Babulal Masraji, CHENNAI V. DCIT, CHENNAI

ITA 2750/CHNY/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 7774 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-02-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2007-2008
• Appeal Filed On: 23-09-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUPRIYO PAL
• Assessee Lawyers: DEVENDRA KUMAR BANDARI F
• Section: 143(3)

Judgement Text

, .. , IN THE INCOME TAX APPELLATE TRIBUNAL , SMC C BENCH, CHENNAI . , BEFORE SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ I.T.A.NO.2750/MDS/2016 ( / ASSESSMENT YEAR: 2007-08) SHRI BABULAL MASRAJI, NO.36/2, PERUMAL MUDALI STREET, CHENNAI 600 079 VS THE DEPUTY COMMISSIONER OF INCOME TAX, NCC-5, CHENNAI PAN: AAEPB1098F ( / APPELLANT) ( / RESPONDENT) / APPELLANT BY : SHRI DEVENDRA KUMAR BANDARI, F.C.A /RESPONDENT BY : SHRI SUPRIYO PAL, JCIT ! /DATE OF HEARING : 15.02.2017 '# ! /DATE OF PRONOUNCEMENT : 23.02.2017 / O R D E R THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-5, CHEN NAI DATED 29.07.2016 IN ITA NO.29/CIT(A)-5/13-14 U/S. 256 R.W. S. 143(3) OF THE ACT FOR THE ASSESSMENT YEAR 2007-08 2. THE ASSESSEE HAS RAISED FOUR GROUNDS IN HIS APPEA L, HOWEVER THE CRUX OF THE ISSUE IS THAT THE LD. CIT(A) HAD UPHELD THE ORDER OF THE LD. AO, WHO HAD DISALLOWED THE INTEREST EXPENDITURE INCURRE D BY THE ASSESSEE AMOUNTING TO RS.2,49,076/- FOR EARNING SHORT TERM C APITAL GAIN. 2 I.T.A. NO.2750/MDS/2016 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN INDIVIDUAL ENGAGED IN TRADING AND FINANCE BUSINESS FILED HIS R ETURN OF INCOME FOR THE ASSESSMENT YEAR 2007-08 ON 31.07.2007, ADMITTING HI S TOTAL INCOME AS RS.23,16,341/-. SUBSEQUENTLY, THE CASE WAS TAKEN U P FOR SCRUTINY AND THE ASSESSMENT WAS COMPLETED U/S. 143(3) OF THE ACT ON 29.12.2009, WHEREIN THE LD. AO DISALLOWED RS.2,49,076/- BEING THE EXPEN DITURE INCURRED TOWARDS PAYMENT OF INTEREST. THE ASSESSEE HAD CLAIM ED THE EXPENDITURE TOWARDS EARNING SHORT TERM CAPITAL GAIN OF RS.66,50 0/- WITH REGARD TO SALE OF HIS IMMOVABLE PROPERTY. THE REASON FOR THE DISALLOW ANCE MADE BY THE LD. AO IS THAT THE ASSESSEE HAD NOT CAPITALIZED THE INT EREST EXPENDITURE BY ASSIGNING IT TO THE COST OF THE IMMOVABLE ASSET. O N APPEAL, THE LD. CIT UPHELD THE ORDER OF THE LD. AO BECAUSE AS POINTED O UT BY THE LD. AO THERE WERE NO CREDITORS IN THE BUSINESS AND THE BUSINESS CARRIED OUT BY THE ASSESSEE WAS SMALL SCALE I.E., ONLY TO THE EXTENT O F RS.2,93,000/-, THEREFORE THERE IS NO POSSIBILITY THAT THE ASSESSEE WOULD HAV E INCURRED ANY EXPENDITURE TOWARDS INTEREST PAYMENT. 4. BEFORE US, THE LD. AR SUBMITTED THAT THE ASSESSE E HAD BORROWED FUNDS FOR PURCHASE OF THE IMMOVABLE ASSET AND THERE FORE THE INTEREST EXPENSE INCURRED BY HIM HAS TO BE ALLOWED AS DEDUCT ION WHILE COMPUTING THE SHORT TERM CAPITAL GAIN. HE FURTHER SUBMITTED THAT ONLY FOR THE REASON 3 I.T.A. NO.2750/MDS/2016 INTEREST EXPENDITURE WAS NOT ADDED TO THE COST OF T HE ASSET, THE DISALLOWANCE MADE BY THE LD. AO IS AGAINST JUSTICE. IT WAS THEREFORE PRAYED THAT THE LD. AO MAY BE DIRECTED TO GRANT DEDUCTION WITH RESPECT TO THE INTEREST EXPENDITURE SUFFERED BY THE ASSESSEE FOR P URCHASE OF THE IMMOVABLE ASSET. THE LD. DR ON THE OTHER HAND ARGUE D IN SUPPORT OF THE ORDERS OF THE REVENUE AUTHORITIES AND PLEADED FOR U PHOLDING THE SAME. 5. I HAVE HEARD THE RIVAL SUBMISSION AND CAREFULLY PERUSED THE MATERIALS AVAILABLE ON RECORD. I FIND MERIT IN THE SUBMISSIO N OF THE LD. AR. IF THE ASSESSEE HAS BORROWINGS WHICH WAS FOR THE PURCHASE OF THE IMMOVABLE ASSET, THEN THE SAME SHOULD BE EITHER ADDED TO THE COST OF THE ASSET OR ALLOWED AS DEDUCTION WHILE COMPUTING SHORT TERM CAP ITAL GAIN. IT WOULD NOT BE APPROPRIATE TO REJECT THE DEDUCTION ONLY BECAUSE OF THE SIMPLE REASON THAT THE ASSESSEE HAS NOT CAPITALIZED THE INTEREST EXPENDITURE TOWARDS THE COST OF THE IMMOVABLE ASSET. THESE ARE ONLY TECHNI CAL MISTAKES COMMITTED BY THE ASSESSEE WHICH NEEDS TO BE OVERLOOKED WHILE ARRIVING AT THE ACTUAL AND CORRECT GAIN ENJOYED BY THE ASSESSEE WHILE COMP UTING THE SHORT TERM CAPITAL GAIN. THEREFORE IN THE INTEREST OF JUSTICE, I HEREBY DIRECT THE LD. AO TO VERIFY WHETHER THE INTEREST EXPENSE SUFFERED BY THE ASSESSEE IS ATTRIBUTABLE FOR THE PURCHASE OF THE IMMOVABLE ASSE T BY WAY OF THE BORROWINGS BEING UTILIZED FOR ACQUISITION OF THE IM MOVABLE ASSETS AND IF FOUND SO, ALLOW DEDUCTION BY EITHER ADDING IT TO TH E COST OF THE ASSET OR 4 I.T.A. NO.2750/MDS/2016 CONSIDERING IT AS THE EXPENDITURE INCURRED FOR THE ACQUISITION OF THE ASSET. IT IS ORDERED ACCORDINGLY. 6. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLO WED FOR STATISTICAL PURPOSES AS INDICATED HEREIN ABOVE. ORDER PRONOUNCED IN THE COURT ON THE 23 RD FEBRUARY, 2017. SD/- ( . ) (A. MOHAN ALANKAMONY) / ACCOUNTANT MEMBER $% /CHENNAI, &' /DATED 23 RD FEBRUARY, 2017 JR. ' )* +* /COPY TO: 1. APPELLANT 2. RESPONDENT 3. , ( )/CIT(A) 4. , /CIT 5. *-. / /DR 6. .0 /GF.