M/s. Neptune Associates, Vadodara V. The DCIT, Circle-1(2), Vadodara

ITA 2907/AHD/2017

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 8590 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-01-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 17-12-2019
• Assessment Year: 2014-2015
• Appeal Filed On: 26-12-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: MILIND MEHTA
• Keywords: Related party transaction; Business income; Business expenditure; Deemed to accrue or arise in india; Fair market value; Set aside
• Section: 143(3); 69A; 43

Judgement Text

, B IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER & SMT. MADHUMITA ROY, JUDICIAL MEMBER ./ I.T.A. NO. 2907/AHD/2017 ( ASSESSMENT YEAR : 2014-15) M/S. NEPTUNE ASSOCIATES 22/23, ROKADNATH SOCIETY, RACE COURSE CIRCLE (SOUTH), VADODARA - 390007 / VS. THE DEPUTY COMMISSIONER OF INCOME TAX CIRCLE 1(2), AAYAKAR BHAVAN, RACE COURSE, VADODARA 390 007 ./ ./ PAN/GIR NO. : AAAAN5530F ( APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI MILIND MEHTA, A.R. / RESPONDENT BY : SHRI VIDHYUT TRIVEDI, CIT.D.R. DATE OF HEARING 17/12/2019 !'# / DATE OF PRONOUNCEMENT 20/01/2020 / O R D E R PER PRADIP KUMAR KEDIA - AM: THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTANCE OF THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF I NCOME TAX (APPEALS)-4, VADODARA, (CIT(A) IN SHORT), DATED 2 7.09.2017 ARISING IN THE ASSESSMENT ORDER DATED 28.12.2016 PASSED BY THE ASSESSING OFFICER (AO) UNDER S. 143(3) OF THE INCOME TAX ACT, 1961 (THE ACT) CONCERNING AY 2014-15. ITA NO.2907/AHD/17 [M/S. NEPTUNE ASSOCIATES VS. DCIT] A.Y. 2014-15 - 2 - 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE REA D AS UNDER: 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) - 4, VADODARA ['THE C1T(A)'] ERRED IN FACT AND IN LAW IN CONFIRMING THE ACTION OF THE LEARNED DEPUTY COMMISSIONER OF IN COME TAX, CIRCLE-L(2), VADODARA ('THE AO') IN COMPUTING THE I NCOME OF THE APPELLANT AT RS.2,89,75,000/- 2. THE LEARNED CIT(A) ERRED IN FACT AND IN LAW IN CONFIRMING THE ACTION OF THE AO IN CONCLUDING THAT THE AMOUNT OF RS.2,89,75,000/- REPRESENTED DEEMED INCOME AND THER EFORE NO CLAIM OF EXPENDITURE WAS AVAILABLE FROM THE SAID IN COME. 3. WITHOUT PREJUDICE TO THE ABOVE, THE LEARNED CIT(A) ERRED IN FACT AND IN LAW IN CONFIRMING THE ACTION OF THE AO IN NO T ALLOWING THE CARRY FORWARD OF BUSINESS EXPENSES INCURRED DURING THE YEAR. 4. THE LEARNED CIT(A) ERRED IN FACT AND IN LAW IN CONFIRMING THE ACTION OF THE AO IN INVOKING THE PROVISIONS OF SECT ION 40A(2)(B) OF THE INCOME TAX ACT, 1961 ('THE ACT') AND MAKING DISALLOWANCE OF RS. 52,57,142/-. 3. THE ASSESSEE IS AN ASSOCIATION OF PERSON (AOP) ENGAGED IN BUSINESS OF TRANSACTIONS IN IMMOVABLE PROPERTIES. A SURVEY OPERATION WAS CONDUCTED ON 30.08.2013 IN THE CASE OF THE ASSE SSEE BY THE INVESTIGATION WING OF INCOME TAX DEPARTMENT. DURIN G THE COURSE OF SURVEY PROCEEDINGS, THE ASSESSEE DECLARED AN AMOUNT OF RS.2,89,75,000/- AS ITS UNDISCLOSED INCOME FOR THE FY 2013-14 RELEVANT TO AY 2014-15. THE ASSESSEE HONOURED THE SAID DISCLOSURE AND INCLUDED THE AFORESAID AMOUNT IN THE TURNOVER I .E. UNDER THE HEAD SALE OF LAND/PLOTS WHILE PREPARING THE P&L ACCOUN T AND FILING CONSEQUENT RETURN OF INCOME. THE ASSESSEE EVENTUAL LY DECLARED TOTAL INCOME AT RS.20,80,830/- IN THE HANDS OF THE ASSESS EE. THE RETURN SO FILED BY THE ASSESSEE WAS SUBJECTED TO SCRUTINY ASS ESSMENT. THE AO IN THE COURSE OF THE ASSESSMENT HELD THAT INCOME DECLA RED DURING THE COURSE OF SURVEY IS DEEMED INCOME AND THEREFORE N O SET OFF OF EXPENSES INCURRED OR SET OFF OF LOSSES ARISING UNDE R OTHER HEADS WOULD BE ALLOWABLE OUT OF ADMITTED UNDISCLOSED INCOME. T HE AO ACCORDINGLY DENIED CLAIM OF EXPENSES/LOSS UNDER OTHER HEADS FRO M BEING SET OFF AGAINST DEEMED INCOME ARISING ON ACCOUNT OF UNREC ORDED INCOME SO DECLARED. THE AO ALSO OBSERVED THAT SOURCE OF UNAC COUNTED INCOME IS ITA NO.2907/AHD/17 [M/S. NEPTUNE ASSOCIATES VS. DCIT] A.Y. 2014-15 - 3 - OBSCURE AND UNDISCLOSED. IT WAS ALSO ALLEGED THAT SAID UNDISCLOSED INCOME WAS UTILIZED BY THE ASSESSEE FOR UNRECORDED INVESTMENTS IN INSURANCE POLICIES OF ITS MEMBERS. THE AO ACCORDIN GLY ASSESSED AFORESAID AMOUNT OF RS.2,89,75,000/- DISCLOSED IN S URVEY SEPARATELY AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSES SEE. 4. WITH REFERENCE TO OTHER CONTROVERSY, THE AO OBSE RVED THAT ASSESSEE HAS CLAIMED INTEREST EXPENDITURE OF RS.2,8 1,97,399/- ON LOAN TAKEN FROM ITS ASSOCIATE CONCERN M/S. NEPTUNE REALT Y PVT. LTD. THE AO NOTICED THAT THE INTEREST WAS PAID ON LOANS @14. 75% PER ANNUM. IT WAS FURTHER NOTICED THAT LOAN TAKEN FROM THE ASS OCIATE CONCERN HAS BEEN INVESTED IN LAND AS WELL AS IN ADVANCES/INVEST MENT WHICH IS ITS PRIME BUSINESS. IN JUSTIFICATION OF THE RATE OF IN TEREST ON FUNDS BORROWED IN A RELATED PARTY TRANSACTION, IT WAS CON TENDED ON BEHALF OF THE ASSESSEE THAT LENDER M/S. NEPTUNE REALTY PVT. L TD. HAS ALSO PROCURED LOAN AT A SIMILAR RATE OF INTEREST OF 14.7 5% PER ANNUM AND CONSEQUENTLY, THE MONEY HAS BEEN LENT TO THE ASSESS EE AT THE SAME RATE WHICH IS TO BE RECORDED AS MARKET RATE AND THUS NO DISALLOWANCE SHOULD BE MADE BY APPLYING THE PROVISIONS OF SECTIO N 40A(2) OF THE ACT. THE AO HOWEVER DID NOT FIND MERIT IN THE JUST IFICATION ADVANCED BY THE ASSESSEE FOR HIGHER RATE OF INTEREST. THE A O OBSERVED THAT RATE OF INTEREST DEFERS FROM BANK TO BANK AND THERE WAS NO JUSTIFICATION TO BORROW MONEY FROM ASSOCIATE CONCERN AT HIGHER RATE INSTEAD OF BORROWAL OF MONEY AT LOWER RATE FROM OTHER ARMED LE NGTH PARTIES/BANKS. THE AO ACCORDINGLY ADOPTED INTERES T AT 12% PER ANNUM TO BE JUSTIFIED AND CONSEQUENTLY, FOUND AN AM OUNT OF RS.52,57,142/- INCURRED TOWARDS INTEREST TO BE EXCE SSIVE OR UNREASONABLE HAVING REGARD TO THE FAIR MARKET VALUE (FMV) OF THE FACILITY AND HAVING REGARD TO THE LEGITIMATE NEEDS OF THE BUSINESS OR PROFESSIONS OF THE ASSESSEE. BESIDES, THE AO ALSO JUSTIFIED THE INVOCATION OF PROVISIONS OF SECTION 40A(2) OF THE A CT ON THE GROUND THAT ADDITION ON THE SAME ISSUE WAS MADE IN AY 2013 -14 AS WELL WHICH DISALLOWANCE REMAINED UNAGITATED BY THE ASSESSEE BE FORE THE CIT(A). ITA NO.2907/AHD/17 [M/S. NEPTUNE ASSOCIATES VS. DCIT] A.Y. 2014-15 - 4 - THE AO ACCORDINGLY RESTRICTED THE CLAIM OF INTEREST EXPENDITURE @ 12% PER ANNUM AND ACCORDINGLY DISALLOWED RS.52,57,1 42/- UNDER S.40A(2) OF THE ACT. 5. AGGRIEVED BY THE ORDER OF THE AO ON BOTH COUNTS, THE ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A). HAVING RECORDE D THE SUBMISSIONS MADE ON BEHALF OF THE ASSESSEE IN DEFENDING ITS POS ITION, THE CIT(A) REFUSED ITS INDULGENCE ON BOTH POINTS. 6. AGGRIEVED BY THE DENIAL OF RELIEF SOUGHT BEFORE THE CIT(A), THE ASSESSEE PREFERRED APPEAL BEFORE THE TRIBUNAL. 7. WHEN THE MATTER WAS CALLED FOR HEARING BEFORE TH E TRIBUNAL, THE LEARNED AR FOR THE ASSESSEE FIRST ADVERTED TO THE I SSUE CONCERNING DEDUCTIBILITY OF EXPENSES/SET OFF OF LOSSES ETC. FR OM THE INCOME DECLARED IN THE COURSE OF SURVEY. IT WAS SUBMITTED BY THE LEARNED AR THAT THE ASSESSEE HAS DULY ABIDED BY THE DECLARATIO NS MADE IN THE COURSE OF THE SURVEY AND IT IS NOT A CASE WHERE INC OME DECLARED IN THE COURSE OF THE SURVEY WAS NOT SHOWN IN THE RETURN OF INCOME. THE ASSESSEE HAS DULY CREDITED UNDISCLOSED INCOME OF RS .289.75 LAKHS IN THE TURNOVER / RECEIPT AND THUS TOOK THE SAME INTO ACCOUNT WHILE COMPUTING THE NET PROFIT. 7.1 IT WAS SUBMITTED THAT THE CORE CONTROVERSY IS O N THE POINT AS TO WHETHER THE ASSESSEE WOULD BE ENTITLED TO CLAIM DED UCTION OF REGULAR EXPENSES INCURRED IN THE COURSE OF CARRYING ON OF I TS BUSINESS ACTIVITIES AND/OR SET OFF OF LOSSES ARISING UNDER O THER HEADS OF INCOME WHILE DETERMINING THE TAXABLE INCOME. THE LEARNED AR FOR THE ASSESSEE HARPED THAT THE INCOME DISCLOSED WAS BUSIN ESS INCOME OF THE ASSESSEE WHICH WAS GENERATED FROM VARIOUS TRANSACTI ONS CARRIED OUT IN REAL ESTATE WHEREIN THE ASSESSEE MERELY WORKED AS A N INTERMEDIARY. THE INCOME SO DECLARED WAS BUSINESS INCOME OF THE A OP AND THEREFORE ALL THE CONSEQUENCES OF DEDUCTION/SET OFF ETC. WOUL D PREVAIL WITH FULL ITA NO.2907/AHD/17 [M/S. NEPTUNE ASSOCIATES VS. DCIT] A.Y. 2014-15 - 5 - FORCE IN ACCORDANCE WITH LAW. IT WAS NEXT POINTED OUT THAT THE AO HAS CURIOUSLY TREATED THE SAME AS DEEMED INCOME OF TH E ASSESSEE. IN THIS REGARD, IT WAS ASSERTED THAT WHILE THE INCOME SO DE CLARED IN SURVEY WAS TREATED AS DEEMED INCOME, SUCH INCOME HAS TO BE N ECESSARILY CLASSIFIED UNDER ONE OR OTHER HEAD OF INCOME NOTIFI ED UNDER S.14 OF THE ACT. IT WAS SUBMITTED THAT THE DEEMED INCOME CANNO T FALL UNDER THE SIXTH HEAD OF INCOME OTHER THAN FIVE HEADS LEGISLAT ED UNDER S.14 OF THE ACT. THE LEARNED AR THUS SUBMITTED THAT THE TAXABI LITY OF AN INCOME FALLING UNDER ONE HEAD OR THE OTHER HAS TO BE DETER MINED AFTER GIVING FULL EFFECT TO THE PROVISIONS OF LAW AS APPLICABLE AT THE RELEVANT TIME. THE REVENUE AUTHORITIES CANNOT DENY DEDUCTION OF EX PENSES AND SET OFF OF LOSSES LEGITIMATELY AVAILABLE TO THE ASSESSEE UN DER VARIOUS HEADS BY ARTIFICIALLY DEEMING THE INCOME DECLARED UNDER SURV EY AS A SEPARATE CATEGORY OR TO BE A DISTINCT STREAM OF INCOME. THE LEARNED AR THEREAFTER SUBMITTED THAT THE INCOME DECLARED WAS B USINESS INCOME OF THE ASSESSEE DERIVED IN THE COURSE OF THE PROPERTY TRANSACTIONS AND NO MATERIAL HAS BEEN BROUGHT ON RECORD TO CONTROVERT T HE SOURCE OF INCOME DECLARED BY AOP. 7.2 THE LEARNED AR SUBMITTED THAT THE ISSUE IN HAND S IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION O F THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. SHILPA DYEING & PRINTING MILLS (P.) LTD. [2013] 219 TAXMAN 279 (GUJ). THE LEARNED AR ALSO RELIED UPON THE DECISION OF THE CO-ORDINATE BENCH OF TRIBU NAL IN THE CASE OF M/S. FASHION WORLD VS. ACIT ITA NO. 1634/AHD/2006; SWASTIK TEXTILES VS. ITO [2003] 1 SOT 327 (JODHPUR) AND JYOTI PRASAD MITTAL (HUF) VS. ACIT [2004] 3 SOT 787 (AGRA TRIB.) FOR THE PROPOSITION THAT INCOME DECLARED IN SURVEY HAS TO FALL UNDER ON E OR OTHER HEAD OF INCOME UNDER S.14 OF THE ACT AND CANNOT BE TAXED SE PARATELY AND SIMILARLY, CURRENT YEARS LOSS CAN BE SET OFF AGAIN ST UNDISCLOSED INCOME DECLARED IN SURVEY. ITA NO.2907/AHD/17 [M/S. NEPTUNE ASSOCIATES VS. DCIT] A.Y. 2014-15 - 6 - 7.3 THE LEARNED AR SUBMITTED THAT THE REVENUE AUTHO RITIES HAVE PROCEEDED ON MISCONCEPTION OF LAW AND HAVE WRONGLY APPLIED OBSERVATIONS OF HONBLE GUJARAT HIGH COURT IN THE C ASE OF FAKIR MOHMED HAJI HASAN VS. CIT [2001] 247 ITR 290 (GUJ) . 7.4 TO BUTTRESS ITS STAND OF ALLOWABILITY OF EXPEND ITURE AGAINST INCOME DECLARED IN SURVEY, THE ASSESSEE REFERRED TO THE PROVISIONS OF SECTION 115BBE OF THE ACT SUBSTITUTED BY TAXATION L AWS (SECOND AMENDMENT) ACT, 2016 W.E.F. AY 2017-18 AY 2017-18. IT WAS POINTED OUT THAT IN VIEW OF SUBSTITUTED PROVISIONS OF SECTI ON 115BBE(2) OF THE ACT, THE ASSESSEE IS NOT ENTITLED TO CLAIM ANY DEDU CTION IN RESPECT OF ANY EXPENDITURE OR ALLOWANCE OR SET OFF OF ANY LOSS WHILE COMPUTING THE INCOME ASSESSED UNDER S.68, 69, 69A OF THE ACT ETC. AS PROVIDED IN SECTION 115BBE(1) OF THE ACT. THE LEARNED AR SUBMI TTED THAT AS A COROLLARY TO SUCH AMENDMENT APPLICABLE PROSPECTIVEL Y FROM AY 2017- 18, ANY LEGISLATIVE EMBARGO IN RESPECT OF EARLIER A SSESSMENT YEARS CANNOT BE INFERRED IN DENYING THE LEGITIMATE CLAIMS OF DEDUCTIONS. 7.5 THE LEARNED AR THUS SUBMITTED THAT THE RELIEF C LAIMED BY THE ASSESSEE ON THIS SCORE REQUIRES TO BE ALLOWED WITHO UT ANY DEMUR IN SO FAR AS AY 2014-15 IS CONCERNED AND THE ORDER OF THE CIT(A) REQUIRES TO BE REVERSED. 8. ADVERTING TO SECOND ISSUE, THE LEARNED AR SUBMIT TED THAT THE ASSESSEE HAS REIMBURSED THE INTEREST EXPENDITURE @ 14.75% PER ANNUM AT WHICH ASSOCIATE CONCERN HAD OBTAINED THE FUNDS. THUS, THE ENTIRE TRANSACTIONS WAS AT ARM LENGTH AND THE INTEREST EXP ENDITURE INCURRED BY ASSESSEE DID NOT RESULT IN ANY BENEFIT TO THE ASSOC IATE CONCERN. IT WAS SUBMITTED THAT THE ISSUE IS SQUARELY COVERED IN FAV OUR OF THE ASSESSEE BY THE DECISION OF THE HONBLE GUJARAT HIGH COURT I N THE CASE OF CIT VS. SARJAN REALITIES LTD. [2014] 50 TAXMANN.COM 52 (GUJARAT), PR.CIT VS. CAMA HOTELS LTD. [2016] 68 TAXMANN.COM 153 (GUJ ARAT) AND CIT VS. ASHOK J. PATEL [2014] 43 TAXMANN.COM 227 (GUJ). THE LEARNED AR ITA NO.2907/AHD/17 [M/S. NEPTUNE ASSOCIATES VS. DCIT] A.Y. 2014-15 - 7 - SUBMITTED THAT THERE IS AN APPARENT FALLACY IN THE PLEA OF THE AO THAT ASSESSEE COULD HAVE BORROWED FUNDS AT CHEAPER RATE FROM OUTSIDE PARTIES. IT WAS SUBMITTED THAT SECTION 40A(2) OF T HE ACT DOES NOT PROVIDE DICTATE TO THE ASSESSEE FOR THE MANNER IN W HICH THE ASSESSEE SHOULD CONDUCT ITS BUSINESS. IT WAS FOR THE AO TO ASSESS FAIR MARKET PRICE AND GIVE COMPARATIVE INSTANCES TO ESTABLISH U NREASONABLENESS OR EXCESSIVENESS IN THE RATE OF INTEREST. THE AO HAS ONLY ACTED UPON CONJUNCTURES AND SURMISES WHICH ACTION CANNOT BE UP HELD IN LAW. THE LEARNED AR THUS SUBMITTED THAT RELIEF AS SOUGHT ON THE ISSUE IS JUSTIFIED BOTH ON LAW AND ON FACTS. 9. THE LEARNED DR FOR THE REVENUE, ON THE OTHER HAN D, RELIED UPON THE ORDERS OF THE LOWER AUTHORITIES. 10. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS. 11. AS PER ITS GROUNDS OF APPEAL, THE ASSESSEE HAS AGITATED THE ORDER OF THE LOWER AUTHORITIES ON TWO COUNTS; (I) ADMISSI BILITY OF DEDUCTION OF EXPENSES/SET OFF OF LOSSES AGAINST UNDECLARED IN COME ADMITTED IN SURVEY PROCEEDINGS AND (II) APPLICABILITY OF PROVIS IONS OF SECTION 40A(2) OF THE ACT OWING TO RELATIONSHIP BETWEEN THE LENDER ASSOCIATE CONCERN AND THE BORROWER ASSESSEE. 12. WE SHALL FIRST ADDRESS OURSELVES ON THE FIRST O BJECTION RAISED ON BEHALF OF THE ASSESSEE TOWARDS DEDUCTIBILITY OF EXP ENDITURE/SET OFF LOSSES OUT OF ADMITTED INCOME IN SURVEY PROCEEDINGS . 12.1 AS NOTED IN THE PRECEDING PARAS, THE ASSESSEE IS IN AOP ENGAGED IN THE BUSINESS OF TRANSACTION IN IMMOVABLE PROPERT IES. THE ASSESSEE HAS DECLARED AN AMOUNT OF RS.2,89,75,000/- AS ITS U NDISCLOSED INCOME IN THE COURSE OF SURVEY UNDER S.133A OF THE ACT AND CLAIMED THAT THE AFORESAID INCOME AROSE OUT OF TRANSACTIONS CARRIED IN IMMOVABLE PROPERTIES AS INTERMEDIARY. WHILE INCLUDING THE AFO RESAID UNDISCLOSED ITA NO.2907/AHD/17 [M/S. NEPTUNE ASSOCIATES VS. DCIT] A.Y. 2014-15 - 8 - INCOME, IN THE RETURN OF INCOME, THE ASSESSEE HAS A LSO SIMULTANEOUSLY CLAIMED CERTAIN EXPENDITURES AGAINST VARIOUS STREAM S OF INCOME DECLARED INCLUDING UNDISCLOSED INCOME. THE AO, HOW EVER, REFUSED TO GRANT DEDUCTION OF ANY EXPENDITURE INCURRED AGAINST INCOME DECLARED IN SURVEY. THE AO FURTHER DENIED SET OFF OF LOSSES ARISING UNDER OTHER HEADS AGAINST SUCH INCOME CONCEDED IN SURVEY. FOR DOING SO, THE AO TREATED THE ADMITTED INCOME OF RS.289.75 LAKHS AS DEEMED INCOME OF THE ASSESSEE AND RELIANCE WAS PLACED ON THE DECI SION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF FAKIR MOHMED HAJI HASAN VS. CIT [2001] 247 ITR 290 (GUJ) . 12.2 IN THIS REGARD, WE CLEARLY FIND MERIT IN THE P LEA ON BEHALF OF THE ASSESSEE THAT THE ASSESSEE IS ENTITLED TO CLAIM EXP ENDITURE INCURRED AS WELL AS SET OFF OF LOSSES. THE CASE OF ASSESSEE FO R DEDUCTIBILITY OF EXPENSES FINDS SUPPORT BY THE DECISION OF THE HONB LE GUJARAT HIGH COURT IN SHILPA DYEING & PRINTING MILLS (P.) LTD. (SUPRA) WHEREIN THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN FAKIR MOHMED HAJI HASAN (SUPRA) WAS DULY CONSIDERED. THE CO-ORDINATE BENCH OF TRIBUNAL IN M/S. FASHION WORLD (SUPRA), SWASTIK TEXTILES (SUPRA ) AND JYOTI PRASAD MITTAL (HUF) (SUPRA) HAVE ALSO RULED IN FAVOUR OF THE ASSESSEE IN SIMILAR CIRCUMSTANCES. 12.3 THE CASE MADE OUT BY THE REVENUE AUTHORITIES T HAT THE INCOME DECLARED IN SURVEY IS TO BE REGARDED AS DEEMED INC OME FALLING UNDER SEPARATE CATEGORY OTHER THAN THE HEADS OF INCOME PR ESCRIBED UNDER S.14 OF THE ACT AS PRIMA FACIE UNSUSTAINABLE. THE INCOME CONCEDED IN SURVEY HAS TO NECESSARILY FALL UNDER ONE HEAD OR TH E OTHER AS PROVIDED IN SECTION 14 OF THE ACT AND CONSEQUENTLY, ALL OTHE R PROVISIONS OF THE ACT WILL COME INTO PLAY IN ORDINARY MANNER WHILE DE TERMINING THE TAXABLE INCOME OF THE ASSESSEE. THE HONBLE GUJARA T HIGH COURT IN SHILPA DYEING & PRINTING MILLS (P.) LTD. (SUPRA) HAS CLEARLY HELD THAT CURRENT YEAR LOSSES CAN BE SET OFF AGAINST UNDISCLO SED INCOME DECLARED IN SURVEY. WE FURTHER FIND SUPPORT FOR SUCH PLEA F ROM THE PROVISIONS ITA NO.2907/AHD/17 [M/S. NEPTUNE ASSOCIATES VS. DCIT] A.Y. 2014-15 - 9 - OF SECTION 115BBE(2) OF THE ACT WHICH CLEARLY DEBAR S THE ASSESSEE FROM CLAIMING DEDUCTION IN RESPECT OF ANY EXPENDITU RE OR ALLOWANCE OR SET OFF OF ANY LOSS AGAINST SUCH DEEMED INCOME. HOWEVER, SUCH PROVISION HAS BEEN INSERTED PROSPECTIVELY W.E.F. AY 2017-18 AND THUS NOT APPLICABLE TO AY 2014-15 IN QUESTION. THE PLEA FOR DEDUCTIBILITY OF EXPENSES IS THUS VINDICATED BY THE SUBSEQUENT AM ENDMENT IN SECTION 115BBE(2) OF THE ACT AS WELL. 12.4 THE CIT(A) IN OUR VIEW HAS MIS-DIRECTED HIMSEL F IN LAW IN NOT ALLOWING THE SET OFF OF EXPENSES / LOSSES AGAINST S UCH INCOME ACCOUNTED FOR IN THE REGULAR BOOKS AFTER SURVEY. W E THUS FIND MERIT IN THE ISSUE RAISED BY THE ASSESSEE. THE ORDER OF THE CIT(A) IS ACCORDINGLY SET ASIDE AND THE AO IS DIRECTED TO GRA NT CLAIM OF DEDUCTION OF EXPENSES AND SET OFF OF LOSSES, IF ANY , AGAINST VARIOUS INCOME TOGETHER WITH INCOME CONCEDED DURING SURVEY AS PER THE PROVISIONS OF THE ACT. 13. GROUND NOS. 1 & 2 CONCERNING THE ISSUE ARE THUS ALLOWED. 14. GROUND NO.3 BEING ALTERNATIVE TO GROUND NOS. 1 & 2 DOES NOT REQUIRE TO ADJUDICATION. 15. GROUND NO.4 CONCERNS DISALLOWANCE OF INTEREST E XPENDITURE BY INVOKING THE PROVISIONS OF SECTION 40A(2)(B) OF THE ACT. 16. AS NOTED, THE ASSESSEE HAS BORROWED MONEY FROM ITS SISTER CONCERN ON WHICH INTEREST HAS BEEN PAID @ 14.75% PE R ANNUM WHICH IS AT PAR WITH THE RATE AT WHICH THE SISTER CONCERN, I N TURN, HAD BORROWED MONEY FROM OTHER PARTIES/BANKS. THE AO HAS CONSIDE RED THE INTEREST RATE OF 12% TO BE REASONABLE AND BALANCE INTEREST P AID WAS CONSIDERED TO BE EXCESSIVE OR UNREASONABLE HAVING REGARD TO TH E FMV OF SERVICES/FACILITY. WE SEE TOTAL LACK OF JUSTIFICAT ION IN SUCH ACTION OF THE REVENUE AUTHORITIES. THE ASSESSEE, IN THE INST ANT CASE, HAS CLEARLY ITA NO.2907/AHD/17 [M/S. NEPTUNE ASSOCIATES VS. DCIT] A.Y. 2014-15 - 10 - PROVED JUSTIFICATION FOR PAYMENT OF INTEREST @ 14.7 5% PER ANNUM WHICH IS THE COST INCURRED BY THE LENDER AS WELL. THE SISTER CONCERN HAS NOT PER SE PROFITED FROM SUCH ARRANGEMENT. THE TRANSACTIONS A RE THUS APPARENTLY ARM LENGTH. THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN SARJAN REALITIES LTD. (SUPRA) . WE THUS REVERSE THE ACTION OF THE LOWER AUTHORITIES AND DIRECT THE AO TO DELETE THE ADDITIO N ON THIS SCORE. 17. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. SD/- SD/- (MADHUMITA ROY) (PRADIP KUMAR K EDIA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: DATED 20/01/2020 TRUE COPY S. K. SINHA !'#' / COPY OF ORDER FORWARDED TO:- &. / REVENUE 2. / ASSESSEE (. )*+ , / CONCERNED CIT 4. ,- / CIT (A) /. 012 33*+4 *+#4 56) / DR, ITAT, AHMEDABAD 7. 289 : / GUARD FILE. BY ORDER / 4 /5 *+#4 56) THIS ORDER PRONOUNCED IN OPEN COURT ON 20/01/202 0