DCIT CEN CIR 10, MUMBAI V. ASHRAY DWELLERS P.LTD, MUMBAI

ITA 2858/MUM/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 3798 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 10 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-02-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 28-01-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 12-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Proportionate interest; Revenue expenditure
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A , MUMBAI BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI JOGINDER SINGH , JUDICIAL MEMBER ITA NO. 2858/MUM/2013 : (A.Y : 20 09 - 10 ) DCIT, CENTRAL CIRCLE - 10, MUMBAI (APPELLANT) VS. M/S. ASHRAY DWELLERS PVT. LTD., 702, NATRAJ M.V. ROAD JUNCTION, WESTERN EXPRESS HIGHWAY, ANDHERI (E), MUMBAI 400 069 PAN : AABCA1923E (RESPONDENT) APPELLANT BY : SHRI YOGESH KAMAT RESPONDENT BY : SHRI NARESH KUMAR DATE OF HEARING : 10/02/2016 DATE OF PRONOUNCEMENT : 24 /02/2016 O R D E R PER G.S. PANNU , A M : THE CAPTIONED APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF CIT(A) - 37, MUMBAI DATED 24.01.2013, PERTAINING TO THE ASSESSMENT YEAR 200 9 - 1 0 , WHICH IN TURN HAS ARISEN FROM THE ORDER PASSED BY THE ASSESSING OFFICER DATED 30.12.2011 UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). 2. IN ITS APPEAL, THE REVENUE HAS RAISED THE FOLLOWING G ROUNDS OF APPEAL : (I) 'ON THE FACT S AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DIRECTING CONSIDERATION OF INTEREST EXPENDITURE OF 2 M/S. ASHRAY DWELLERS PVT. LTD. ITA NO. 2858/MUM/2013 RS.3,14,10,565/ - WHILE TAXING THE INCOME UNDER THE HEAD 'INCOME FROM HOUSE PROPERTY' AS WELL AS 'INCOME FROM OTHER SOURCES' WITHOU T APPRECIATING THE FACT THAT PROPERTY IN QUESTION WAS STOCK - IN - TRADE AND THE BORROWING WAS IN THE FORM OF OVERDRAFT FACILITY FOR THE EXPLICITLY STATED PURPOSE OF 'BUSINESS EXPANSION'. (II) 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN ALLOWING THE ASSESSEE'S ALTERNATIVE CLAIM THAT PROPORTIONATE INTEREST BE ALLOWED IF INTEREST INCOME IS TREATED AS INCOME FROM OTHER SOURCES AND NOT FROM BUSINESS WITHOUT APPRECIATING THE FACT THAT THE LOAN (OVERDRAFT FACILITY) WAS TAKE N FOR BUSINESS EXPANSION AND AS PER THE LAW INTEREST INCOME FALLS UNDER THE HEAD INCOME FROM OTHER SOURCES AND IN THE CIRCUMSTANCES OF THE ASSESSEE'S CASE, THE INTEREST EXPENDITURE SHOULD HAVE BEEN CAPITALIZED AND NOT CLAIMED AS REVENUE EXPENDITURE. ' 3. IN ORDER TO APPRECIATE THE BACKGROUND OF THE DISPUTE, THE FOLLOWING FACTS ARE RELEVANT . THE R ESPONDENT - ASSESSEE IS A COMPANY INCORPORATED UNDER THE PROVISIONS OF THE COMPANIES ACT, 1956 AND IS STATED TO BE IN THE BUSINESS OF REAL ESTATE DEVELOPER. FOR T HE ASSESSMENT YEAR UNDER CONSIDERATION , IT FILED RETURN OF INCOME DECLARING A TOTAL LOSS OF RS. 1,06,96,841/ - WHICH WAS SUBJECT TO SCRUTINY ASSESSMENT WHEREBY THE TOTAL INCOME HAS BEEN ASSESSED AT RS. 1,95,99,255/ - . THE DIFFERENCE BETWEEN THE RETURNED AND ASSESSED INCOME WAS PRIMARILY ON THE G ROUND THAT THE RENTAL INCOME EARNED BY THE ASSESSEE FROM GIVING ITS COMMERCIAL BUILDING RUSTOMJEE ARCADE [ ON RENT TO M/S. VISHAL RETAILS LTD. ] ALONGWITH CERTAIN AMENITIES WAS NOT ACCEPTED AS BUSINESS INCOME; AND SECONDLY , THAT THE INTEREST AND OTHER AD MINISTRATIVE EXPENDITURE DEBITED TO THE PROFIT & LOSS ACCOUNT WAS NOT ALLOWED AS A DEDUCTION. FURTHER, THE INTEREST INCOME DECLARED BY THE ASSESSEE OF RS. 1,04,85,238/ - WAS NOT ASSESSED AS BUSINESS INCOME BUT AS INCOME FROM OTHER SOURCES. THE ASSESSE E HAS CANVASSED IN THE RETURN OF INCOME THAT THE RENTAL INCOME AS WELL AS INTEREST INCOME WERE LIABLE TO BE TREATED AS BUSINESS INCOME. 3 M/S. ASHRAY DWELLERS PVT. LTD. ITA NO. 2858/MUM/2013 THE INTEREST EXPENSES ALONGWITH OTHER ADMINISTRATIVE COSTS WERE NOT CONSIDERED BY THE ASSESSING OFFICER FOR DEDUCTION AS , ACCORDING TO HIM , THERE WAS NO BUSINESS ACTIVITY IN EXISTENCE. 4. BEFORE THE CIT(A), THE ASSESSEE ASSAILED THE ORDER OF THE ASSESSING OFFICER ON VARIOUS GROUNDS. FOR THE PURPOSE OF APPRECIATING THE DISPUTE BEFORE US, IT IS TO BE NOTED THAT ONE OF THE GROUNDS RAISED BY THE ASSESSEE WAS THAT EVEN IF THE RENTAL INCOME WAS TO BE ASSESSED UNDER THE HEAD INCOME FROM HOUSE PROPERTY AND THE INTEREST INCOME WAS TO BE ASSESSED UNDER THE HEAD INCOME FROM OTHER SOURCES, YET THE INTEREST EXPENDITURE INCURRE D BY THE ASSESSEE WAS LIABLE TO BE CONSIDERED WHILE COMPUTING THE INCOME UNDER THE AFORESAID TWO HEADS OF INCOME. THIS WAS AN ALTERNATIVE PLEA RAISED BY THE ASSESSEE NOTWITHSTANDING THE MAIN PLEA THAT SUCH INCOMES WERE IN THE NATURE OF BUSINESS INCOMES. THE CIT(A) HAS AGREED WITH THE ALTERNATIVE PLEA OF THE ASSESSEE AND DIRECTED THE ASSESSING OFFICER THAT THE INTEREST EXPENDITURE OF RS. 3,14,10,565/ - OUGHT TO BE CONSIDERED WHILE COMPUTING THE INCOME UNDER THE HEADS INCOME FROM HOUSE PROPERTY AS WELL AS INCOME FROM OTHER SOURCES. IT IS AGAINST THIS DIRECTION OF THE CIT(A) THAT THE REVENUE IS IN APPEAL BEFORE US. 5 . IN THE COURSE OF HEARING, THE LEARNED DEPARTMENTAL REPRESENTATIVE (IN SHORT DR) RELIED UPON THE GROUNDS OF APPEAL RAISED, WHICH HAVE BEE N REPRODUCED IN THE EARLIER PART OF THIS ORDER. IN THIS CONTEXT, IT WAS PUT ACROSS TO THE LD. DR THAT THE GROUNDS OF APPEAL RAISED BY THE REVENUE ARE BASED ON THE HYPOTHESIS THAT THE PROPERTY IN QUESTION WAS STOCK - IN - TRADE AND THE BORROWINGS IN CONNECTI ON WITH THE IMPUGNED INTEREST EXPENDITURE WAS STATED TO BE FOR THE STATED PURPOSE OF BUSINESS 4 M/S. ASHRAY DWELLERS PVT. LTD. ITA NO. 2858/MUM/2013 EXPANSION . IN VIEW OF SUCH AVERMENTS IN THE GROUNDS OF APPEAL, IT WAS PUT ACROSS TO THE LD. DR THAT THE SAME MILITATES AGAINST THE VERY STAND OF THE ASSESSING OFFICER THAT DURING THE YEAR NO INCOME WAS ASSESSABLE UNDER THE HEAD OF BUSINESS INCOME WHICH HAD PROMPTED THE ASSESSING OFFICER TO ASSESS THE RENTAL INCOME AS WELL AS THE INTEREST INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY AND INCOME FROM OTHER SOURCES RESPECTIVELY. THE LD. DR MERELY REITERATED RELIANCE ON THE GROUNDS OF APPEAL AND FURTHER CONTENDED THAT THE IMPUGNED DIRECTION OF THE CIT(A) WAS NOT JUSTIFIED. 6 . ON THE OTHER HAND, THE LEARNED REPRESENTATIVE FOR THE ASSESSEE VEHEMENTLY POINTED OUT THAT THERE WAS NO ERROR ON THE PART OF THE CIT(A) IN ALLOWING THE ALTERNATE PLEA OF THE ASSESSEE THOUGH THE MAIN PLEA OF THE ASSESSEE THAT THE RENTAL INCOME AS WELL AS THE INTEREST INCOME WAS LIABLE TO BE ASSESSED AS BUSINESS INCOME WAS ACCEPTED IN EARLIER YEARS AND EVEN IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR 2008 - 09 , IN A REGULAR ASSESSMENT FRAMED U/S. 143(3) OF THE ACT, SUCH A POSITION HAS BEEN ACCEPTED. 7 . WE HAVE CAREFULLY CONSIDERED THE RIVAL STAN DS AND FIND NO MERIT IN THE PRESENT APPEAL OF THE REVENUE WHICH IS POINTEDLY DIRECTED AGAINST THE ACTION OF CIT(A) IN DIRECTING THE ASSESSING OFFICER TO CONSIDER THE INTEREST EXPENDITURE OF RS. 3,14,10,565/ - WHILE TAXING THE INCOMES UNDER THE HEAD INCOME FROM HOUSE PROPERTY AS WELL AS INCOME FR OM OTHER SOURCES WITH RESPECT TO THE RENTAL INCOME AND INTEREST INCOME RESPECTIVELY. EITHER IN LAW OR ON FACTS THE LD. DR HAS NOT GIVEN ANY COGENT REASONING TO DEMONSTRATE ANY INFIRMITY IN SUCH DIRECTION OF THE 5 M/S. ASHRAY DWELLERS PVT. LTD. ITA NO. 2858/MUM/2013 CIT(A) , WHICH WE HEREBY AFFIRM. ACCORDINGL Y, THE ORDER OF CIT(A) IS HEREBY AF FIRMED AND REVENUE FAILS IN ITS APPEAL. 8 . IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 2 4 T H FEBRUARY, 2016. SD/ - SD/ - ( JOGINDER SINGH ) JUDICIAL MEMBER ( G.S. PANNU ) ACCOUNTANT MEMBER MUMBAI, DATE : 2 4 T H FEBRUARY, 2016 COPY TO : 1) THE APPELLANT 2) THE RESPONDENT 3) THE CIT(A) CONCERNED 4) THE CIT CONCERNED 5) THE D.R, A BENCH, MUMBAI 6) GUARD FILE BY ORDER DY./ASSTT. REGISTRAR *SSL* I.T.A.T, MUMBAI