Sivakumar Sanjai, Salem V. ACIT Circle 1, Salem

ITA 2816/CHNY/2017

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 4913 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 11 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-11-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 22-11-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: G BASKAR
• Keywords: Capital receipt

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , A BENCH, CHENNAI . . . , , BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI S. JAYARAMAN, ACCOUNTANT MEMBER ./ ITA NO.2816/CHNY/2017 [ [ /ASSESSMENT YEAR: 2012-13 SHRI SIVAKUMAR SANJAI, C-18/A, TAMIL SANGAM ROAD, SALEM 636 007. VS. THE ACIT, CIRCLE-1, SALEM. PAN: ACXPS8474K ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : SHRI G. BASKAR, ADVOCATE /RESPONDENT BY : SHRI AR.V. SREENIVASAN, JCIT /DATE OF HEARING : 14.08.2019 / DATE OF PRONOUNCEMENT : 05.11.2019 / O R D E R PER SHRI S. JAYARAMAN, ACCOUNTANT MEMBER : THE ASSESSEE FILED THIS APPEAL AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS), SALEM IN ITA NO.286/2014-15 DATED 22.09.2017 FOR THE ASSESSMENT YEAR 2012-13. ITA NO.2816/CHNY/2017 :- 2 -: 2. SHRI SIVAKUMAR SANJAI, THE ASSESSEE, IS AN INDIVIDUAL DOING BUSINESS AND PROFESSION OF CONSULTANCY AND SALE OF SIDDHA MEDICINE. WHILE MAKING THE ASSESSMENT FOR THE ASSESSMENT YEAR 2012-13, THE ASSESSEE CLAIMED RS.5,65,924/-, INTEREST PAYMENT MADE TO CITI FINANCE LOAN ON THE LOAN TAKEN FOR THE PURCHASE OF A LAND. THE AO FOUND THAT THE LAND WAS NEITHER USED BY THE ASSESSEE FOR HIS BUSINESS NOR ANY INCOME ADMITTED ON THE SAME. HOWEVER, THE ASSESSEE ENTERED INTO AN AGREEMENT OF LEASE FOR 10 YEARS WITH M/S. SIVARAJ HOLIDAY INN PVT. LTD., TO CONSTRUCT A BUILDING AND RECEIVED RS.10,000/- AS ANNUAL LEASE. THE ASSESSING OFFICER TREATED THE LUMPSUM RECEIVED AT RS.10,000/- AS A CAPITAL RECEIPT AND REFUSED TO ADMIT THE ASSESSEES CLAIM OF RS.5,65,924/-. AGGRIEVED, THE ASSESSEE FILED APPEAL BEFORE THE CIT(A). THE LD.CIT(A) HELD, INTER-ALIA, THAT THE ASSESSEE PURCHASED A PIECE OF LAND AT A VERY HIGH PRICE BY AVAILING LOAN, WITH AN INTEREST BURDEN IS RS.5,65,924/-. IN ORDER TO JUSTIFY THE DEDUCTIBILITY OF THIS HUGE INTEREST, HE HAS GOT INTO AN AGREEMENT WITH A COMPANY M/S. SIVARAJ HOLIDAY INN PVT. LTD., IN WHICH HE HAS SUBSTANTIAL INTEREST ON A NOMINAL LEASE RENT OF RS.10,000/- PER YEAR. THIS ARRANGEMENT CAN BE DEEMED AS A COLOURABLE DEVISE TO REDUCE THE TAX BURDEN AND HENCE HE DISMISSED THE APPEAL. AGGRIEVED THE ASSESSEE FILED THIS APPEAL. ITA NO.2816/CHNY/2017 :- 3 -: 3. THE LD.AR INVITING OUR ATTENTION TO THE COPIES OF RETURN FILED, SUBMITTED THAT THE ASSESSEE ADMITTED RS.10,000/- RENTAL INCOME, CLAIMED A STANDARD DEDUCTION U/S.24(A) AT RS.3,000/- AND ADMITTED THE NET PROPERTY INCOME AT RS.7,000/-. HOWEVER, THE ASSESSEE CLAIMED THE INTEREST ON CITY FINANCE LOAN AGAINST THE INCOME UNDER THE HEAD OTHER SOURCES. THEREFORE, THE ASSESSING OFFICER HAS ASSESSED THE PROPERTY INCOME BUT FAILED TO ALLOW THE INTEREST EXPENDITURE ON THE BORROWABLE MADE TO MEET THE COST OF THE SITE U/S.57(III). HE PLEADED THAT SMALLNESS OF RENT AMOUNT SHOULD NOT HAVE LEAD THE LD.CIT(A) TO DISALLOW THE INTEREST. RELYING ON VARIOUS CASE LAWS, THE LD.AR PLEADED THAT THE INTEREST CLAIMED BY THE ASSESSEE SHOULD BE ALLOWED. WHEN THE BENCH ASKED THE RELATIONSHIP BETWEEN THE ASSESSEE AND THE OTHER SHAREHOLDERS OF M/S. SIVARAJ HOLIDAY INN PVT. LTD., HE REPLIED THAT IT COULD BE FATHER AND SON OR MAY BE WITH OTHER FAMILY MEMBERS. PER CONTRA, THE LD.DR SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES SUBMITTING THAT THE ARRANGEMENT IS A COLOURABLE DEVICE AND HENCE, THE INTEREST CLAIM SHOULD NOT BE ALLOWED. 4. WE HEARD THE RIVAL SUBMISSIONS AND GONE THROUGH THE RELEVANT MATERIAL. FROM THE FACTS, IT IS CLEAR THAT THE ASSESSEE HAS AVAILED HUGE ITA NO.2816/CHNY/2017 :- 4 -: LOAN OF RS.55,15,000/- FOR ACQUIRING A PIECE OF LAND AND INCURRED AN INTEREST BURDEN OF RS.5,65,924/-. IT IS A PLEA OF THE ASSESSEE THAT HE HAS ENTERED INTO AN AGREEMENT OF LEASE FOR 10 YEARS WITH M/S. SIVARAJ HOLIDAY INN PVT. LTD. TO CONSTRUCT A BUILDING, IN WHICH HE HAS SUBSTANTIAL INTEREST FOR A NOMINAL LEASE RENT OF RS.10,000/- PER YEAR. THEREFORE, IT IS NOT CLEAR FROM THE ORDERS OF THE LOWER AUTHORITIES WHAT ARE THE TERMS AND CONDITIONS BETWEEN THE ASSESSEE AND M/S. SIVARAJ HOLIDAY INN PVT. LTD., THE RELATIONSHIP BETWEEN BOTH OF THEM, THE SHARE HOLDING PATTERN AND RIGHTS AND LIABILITIES OF THE OWNER AS WELL AS THE LESSEE, ETC. IT IS NOT CLEAR AS TO WHY THE ASSESSEE IS INCURRING A HUGE INTEREST COST AND TAKING SUCH A LOW INCOME. ALL THESE FACTORS WERE NOT EXAMINED AND DUE DECISION WAS NOT TAKEN. IN THE FACTS AND CIRCUMSTANCES, WE DEEM IT FIT TO REMIT THIS ISSUE BACK FOR A DUE EXAMINATION AND FOR APPROPRIATE DECISION, IN ACCORDANCE WITH LAW. THE ASSESSEE SHALL LAY ALL MATERIALS IN SUPPORT OF HIS CONTENTION BEFORE THE ASSESSING OFFICER AND COMPLY WITH THE REQUIREMENTS OF THE ASSESSING OFFICER IN ACCORDANCE WITH LAW. THE ASSESSING OFFICER IS FREE TO CONDUCT APPROPRIATE ENQUIRY AS DEEMED FIT, HOWEVER, HE SHALL FURNISH DUE OPPORTUNITY TO THE ASSESSEE ON THE MATERIALS ETC., TO BE USED ITA NO.2816/CHNY/2017 :- 5 -: AGAINST THE ASSESSEE AND ON DUE CONSIDERATION OF THE ASSESSEES CLARIFICATION / EXPLANATION SHALL PASS THE ORDER IN ACCORDANCE WITH LAW. 5. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT ON 5 TH NOVEMBER, 2019 IN CHENNAI. SD/- SD/- /CHENNAI, /DATED 5 TH NOVEMBER, 2019 RSR /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. ( ) /CIT(A) 4. /CIT 5. /DR 6. /GF ( . . . ) (N.R.S. GANESAN) / JUDICIAL MEMBER ( ) (S. JAYARAMAN) /ACCOUNTANT MEMBER