M/s Amanshil realtors (P) Ltd., Delhi V. DCIT, New Delhi

ITA 2650/DEL/2016

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 8685 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 8 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-01-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Appeal Filed On: 10-05-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: V K CHADHA
• Keywords: Depreciation; Set aside
• Section: 143(3); 32; 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: A NEW DELHI BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER & SHRI K.NARASIMHA CHARY, JUDICIAL MEMBER ITA NO. 2650/DEL/2016 ASSESSMENT YEAR: 2012-13 AMANSHIL REALTORS (P) LTD., 135, FF TRIBHUVAN COMPLEX, MATHURA ROAD, ISHWAR NAGAR, DELHI. AAFCA 0296G VS DCIT, CIRCLE-2 (2), NEW DELHI APPELLANT RESPONDENT ASSESSEE BY SH. SACHIN AGARWAL, CA REVENUE BY SH. V.K. CHADHA, SR. DR ORDER PER K. NARASIMHA CHARY, JM AGGRIEVED BY THE ORDER DATED 03/03/2016 IN APPEAL NO. 418/14-15 PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (A PPEALS)-1, NEW DELHI (LD. CIT(A)) FOR THE ASSESSMENT YEAR 2012-13, M/S AMANSHIL REALTORS PRIVATE LIMITED (THE ASSESSEE) FILED THIS APPEAL. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF TRADING OF SHARES, COMMODITIES AND FUTURE AND OPTIONS. FOR THE ASSESSMENT YEAR 2012-13 IT HAD FILED ITS RETURN OF INCOME ON 30/9/2012 DECLARING A LOSS OF RS. 61,05,005/-. ASSESSMENT UND ER SECTION 143(3) OF THE DATE OF HEARING 18.12.2019 DATE OF PRONOUNCEMENT 16.01.2020 2 INCOME TAX ACT, 1961 (FOR SHORT THE ACT) WAS COMP LETE BY ORDER DATED 19/1/2015 AT A LOSS OF RS.12,72,150/- BY MAKING CER TAIN ADDITIONS WHICH INCLUDE, FOR THE PURPOSE OF THIS APPEAL, DISALLOWAN CE OF INTEREST TO THE TUNE OF RS. 8,75,020/-TREATING THE SAME AS NOT ALLOWABLE UNDER SECTION 36 (1)(III)/37 (1) OF THE ACT, DISALLOWANCE OF DEPRECI ATION TO THE TUNE OF RS. 36,35,533/-TREATING THE VATIKA CITY BUILDING OFFICE WITH THE FURNITURE IS NOT HAVING BEEN USED FOR BUSINESS PURPOSE FOR A LIMITED PERIOD AND DISALLOWANCE OF INTEREST OF RS.2,16,003/-DUE TO NON-AVAILABILITY OF FUNDS IS NOT BEING ALLOWED IN SECTION 37 (1) OF THE ACT. 3. IN THE APPEAL PREFERRED BY THE ASSESSEE, LD. CIT (A), BY WAY OF IMPUGNED ORDER SUSTAINED THESE THREE ADDITIONS. HEN CE THE ASSESSEE IS BEFORE US IN THIS APPEAL. 4. INSOFAR AS THE 1 ST ADDITION IS CONCERNED, ON A PERUSAL OF THE P&L ACCOUNT OF THE ASSESSEE, LEARNED ASSESSING OFFICER FOUND THAT THE ASSESSEE HAD SHOWN GROSS TURNOVER OF RS. 61,11,803/-ON SALES OF SHARES AND INCOME OF RS.7,13,925/-WAS SHOWN AS A SERVICE CHARGES RECEIVE D; THAT UNDER THE HEAD OTHER INCOME, THE ASSESSEE HAD FURTHER DECLARED DIV IDEND INCOME OF RS. 2,78,258/-AND RENTAL RECEIVED OF RS. 34,18,841/-; T HAT AS PER COMPETITION, THE RENTAL INCOME WAS OFFERED TO TAX SEPARATELY AND A D IVIDEND OF RS.2,78,258/- WAS CLAIMED AS EXEMPT; AND THAT THE ASSESSEE HAD AL SO SHOWN INTEREST INCOME OF RS. 6,83,041/-UNDER THE HEAD INCOME FROM OTHER SOURCES. ON A PERUSAL OF THE BALANCE SHEET LEARNED ASSESSING OFFI CER FOUND THAT THE ASSESSEE HAD DEPLOYED SHARE CAPITAL OF RUPEES ONE C RORE IN ITS BUSINESS, RESERVE AND SURPLUS ON THE 1 ST DAY OF THE YEAR WAS SHOWN AT RS.3,19,57,521/- AND AT THE END OF THE YEAR AFTER THE ADJUSTMENT OF CURRENT YEARS LOSS, THE NET SURPLUS OF RS.2,70, 48,094/-WAS SHOWN AND THE ASSES SEE HAD SHOWN LONG- 3 TERM BORROWING OF RS.4,47,72,998/-AND SHORT-TERM BO RROWING OF RS.1,52,34,051/-. IN THE ASSET SIDE NON-CURRENT INV ESTMENT OF RS.67,66, 397/- WAS SHOWN AS ON THE 1 ST DAY OF THE YEAR AND LONG-TERM LOANS AND ADVANCES GIVEN AMOUNTING TO RS. 3,13,81,947/-AND RS. 3, 12,6 0,638/-WERE SHOWN AS ON 1 ST AND LAST DAY OF THE YEAR RESPECTIVELY. SHORT-TERM LOANS AND ADVANCES AMOUNTING TO RS.1,40,04,383/-AND RS.58,03,437/-AS O N THE 1 ST AND LAST DAY OF THE YEAR WERE ALSO APPEARING IN THE BALANCE SHEET. THE TRADE INVENTORIES AS ON THE 1 ST AND LAST DAY OF THE YEAR WERE SHOWN AT RS.2,06,50, 962/-AND RS.1,80,09,434/-WERE ALSO SHOWN. AS PER THE P&L STA TEMENT, THE ASSESSEE HAD CLAIMED EMPLOYEE BENEFIT EXPENSES OF RS.10,56,8 55/-, FINANCE COST OF RS.9,15,671/-AND OTHER EXPENSES AMOUNTING TO RS.14, 74,223/-. AS PER THE COMPUTATION, DEPRECIATION OF RS.43,80,140/-WAS CLAI MED UNDER SECTION 32 (1) OF THE ACT. 5. ON AN ANALYSIS OF THESE FACTS, LEARNED ASSESSING OFFICER FELT THAT THE ASSESSEE HAD INCURRED EXPENDITURE ON PAYMENT OF INT EREST ON BORROWINGS WHICH HAVE BEEN MAINLY UTILIZED FOR THE PURPOSE OF MAKING INVESTMENT IN THE REAL ESTATE AND ALSO MAKING ADVANCES. AFTER HEARING THE ASSESSEE LEARNED ASSESSING OFFICER HELD THAT THERE WAS NO JUSTIFICAT ION FOR PAYMENT OF INTEREST ON BORROWING ON ONE HAND AND PARKING THE FUNDS IN T HE NAME OF INVESTMENT/INTEREST FREE ADVANCES WHICH IS NOT THE CORE OF BUSINESS OF THE ASSESSEE AND THEREFORE, LEARNED ASSESSING OFFICER B ROUGHT AN AMOUNT OF RS.8,75,020/-TO TAX UNDER SECTION 36(1)(III)/37(1) OF THE ACT. 6. ON THIS ASPECT LD. CIT(A) CONCURRED WITH THE FIN DINGS OF THE LEARNED ASSESSING OFFICER AND HELD THAT THE ASSESSEE HAD AD VANCED LOAN TO ITS SISTER CONCERNS OR OTHER PERSONS WITHOUT CHARGING ANY INTE REST AND THERE WAS NO NEXUS BETWEEN THE PAYMENT OF INTEREST CLAIMED FOR B USINESS PURPOSE 4 JUSTIFYING THE LEARNED ASSESSING OFFICER TO INFER T HAT THE ASSESSEE DID NOT UTILISE THE BORROWED FUNDS FOR BUSINESS. 7. BEFORE US, THE ASSESSEE CONFINED THE ARGUMENTS I N RESPECT OF GROUNDS NO. 3 TO 5. IN RESPECT OF GROUND NO. 3, LD. AR SUBM ITTED THAT THE INTEREST OF RS. 8,75,020/-ON LOAN WAS PAID TO ICICI BANK FOR PU RCHASING OFFICE BUILDING HAVING ADDRESS FLAT NO. 307, VATIKA CITY POINT, MG ROAD, GURGAON FOR BUSINESS EXPANSION PURPOSES AND, THEREFORE, THE INTEREST PAI D SHALL BE INFERRED TO HAVE BEEN INCURRED FOR BUSINESS PURPOSE AND BE ALLO WED. IN THE ALTERNATIVE, IT IS PLEADED BEFORE US THAT IF SUCH AN INTEREST ON LOAN IS NOT TREATED AS FOR BUSINESS PURPOSE, THEN SUCH AN INTEREST SHOULD BE A LLOWED AS INTEREST ON BORROWED CAPITAL UNDER INCOME FROM HOUSE PROPERTY U NDER SECTION 24 (B) OF THE ACT SINCE THE SAID BUILDING WAS LET OUT FROM 19 /10/2011 AND RENTAL INCOME FROM HOUSE PROPERTY TO THE TUNE OF RS. 27,95 ,754/-WAS DULY DECLARED IN THE BOOKS OF ACCOUNTS AND INCOME TAX RETURN. 8. IN RESPECT OF THE DEPRECIATION, IT IS SUBMITTED BY THE LD. AR THAT THE ASSESSEE COMPANY DECIDED TO EXPAND ITS BUSINESS AND TO OPEN A NEW BRANCH IN GURUGAON, A GROWING BUSINESS HAVE FOR MNCS AND I N ORDER TO HAVE BUSINESS OPPORTUNITIES AND TO GET SOME OR POTENTIAL CLIENTS, THE ASSESSEE THOUGHT OF OPENING A NEW BRANCH IN THE COMMERCIAL S PACE WHICH IS ALREADY BEEN WITH THE ASSESSEE IN VATIKACITY, GURUGAON. SUB SEQUENTLY SUCH PROPERTY WAS LET OUT AND THE RENTAL RECEIVED WAS DECLARED IN THE BOOKS AND INCOME TAX RETURN. 9. IN SUPPORT OF THESE CONTENTIONS THE ASSESSEE PRO DUCED CERTAIN DOCUMENTS LIKE LETTER DATED 15/1/2010 ISSUED BY ICI CI HOME FINANCE, BANK STATEMENT, LEASE DEED DATED 19/10/2011 AND CERTAIN VOUCHERS AND BILLS TO SHOW THAT THE PREMISES WAS REQUIRED FOR BUSINESS PU RPOSE. ASSESSEE ALSO 5 PRODUCED THE LETTER ISSUED BY ADITYA BIRLA MONEY FO R THE PURPOSE OF ACTIVATING THE CURRENCY TRADING ACCOUNT FROM THE NE W BUSINESS PREMISES FROM VATIKACITY POINT, ENERGY BILLS AND TELEPHONE B ILLS ETC TO SHOW THAT THE NEWLY ACQUIRED PREMISES WAS USED FOR THE PURPOSE OF BUSINESS TILL 4/10/2011, THE PERIOD EXCEEDING 180 DAYS IN SUPPORT OF THE CLAIM FOR FULL DEPRECIATION ON THE BUILDING. 10. LD. DR SUBMITTED THAT ALL THESE DOCUMENTS WERE NOT AVAILABLE BEFORE THE LEARNED ASSESSING OFFICER AND IT IS FOR THE 1 ST TIME THE ASSESSEE PRODUCED SUCH DOCUMENTS BEFORE THE TRIBUNAL AND TAKING A NEW PLEA THAT WAS NOT AVAILABLE BEFORE THE AUTHORITIES BELOW. LD. DR SUBM ITTED THAT THE MATTER REQUIRES FACTUAL VERIFICATION WHICH CANNOT CONVENIE NTLY BE DONE BY THE TRIBUNAL. 11. BE THAT AS IT MAY, THE PLEA TAKEN BY THE ASSESS EE IS THAT THE BORROWED FUNDS WERE NOT UTILIZED FOR INVESTMENTS AND INTERES T FREE ADVANCES AND THEY WERE UTILISED ONLY FOR BUSINESS PURPOSE AND ACQUISI TION OF A PREMISES TO RUN THE OFFICE. IT IS SUBMITTED THAT THE CLAIM OF THE A SSESSEE IS WELL SUPPORTED BY DOCUMENTS WHICH COULD NOT BE FILED BEFORE THE LEARN ED ASSESSING OFFICER UNDER MISTAKEN IMPRESSION INASMUCH AS IT IS NOT POS SIBLE TO VERIFY THE VERACITY OF SUCH DOCUMENTS AT TRIBUNAL LEVEL. KEEPI NG IN VIEW THE SUBMISSIONS MADE BY THE COUNSEL ON EITHER SIDE, WE ARE OF THE CONSIDERED OPINION THAT THE UTILISATION OF FUNDS AND USE OF TH E NEWLY ACQUIRED PREMISES FOR BUSINESS PURPOSES REQUIRES VERIFICATION OF FACT S IN THE LIGHT OF THE DOCUMENTS PRODUCED BY THE ASSESSEE. THIS REQUIRES T HE MATTER TO BE REMANDED TO THE FILE OF THE LEARNED ASSESSING OFFIC ER TO CAUSE SUCH VERIFICATION. WE, THEREFORE, SET ASIDE THESE GROUND S NO. 3 AND 4 TO THE FILE OF 6 THE ASSESSING OFFICER FOR FACTUAL VERIFICATION ON T HESE ASPECTS AND TO TAKE A VIEW AS PER LAW. 12. NOW COMING TO THE DISALLOWANCE OF INTEREST OF R S.2,21,003/-, COVERED BY GROUND NO. 5, LD. AR SUBMITTED THAT SUCH EXPENSE S WERE NOT ADDED IN THE COMPUTATION OF INCOME AND THE ASSESSEE HAS NO OBJEC TION FOR DISALLOWANCE OF THE SAME. BY RECORDING THE SAME, WE DISMISS GROU ND NO. 5 AS NOT PRESSED. 13. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D IN PART FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 16 TH JANUARY, 2020. SD/- SD/- (R.K. PANDA) (K. NARASIMHA CHAR Y) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 16/01/2020 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI