ACIT, New Delhi V. Smt. Pooja Wadia, Delhi

ITA 3072/DEL/2010

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 69158 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 1 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-08-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 13-06-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 18-06-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BHIM SINGH
• Assessee Lawyers: H P SINGH
• Keywords: Revised return
• Section: 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: F NEW DELHI BEFORE SHRI U. B. S. BEDI, JUDICIAL MEMBER AND SHRI J. S. REDDY, ACCOUNTANT MEMBER I.T.A. NO. 3072/DEL/2010 ASSESSMENT YEARS: 2007-08 ACIT VS. SMT. POOJA WADIA, CIRCLE 34 (1), BLOCK G, B-36,MOHAN PARK, VIKASH BHAVAN, NAVEEN SHAHDARA, NEW DELHI. DELHI-110053. PAN: AAGPW9442A (APPELLANT) (RESPONDENT) REVENUE BY : SHRI BHIM SINGH, SR.DR. ASSESSEE BY : SHRI. H. P. SINGH, ADV. ORDER PER J. S. REDDY, AM : THIS IS AN APPEAL FILED BY THE REVENUE DIRECTED AGA INST THE ORDER OF LD. CIT (A)-XXVII, NEW DELHI, DATED 20.01.2010 FOR THE A.Y. 2007-08. 2. THE ASSESSEE IS INDIVIDUAL AND HAS FILED HER RET URN OF INCOME FOR THE 2007-08 ON 11.06.2008 DECLARING INCOME OF RS.3,34,4 30/-. THIS WAS A BELATED RETURN. LATER, THE ASSESSEE FILED REVISED R ETURN ON 31.03.2009 DECLARING TOTAL INCOME OF RS.6,84,009/-. THE AO DEC LARED THE REVISED RETURN I.T.A. NO. 3072/DEL/2010 2 AS NONEST IN LAW AS THE ORIGINAL RETURN OF INCOME W AS FILED BELATEDLY. HE CONSIDERED THE INFORMATION FURNISHED IN THIS REVISE D RETURN AS INFORMATION WHILE FINALIZING THE ASSESSMENT. THE ASSESSMENT WAS BASED ON THE ORIGINAL RETURN OF INCOME. THE ISSUE BEFORE US IS THE ALLOWA BILITY TO INTEREST PAID BY THE ASSESSEE IN WADIA HOTEL PVT. LTD. THE AO DISALL OWED THE SAME. THE CIT (A) ALLOWED THE SAME. 3. WE HAVE HEARD, MR. BHIM SINGH THE SR. DR ON BEHA LF OF THE REVENUE AND MR. H.P. SINGH, THE LD. COUNSEL FOR THE ASSESSE E. 4. THE FACTS OF THE ISSUE ARE BROUGHT OUT BY THE LD . CIT (A) AT PARA 4.1 AND 4.2 OF HIS ORDER. IT HAS BEEN OBSERVED BY THE A SSESSING OFFICER THAT IN THE RETURN OF INCOME, THE ASSESSEE HAS SHOWN INCOME UND ER THE HEAD PROFIT & GAINS FROM BUSINESS OR PROFESSION OF RS.2,87,342/- , AFTER DEDUCTING RS.18,00,000/- AS INTEREST PAID, OUT OF INTEREST RE CEIVED OF RS.20,87,342/- FROM M/S JAI KRISHAN WINES DELHI, IN WHICH SHE IS A PARTNER. DURING THE COURSE OF HEARING VIDE ORDER SHEET ENTRY DATED 29.1 0.2009 THE AUTHORISED REPRESENTATIVE OF THE ASSESSEE WAS REQUIRED TO EXPL AIN HOW THE CLAIM OF INTEREST PAID OF RS.18,00,000/- IS ALLOWABLE AS EXP ENDITURE AGAINST INCOME SHOWN UNDER THE HEAD PROFIT & GAINS FROM BUSINESS/ PROFESSION. SHE WAS ALSO REQUESTED TO FURNISH THE DETAILS OF EXPENSES C LAIMED AS INTEREST PAID. IN I.T.A. NO. 3072/DEL/2010 3 THE REPLY DATED 13.11.2009, THE AUTHORIZED REPRESEN TATIVE OF THE ASSESSEE HAS SUBMITTED AS UNDER: A. ASSESSEE RECEIVED LOAN OF RS.1 CRORE @ 12% P.A. FR OM SH. ASHISH WADIA ON 24.03.2006 AND ADVANCED THE SAME AS LOAN T O M/S WADIA HOTELS (P) LTD. @ 4% P.A. THUS, ASSESSEE PAID RS.12 LAKHS AS INTEREST ON LOAN TO SH. ASHISH WADIA. B. ASSESSEE ALSO RECEIVED LOAN OF RS.50 LAKHS @ 12% P.A. FROM SH. AHOK WADIA ON 27.03.2006 AND INVESTED THE SAME AS CAPITA L WITH M/S JAI KRISHAN WINES, DELHI. THUS, THE ASSESSEE PAID RS.6 LAKHS AS INTEREST ON LAON TO SH. ASHOK WADIA. C. ASSESSEE ALSO RECEIVED INTEREST FREE LOAN OF RS. 30 LAKHS ON 18.04.2006 AND RS.1 CRORE ON 19.04.2006 FROM SH. ANIL WADIA AN D INVESTED THE SAME AS CAPITAL WITH M/S JAI KRISHAN WINES, DELHI. THE ASSESSEE WHILE FILING INCOME TAX RETURN HAS DED UCTED ABOVE PAYMENT OF RS.18 LAKHS TO SH. ASHISH WADIA AND SH. ASHOK WADIA FROM INTEREST ON CAPITAL FROM M/S JAI KRISHAN WINES , DELHI. EVEN IF INTEREST PAYMENT OF RS.12 LAKHS TO SH. ASHISH WADIA WAS DEDUCTED OUT OF INTEREST INCOME FROM M/S WADIA HOTELS (P) LTD., THERE WOULD NOT HAVE ANY EFFECT ON TOTAL TAXABLE INCOME OF THE ASSE SSEE. I.T.A. NO. 3072/DEL/2010 4 D. BANK RECOVERED INTEREST OF RS.50,333/- ON PRE MA TURITY OF FIXED DEPOSIT. THE SAME WAS SHOWN AS INCOME IN EARLIER YE AR. ASSESSEE HAS DEDUCTED THIS RECOVERY OF INTEREST BY BANK FROM HER INTEREST INCOME. THE COPY OF CAPITAL ACCOUNT OF THE ASSESSEE WITH M /S JAI KRISHAN WINES, DELHI HAS ALSO BEEN SUBMITTED, WHICH IS REPR ODUCED AS UNDER: DATE PARTICULARS DR. CR. BALANCE 01.04.2006 CASH (WITHDRAWN FROM BANK DATED 27.03.2006 FBD. 50,00,000 50,00,000 18.04.2006 CH. 10145 RECEIVED AT PNB, SONIPAT 30,00,000 80,00,000 19.04.2006 CH. 10146 DEPOSITED IN BOB, FBD 1,00,00,000 1,80,00,000 31.03.2007 INTEREST ON CAPITAL @ 12% P.A. 20,78,342 2,00,87,3 42 31.03.2007 SHARE OF PROFIT @ 20% 26,49,067.63 2,27,36,409.63 BALANCE AS ON 31.03.2007 CR. 2,27,36,409.63 FROM THE CAPITAL ACCOUNT OF THE ASSESSEE WITH M/S JAI KRISHAN WINES, DELHI AND THE REPLY SUBMITTED BY THE AUTHORIZED REP RESENTATIVE OF THE ASSESSEE, IT IS QUITE CLEAR THAT THE AMOUNT OF RS.5 0 LAKHS TAKEN AS LOAN FROM SH. ASHOK WADIA, AND THE INTEREST FREE LOAN OF RS.1 ,30,00,000/- TAKEN FROM SH. ANIL WADIA HAS BEEN UTILIZED AS CAPITAL IN THE ABOVE FIRM. THEREFORE, THE INTEREST PAID OF RS.6 LAKHS ON THE LOAN OF RS.50 LA KHS FROM SH. ASHOK WADIA IS ALLOWABLE EXPENDITURE AND THE INTEREST OF RS.12 LAKHS PAID TO SH. ASHISH WADIA IS NOT ALLOWABLE EXPENDITURE AS THE FUNDS REC EIVED FROM SH. ASHISH I.T.A. NO. 3072/DEL/2010 5 WADIA, WERE NOT INVESTED IN THE CAPITAL WITH M/S JA I KRISHAN WINES, DELHI. HERE, IT IS RELEVANT TO MENTION THAT AS PER PROVISI ON OF SECTION 37 (1) OF THE ACT, ACCORDING TO WHICH, ANY EXPENDITURE, LAID OUT OR EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE BUSINESS SHALL B E ALLOWED IN COMPUTING THE INCOME UNDER THE HEAD PROFIT & GAINS OF BUSINESS O R PROFESSION. THE REPLY OF THE ASSESSEE THAT, EVEN IF INTEREST PAYMENT OF RS.12 LAKHS TO SH. ASHISH WADIA WAS DEDUCTED OUT OF INTEREST IN COME FROM M/S WADIA HOTELS (P) LTD. THERE WOULD NOT HAVE ANY EFFECT ON TOTAL TAXABLE INCOME OF THE ASSESSEE WILL BE DISCUSSED WHILE COMPUTING THE INCOME UNDER THE HEAD INCOME FROM OTHER SOURCES. BUT, CERTAINLY THIS IS NOT AN ALLOWABLE EXPENSE UNDER THE HEAD INCOME FROM BUSINESS & PROFESSION. IN VIEW OF THE ABOVE FACTS AND POSITION OF LAW, TH E INTEREST OF RS.12 LAKHS PAID TO SH. ASHISH WADIA ON THE LOAN OF RS.1 CRORE AND ADVANCED THE SAME TO M/S WADIA HOTELS (P) LTD. @ 4%, IS NOT ALLO WABLE EXPENDITURE UNDER THE HEAD PROFIT & GAINS FROM BUSINESS OR PRO FESSION AS CLAIMED BY THE ASSESSEE. HENCE, THE SAME IS DISALLOWED AND ADD ED BACK TO THE INCOME OF THE ASSESSEE. THE LD. AO HELD AS FOLLOWS: 5. THE ISSUE IS WHETHER THE CLAIM FOR DEDUCTION OF INTEREST PAYMENT OF 12 LAKH TO SH. ASHISH WADIA IS ALLOWABLE OR NOT. AT PA GE 4 PARA 5 OF THE ORDER I.T.A. NO. 3072/DEL/2010 6 THE AO DID NOT ALLOW THE CLAIM OF RS.12 LAKH UNDER THE HEAD INCOME FROM OTHER SOURCES ON THE GROUND THAT THE CLAIM HAS NOT BEEN MADE IN THE RETURN OF INCOME FILED AS NO INCOME IS DECLARED UNDER THE HEA D INCOME FROM OTHER SOURCES. (A) THAT IN THE RETURN OF INCOME FILED ON 11.06.20 08, THE ASSESSEE HAD NOT SHOWN ANY INCOME UNDER THE HEAD INCOME FRO M OTHER SOURCES. (B) IN THE REVISED RETURN, WHICH IS A NONEST RETUR N AS DISCUSSED ABOVE, THOUGH THE ASSESSEE HAS SHOWN THE INTEREST I NCOME OF RS.4,00,000/- RECEIVED FROM M/S WADIA HOTELS (P) LT D. UNDER THE HEAD INCOME FROM OTHER SOURCES. BUT THE DEDUCTION OF R S.12 LACS INTEREST PAID TO SH.ASHISH WADIA HAS HIMSELF NOT BEEN CLAIME D. (C) THE ARGUMENT OF THE ASSESSEE TO ALLOW THE EXPEN DITURE OF INTEREST PAYMENT OF RS.12 LACS TO SH. ASHISH WADIA ON THE LOAN OF RS. 1 CRORE IS ALSO NOT ACCEPTABLE IN VIEW OF THE FACTS THAT HE HAS ADVANCED THE SAME MONEY TO M/S WADIA HOTELS (P) LTD . @ 4% AND HAS EARNED THE INTEREST INCOME OF RS.4,00,000/- ONL Y. IF, HE WOULD HAVE CLAIMED THIS EXPENDITURE AGAINST THE INCOME SHOWN U NDER THE HEAD INCOME FROM OTHER SOURCES, THE SAME MAY BE AN ALL OWABLE EXPENDITURE UPTO THE EXTENT OF RS.4,00,000/- ONLY. FURTHER, THE I.T.A. NO. 3072/DEL/2010 7 ASSESSEE HAS FAILED IN CLAIMING THE SAME IN HIS RET URN OF INCOME, IT CAN NOT BE ALLOWED NOW, IN VIEW OF THE HONBLE SUPREME COURT DECISION IN THE CASE OF GOEDZE (INDIA) LTD. V/S CIT (2006) 284 ITR, 323 (SC). IT HAS BEEN HELD THAT AFTER FILING RETURN IF THE ASSES SEE HAS TO CLAIM THE DEDUCTION HE HAS TO FILE REVISE RETURN IF THE ASSES SEE CLAIMS DEDUCTION BY MERE FILING AN APPLICATION AO WOULD BE JUSTIFIED IN REJECTING THE CLAIM. IN VIEW OF THE ABOVE FACTS, THIS PLEA TAKEN BY TH E AR OF THE ASSESSEE IS AN AFTERTHOUGHT TO BRING DOWN THE TAX I NCIDENT AND TO AVOID THE DUE TAX BECAUSE THIS CLAIM HAS NEITHER BEEN MAD E IN THE ORIGINAL RETURN WHICH IS A BELATED ONE NOR IN THE RETURN FIL ED ON 31.03.2009, WHICH IS A NONEST RETURN. ON THE ABOVE GROUNDS THE CLAIM OF THE ASSESSEE IS REJECTED AND INCOME UNDER THE HEAD INC OME FROM OTHER SOURCES IS TAKEN AT RS.3,49,667/- ON THE BASIS OF INFORMATION AVAILABLE ON RECORD FURNISHED BY THE ASSESSEE IN TH E SHAPE OF A REVISED RETURN WHICH IS A NONEST ONE. 6. ON APPEAL THE LD. CIT (A) ALLOWED THE CLAIM BY FOLLOWING AT PAGE 6 & 6.1 OF THIS ORDER: 6. I HAVE CAREFULLY GONE THROUGH THE SUBMISSIONS M ADE BY THE APPELLANT AS WELL AS THE FINDINGS OF THE ASSESSING OFFICER. THE ASSESSEE HAS ALREADY CLAIMED THE DEDUCTION OF INTEREST PAYME NT OF RS.12 LAKHS I.T.A. NO. 3072/DEL/2010 8 TO SH. ASHISH WADIA IN THE ORIGINAL RETURN. HOWEVER IT IS TRUE THAT INADVERTENTLY THE SAME WAS CLAIMED AS DEDUCTION FRO M THE HEAD PROFIT AND GAINS FROM BUSINESS OR PROFESSION INSTEAD OF IN COME FROM OTHER SOURCES. THIS IS MERELY A TYPOGRAPHICAL ERROR WHICH ULTIMATELY DOES NOT HAVE ANY EFFECT ON TOTAL INCOME OF THE ASSESSEE . 6.1. IT IS OBSERVED THAT MOREOVER, THE ARGUMENTS OF THE ASSESSING OFFICER THAT IF THE ASSESSEE WOULD HAVE CLAIMED THI S EXPENDITURE OF INTEREST PAYMENT OF RS.12 LAKHS AGAINST THE INCOME SHOWN UNDER THE HEAD INCOME FROM OTHER SOURCES, THE SAME MAY BE A N ALLOWABLE EXPENDITURE UPTO THE EXTENT OF INTEREST INCOME OF R S.4 LAKHS ONLY U/S 57 (III). THIS IS NOT A JUSTIFIED ARGUMENT IN VIEW OF THE HONBLE SUPREME COURT DECISION IN THE CASE OF CIT VS. RAJEN DRA PRASAD MOODY (1978) 115 ITR 519 (SC). IT STATES THAT WHAT SEC. 57 (III) REQUIRES IS THAT THE EXPENDITURE MUST BE LAID OUT O R EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF MAKING OR EARNIN G INCOME. IT IS THE PURPOSE OF THE EXPENDITURE THAT IS RELEVANT IN DETE RMINING THE APPLICABILITY OF SECTION 57 (III) AND THAT PURPOSE MUST BE MAKING OR EARNING OF INCOME. SECTION 57(III) DOES NOT REQUIRE THAT THIS PURPOSE MUST BE FULFILLED IN ORDER TO QUALIFY THE EXPENDITU RE FOR DEDUCTION. IT DOES NOT SAY THAT THE EXPENDITURE SHALL BE DEDUCTIB LE ONLY IF ANY INCOME IS MADE OR EARNED. THERE IS IN FACT NOTHING IN THE LANGUAGE OF SECTION 57 (III) TO SUGGEST THAT THE PURPOSE FOR WH ICH THE EXPENDITURE IS MADE SHOULD FRUCTIFY INTO ANY BENEFIT BY WAY OF RET URN IN THE SHAPE OF INCOME. THE PLAIN NATURAL CONSTRUCTION OF THE LANGU AGE OF SECTION 57(III) IRRESISTIBLY LEADS TO THE CONCLUSION THAT T O BRING A CASE WITHIN THE SECTION, IT IS NOT NECESSARY THAT ANY INCOME SH OULD IN FACT HAVE BEEN EARNED AS A RESULT OF THE EXPENDITURE. THUS TH E ARGUMENT OF THE I.T.A. NO. 3072/DEL/2010 9 ASSESSING OFFICER TO RESTRICT THE ALLOWABILITY OF E XPENDITURE OF INTEREST PAYMENT OF RS.12 LAKHS IF ALLOWABLE TO THE EXTENT O F INTEREST INCOME OF RS.4 LAKHS FROM M/S WADIA HOTELS (P) LTD. IS ABSOLU TELY WRONG. I, THEREFORE, DELETE THE ABOVE ADDITION OF RS.12 L AKHS FROM THE TOTAL INCOME OF THE ASSESSEE. 7. ON CONSIDERING RIVAL CONTENTIONS, WE UPHOLD THE ORDER OF THE LD. CIT (A) FOR THE REASON THAT THE ASSESSEE HAS CLAIMED TH IS EXPENDITURE IN THE RETURN OF INCOME, THROUGH UNDER A DIFFERENT HEAD AND IN SU CH CIRCUMSTANCES THE JUDGMENT IN THE CASE OF GOETZE (INDIA) VS. CIT 284 ITR 325 DOES NOT APPLY. THE CLAIM IS ALLOWABLE BY APPLYING THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. RAJENDRA PRASAD MOODY 115 ITR 519 (SC). 8. HENCE WE DISMISS THIS APPEAL OF THE REVENUE. ORDER PRONOUNCED IN THE OPEN COURT ON 02/08/2013. SD/- SD/- ( U. B. S. BEDI ) (J. S. REDDY) JUDICIAL MEMBER ACCOUNTANT ME MBER DATED: 2/08/2013 *AK VERMA* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR