES . ORDER PR ONOUNCED IN THE OPEN C OURT ON 01 - 10 - 201 9 SD/ - SD/ - ( RAJPAL YADAV ) ( AMARJIT SINGH ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD : DATED 0 1 / 10 /2019 / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,