DIVINE DEVELOPERS, MUMBAI V. ITO 15(2)(2), MUMBAI

ITA 3095/MUM/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 71978 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-12-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 18-12-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 07-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: DR K SHIVARAM; NEELAM C JADHAV
• Keywords: Business expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH D , MUMBAI BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI SANJAY GARG , JUDICIAL MEMBER ITA NO. 3095/M/12 ASSESSMENT YEAR: 2006 - 07 M/S. DIVINE DEVELOPERS A - 501, KOTIA NIRMAN, OPP. LAXMI INDL. ESTATE , NEW ANDHERI LINK ROAD, ANDHERI (W) MUMBAI 400 053 PAN: AAKFM5243K VS. I.T.O. 15(2)(2) , MATRU MANDIR, MUMBAI 3 4 (APPELLANT) (RESPONDENT) ASSESSEE BY : DR. K. SHIVARAM & MS. NEELAM C. J ADHAV REVENUE BY : SHRI SANJEEV JAIN, D.R. DATE OF HEARING : 18.12. 20 13 DATE OF PRONOUNCEMENT : 18.12.2013 O R D E R PER SANJAY GARG, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT(A) DATED 19.1 2.11 RELEVANT TO ASSESSMENT YEAR 2006 - 07. GROUND NO.1 THE GROUND NO.1 TAKEN BY THE ASSESSEE IN ITS APPEAL IS REPRODUCED AS UNDER: 1. THE LEARNED CIT(A) ERRED IN CONFIRMING THE ORDER OF THE ASSESSING OFFICER WHEREIN HE IS NOT ALLOWED SET OFF OF BUSINESS LOSS OF THE CURRENT YEAR AMOUNTING TO RS.10,38,074/ - AND CARRIED FORWARD BUSINESS LOSS OF RS.1,14,829/ - AGAINST THE INTEREST INCOME OF RS.15,69,116/ - ASSESSING THE SAID INCOME AS INCOME FROM OTHER SOURCES AS AGAINST THE SAID INTEREST INCOME WAS SHOWN AS B U SINESS INCOME BY THE ASSESSEE. 2. THE ASSESSEE FIRM IS ENGAGED IN THE BUSINESS OF BUILDER AND REAL ESTATE DEVELOPMENT. DURING THE ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER (HEREIN ITA NO .3095/M/12 M/S. DIVINE DE VELOPERS 2 AFTER REFERRED TO AS AO) NOTICED THAT THE ASSESSEE F IRM HAD SET OFF BUSINESS EXPENDITURE OF RS.10,38,074/ - AND CARRIED FORWARD LOSSES OF RS.1,14,829/ - AGAINST THE INTEREST INCOME OF RS.15,69,116/ - FROM BANK . THE AO OBSERVED THAT THE INTEREST INCOME FALLS UNDER THE HEAD INCOME FROM OTHER SOURCES AND COULD NOT SET OFF AG AINST THE BUSINESS LOSSES. HE THEREFORE DISALLOWED THE SET OFF AND TAXED THE INTEREST INCOME OF RS.15,69,116/ - AS INCOME FROM OTHER SOURCES AND FURTHER THE BUSINESS LOSSES WERE ALLOWED TO BE CARRIED FORWARD FOR NEXT YEARS. IN THE FIRST APPEAL , THE LD. C IT(A) CONFIRMED THE ACTION OF THE AO IN DOING SO. 3. DR. K. SHIVARAM, T HE LD. A.R. HAS BROUGHT OUR ATTENTION TO SECTION 71(1) OF THE INCOME TAX ACT WHEREIN IT HAS BEEN PROVIDED THAT THE LOSSES OTHER THAN UNDER THE HEAD CAPITAL GAINS CAN BE SET OFF AGA INST THE INCOME OF THE ASSESSEE FOR THAT VERY ASSESSMENT YEAR UNDER ANY OTHER HEAD. FOR THE SAKE OF CONVENIENCE SAID SECTION 71(1) OF THE INCOME TAX ACT IS REPRODUCED AS UNDER: SET OFF OF LOSS FROM ONE HEAD AGAINST INCOME FROM ANOTHER. 71. (1) WHERE IN RESPECT OF ANY ASSESSMENT YEAR THE NET RESULT OF THE COMPUTATION UNDER ANY HEAD OF INCOME, OTHER THAN CAPITAL GAINS, IS A LOSS AND THE ASSESSEE HAS NO INCOME UNDER THE HEAD CAPITAL GAINS, HE SHALL, SUBJECT TO THE PROVISIONS OF THIS CHAPTER, BE ENTIT LED TO HAVE THE AMOUNT OF SUCH LOSS SET OFF AGAINST HIS INCOME, IF ANY, ASSESSABLE FOR THAT ASSESSMENT YEAR UNDER ANY OTHER HEAD. 4. T H E LD. A.R. FOR THE ASSESSEE HAS BEEN FAIR ENOUGH TO ADMIT THAT THE CARRIED FORWARD LOSSES OF THE EARLIER YEARS COULD NO T BE SET OFF AGAINST THE INTEREST INCOME FOR THE ASSESSMENT YEAR IN CONSIDERATION. HOWEVER, IN VIEW OF THE SPECIFIC PROVISIONS OF SECTION 71(1) , THE ASSESSEE HAS BEEN ENTITLED TO CLAIM THE SET OFF OF BUSINESS LOSSES AGAINST THE INTEREST INCOME OF THE RELE VANT ASSESSMENT YEAR. ACCORDINGLY, THE SET OFF OF BUSINESS LOSSES OF CURRENT YEAR ITA NO .3095/M/12 M/S. DIVINE DE VELOPERS 3 AMOUNTING TO RS.10,38,074/ - IS HEREBY DIRECTED TO BE ALLOWED. GROUND NO.1 OF THE APPEAL IS THUS PARTLY ALLOWED IN FAVOUR OF THE ASSESSEE. GROUND NO.2 THE GROUND NO.2 OF THE APPEAL IS REPRODUCED AS UNDER: 2. WITHOUT PREJUDICE TO THE ABOVE, INTEREST INCOME OF RS.15,69,116/ - EARNED FROM PUNJAB NATIONAL BANK AUTO SWEEP A/C. AND THE ASSESSEE PAID INTEREST OF RS.2,84,62,245/ - IN RESPECT OF THE BORROWED MONEY WHICH WAS USED F OR THE PURPOSE OF EARNING INTEREST INCOME, AS THERE IS DIRECT NEXUS, INTEREST PAYMENT IS MORE THAN INTEREST EARNED, THE SAME MAY BE SET OFF AGAINST INTEREST PAID AND THE INCOME ASSESSED AS INCOME FROM OTHER SOURCE MAY BE DEL ETED. THE GROUND NO.2 HAS BEE N TAKEN BY THE ASSESSEE AS AN ALTERNATIVE TO GROUND NO.1. THE ASSESSEE HAS CLAIMED THAT AGAINST THE INTEREST INCOME FROM THE BANK , THE ASSESSEE BE ALLOWED TO CLAIM SET OFF OF INTEREST PAID OF RS.2,84,62,245/ - IN RESPECT OF BORROWED MONEY WHICH WAS USED FO R THE PURPOSE OF PENDING INTEREST INCOME. THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THERE WAS A DIRECT NEXUS BETWEEN THE INTEREST PAYMENT AND THE INTEREST EARNED AND THE SAME IS REQUIRED TO BE SET OFF AND THE ADDITION MADE BY THE AO ON ACCOUNT O F INTEREST INCOME BE DELETED. 5. THE LD. A.R. HAS BROUGHT OUR ATTENTION TO THE LETTER DATED 03.10.11 PLACED AT PAGE NO.15 OF THE PAPER BOOK TO STRESS THAT THIS POINT WAS RAISED BEFORE THE LD. CIT(A) ALSO BUT THE LD. CIT(A) FAILED TO GIVE ANY FINDING IN THIS RESPECT. ON THE OTHER HAND LD. D.R. HAS STRESSED THAT THIS ISSUE WAS NOT TAKEN BY THE ASSESSEE IN ITS GROUNDS OF APPEAL BEFORE THE LD. CIT(A). 6. WE HAVE CONSIDERED THE SUBMISSIONS OF THE LD. REPRESENTATIVES OF BOTH THE PARTIES AND HAVE ALSO GONE THROUGH THE RECORDS. THE ASSESSEE HAS CLAIMED THAT THE ASSESSEE HAD PAID INTEREST ON THE BORROWED MONEY WHICH WAS USED FOR ITA NO .3095/M/12 M/S. DIVINE DE VELOPERS 4 EARNING THE INTEREST INCOME FROM THE BANK AND HE HAS FURTHER CLAIMED THAT THERE WAS A DIRECT NEXUS BETWEEN THE INTEREST PAID AND THE INTEREST INCOME. HE HA S ALSO RAISED THIS ISSUE BEFORE THE LD. CIT(A) AS IS EVIDENT FROM THE LETTER DATED 03.10.11 PLACED AT PAGE 15 OF THE PAPER BOOK FILED BY THE ASSESSEE. IT MAY BE OBSERVED THAT THIS SUBMISSION OF THE ASSESSEE HAS NEITHER BEEN CONSI DERED BY THE AO NOR BY THE LD. CIT(A). IF THE ASSESSEE HAS A GENUINE CLAIM OF SET OFF OF INTEREST PAID AGAINST THE INTEREST INCOME THEN HE MUST BE ALLOWED THE BENEFIT OF THE SAME. WE ACCORDINGLY REMAND THE CASE TO THE FILE OF THE AO TO DECIDE THIS LIMITE D ISSUE OF SET OFF OF INTEREST PAID AGAINST THE INTEREST INCOME. IF THE ASSESSEE WILL BE ABLE TO PROVE THAT THERE HAD BEEN A NEXUS BETWEEN THE INTEREST PAID AND THE INTEREST INCOME THEN THE AO WILL ALLOW THE CLAIM FOR THE SAME , SUBJECT TO THE CONDITION TH AT THE ASSESSEE WILL NOT BE ENTITLED TO ANY BENEFIT MORE THAN OR BEYOND THE RETURNED INCOME IN HIS INCOME TAX RETURN. MEANING THEREBY , THE ASSESSEE WILL NOT BE ENTITLED TO ANY RELIEF/TAX BENEFIT OUT OF THE TAX PAID BY HIM AS PER HIS SELF ASSESSED RETURN O F INCOME AND WILL NOT BE ENTITLED TO ANY REFUND ETC. AGAINST HIS RETURNED INCOME. THIS ISSUE IS ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSES. 7. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUN CED IN THE OPEN COURT ON 18/12/ 2013. SD/ - SD/ - (D. K ARUNAKARA R AO ) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 18/12/ 2013. * KISHORE ITA NO .3095/M/12 M/S. DIVINE DE VELOPERS 5 COPY TO : THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT ( A) CONCERNED, MUMBAI THE DR C BENCH //TRUE COPY// [ BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.