TOWNSHIP REAL ESTATE DEV ELOPERS (INDIA) P. LTD, MUMBAI V. ACIT 2(3), MUMBAI

ITA 3370/MUM/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 62197 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-04-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: J
• Next Hearing Date: 29-03-2012
• Assessment Year: 2004-2005
• Appeal Filed On: 30-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D S SUNDER SINGH
• Assessee Lawyers: ARVIND SONDE
• Keywords: Depreciation; Business expenditure
• Section: 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH J,MUMBAI BEFORE SHRI T.R. SOOD (AM) & SHRI VIJAY PAL RAO ( JM) I.T.A. NO.1715/MUM /2008 & 3370/MUM/2010 (A.Y. 2004-05) TOWNSHIP REAL ESTATE DEVELOPERS (INDIA) PVT. LTD., 373, KONARK HOUSE, VEER SAVARKAR ROAD, PRABHADEVI, DADAR (W), MUMBAI-400 028. PAN: AABCT7356E VS. ACIT-2(3), AAYKAR BHAVAN, 5 TH FLOOR, M.K. ROAD, MUMBAI-400 020. APPELLANT RESPONDENT I.T.A. NO. 2072/MUM/2008 (A.Y. 2004-05) ACIT-2(3), AAYKAR BHAVAN, 5 TH FLOOR, M.K. ROAD, MUMBAI-400 020. VS. TOWNSHIP REAL ESTATE DEVELOPERS (INDIA) PVT. LTD., 373, KONARK HOUSE, VEER SAVARKAR ROAD, PRABHADEVI, DADAR (W), MUMBAI-400 028. PAN: AABCT7356E APPELLANT RESPONDENT ASSESSEE BY SHRI ARVIND SONDE. DEPARTMENT BY SHRI D.S. SUNDER SINGH. DATE OF HEARING 29-03-2012 DATE OF PRONOUNCEMENT 04-04-2012 O R D E R PER T.R. SOOD, AM : ITA NOS1715, 2072/MUM/2008 & 3370/MUM/2010 TOWNSHIP REAL ESTATE DEVELOPERS (I) P .LTD.. 2 I.T.A.NO.1715/MUM/2008 (BY ASSESSEE): IN THIS APPEAL, THE ASSESSEE HAS RAISED THE FOLLOWI NG GROUNDS : 1 (A) THE LEARNED COMMISSIONER OF INCOME-TAX (APPE ALS) ERRED IN UPHOLDING THE ACTION OF THE LEARNED ASSIS TANT COMMISSIONER OF INCOME-TAX (THE ASSESSING OFFICER) IN DISALLOWING A SUM OF RS.1,19,55,318/- INCURRED BY T HE APPELLANT UNDER THE HEAD PROFITS & GAINS OF BUSINE SS OR PROFESSION. (B) THE LEARNED COMMISSIONER OF INCOME-TAX (AP PEALS) ERRED IN ENDORSING THE OBSERVATION MADE BY THE ASSE SSING OFFICER THAT IT IS EVIDENT THAT THE APPELLANT HAS T RIED EVERY POSSIBLE WAY OF REDUCING OR PROPONING ITS TAX LIABI LITY OR HAS ADOPTED SCRUPULOUS METHODS TO AVOID PAYMENT OF TAX. THE APPELLANT SUBMITS THAT DEDUCTION CLAIMED BY IT WERE FOR BONA FIDE BUSINESS EXPENDITURE AND THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) WAS NOT JUSTIF IED IN ENDORSING THE AFORESAID OBSERVATIONS OF THE ASSESSI NG OFFICER. (C) THE APPELLANT SUBMITS THAT EXPENSES CLAIME D BY IT OUGHT TO BE ALLOWED AS BUSINESS EXPENDITURE AND IF THE SAME ARE NOT ALLOWED AS BUSINESS EXPENDITURE, THE S AME OUGHT TO BE REDUCED FROM RENT RECEIVED WHILE COMPUT ING ANNUAL VALUE UNDER SECTION 23 OF THE ACT. 2. THE APPELLANT SUBMITS THAT THE ASSESSING OFFICER BE DIRECTED : (I) TO DELETE THE DISALLOWANCE OF A SUM OF RS.1,19,55,318/- TRATING THE SAME AS BUSINESS EXPENDITURE. (II) WITHOUT PREJUDICE TO WHAT IS STATED IN (I) ABOVE, T O REDUCE THE EXPENSES FROM THE RENT RECEIVED FOR THE PURPOSE OF SECTION 23; AND TO MODIFY THE ASSESSMENT IN ACCORDANCE WITH THE PROVISIONS OF THE ACT. ITA NOS1715, 2072/MUM/2008 & 3370/MUM/2010 TOWNSHIP REAL ESTATE DEVELOPERS (I) P .LTD.. 3 2. AFTER HEARING BOTH THE PARTIES, WE FIND THAT THE ASSESSEE COMPANY WAS INCORPORATED TO CARRY ON THE BUSINESS OF BUILDERS, CONTRACTORS & INVESTMENT IN IMMOVEABLE PROPERTIES FOR SALE, LEASE, ETC. DURI NG THE YEAR, THE ASSESSEE COMPANY ACQUIRED UNITS BEARING NOS.401, 501, 601, 7 01 & 801 IN THE BUILDING KNOWN AS MAGNUS TOWERS IN MUMBAI. THE SA ME WERE LEASED OUT DURING THE YEAR. THE INCOME FROM THE LEASE WAS REFLECTED IN THE P & L ACCOUNT UNDER THE HEAD LEASE RENT & COMPENSATION AMOUNTING TO RS.5,73,86,345/-. AFTER DEBITING DEPRECIATION AND V ARIOUS EXPENSES INCLUDING INTEREST ON LOAN, BROKERAGE, ETC., THE NET PROFIT W AS SHOWN AT RS.59,94,444/-. IN THE RETURN OF INCOME, THE ASSESSEE HAS TREATED T HE RENT RECEIVED AS INCOME FROM HOUSE PROPERTY AND AT THE SAME TIME A LOSS OF RS.1,22,12,987/- HAS BEEN BOOKED UNDER THE HEAD BU SINESS. AS A RESULT, THE HOUSE PROPERTY INCOME HAS BEEN REDUCED TO RS.60 ,96,667/-. IN RESPONSE TO THE QUERY, THE ASSESSEE MADE THE FOLLOWING SUBMI SSIONS VIDE LETTER DATED 30-10-2006 : IN PURSUANCE OF THE AFORESAID OBJECT, THE ASSESSEE COMPANY HAS ACQUIRED UNIT NOS.401, 501, 60 1, 701 & 801 IN THE BUILDING KNOWN AS MAGNUS TOWERS. THE AFORESAID PROPERTIES WERE PURCHASED KEEPING IN VIEW THE ASSESSEE COMPANYS BUSINESS OBJECTIVE OF DEALING IN REAL ESTATE. DUE TO THE PREVALENT MARKET CONDITIONS IN REAL ESTATE, THE ASSESSEE THOUGHT IT PRUDENT TO WAIT FOR RIGHT OPPORTUNITY BEFORE RE-SEL LING THE SAID PROPERTIES. HOWEVER, IN THE MEAN TIME, AS A PR UDENT BUSINESSMAN WOULD DO, THE ASSESSEE COMPANY DECIDED TO GIVE THE SAID PROPERTIES ON LEAVE & LICENCE BASI S. ACCORDINGLY, THE ASSESSEE COMPANY ENTERED INTO LEAV E & LICENCE AGREEMENT WITH DAKSH E SERVICES PRIVATE LIMITED (IN RESPECT OF UNITS NOS. 401 & 501) AND J P MORGAN SERVICES INDIA PRIVATE LIMITED (IN RESPECT O F UNITS NOS.601, 701 & 801). THE INCOME RECEIVED IN RESPECT OF ITA NOS1715, 2072/MUM/2008 & 3370/MUM/2010 TOWNSHIP REAL ESTATE DEVELOPERS (I) P .LTD.. 4 ABOVE PROPERTIES HAS BEEN OFFERED UNDER HEAD INCOM E FROM HOUSE PROPERTY. THE ASSESSEE HAS BEEN INCORPORATED WITH THE MAIN OBJECT OF CARRYING ON BUSINESS OF BUYING AND SELLIN G OF PROPERTY AS SPECIFIED IN ITS MEMORANDUM & ARTICLES OF ASSOCIATION AND PROFIT ON THE SAME WILL BE CHARGEAB LE TO TAX UNDER SECTION 28 OF THE INCOME-TAX ACT, 1961. A N ASSESSEE CARRYING ON BUSINESS MAY UTILIZE VARIOUS ASSETS FOR THE PURPOSE OF BUSINESS AND WITH THE HEL P OF THESE ASSETS THE ASSESSEE CARRIED ON BUSINESS AND MAKES PROFIT. IN THE TYPES BUSINESS CARRIED ON BY T HE ASSESSEE, IT HAS TO HOLD THE PROPERTIES TO CARRY ON ITS REAL ESTATE BUSINESS OF BUYING AND SELLING. HOWEVER, TIL L ANY GOOD OPPORTUNITY COMES, IT HAS GIVEN THE SAID PREMI SES ON LEASE TO EARN INCOME. THE ASSESSEE SUBMITS THAT DURING THE PREVIOUS YEAR ENDED 31 ST MARCH, 2004 IT HAS INCURRED CERTAIN EXPENSES AND HAS CLAIMED SUCH EXPENSES AS BUSINESS EXPENDITURE. THE ASSESSEE SUBMITS THAT THE FOLLOWIN G EXPENSES SHOULD BE ALLOWED S BUSINESS EXPENDITURE A S THESE ARE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF ITS BUSINESS WITHOUT PREJUDICE TO WHAT HAS BEEN STATED ABOVE, THE ASSESSEE SUBMITS THAT IN CASE THE SAID EXPENSES ARE NOT ALLOWED AS BUSINESS EXPENSES, THE SAME SHOULD BE REDUCED FROM THE RENT RECEIVED WHILE COMPUTING ANNUAL VALUE UNDER SECTION 23 OF THE ACT. THE AO NOTED THAT INCOME FROM HOUSE PROPERTY IS T O BE ASSESSED U/S.22 AND THE EXPENDITURE ON BROKERAGE AND COMMISSION AMO UNTING TO RS.52,98,936/-, PROFESSIONAL & CONSULTANCY FEES AMO UNTING TO RS.50,19,594/-, MAINTENANCE EXPENSES AMOUNTING TO R S.15,78,742/- AND OTHER SUNDRY EXPENSES AMOUNTING TO RS.58,046/- CLAI MED UNDER THE HEAD INCOME FROM BUSINESS AND PROFESSION IS PRIMARIL Y RELATED TO THE LEASING OUT OF THE PREMISES. HE FURTHER NOTED THAT SUCH KIND OF DEDUCTIONS ARE COVERED BY THE STATUTORY ALLOWANCE U/S.24. THEREFORE, THE S AME CANNOT BE CLAIMED ITA NOS1715, 2072/MUM/2008 & 3370/MUM/2010 TOWNSHIP REAL ESTATE DEVELOPERS (I) P .LTD.. 5 AGAIN AS BUSINESS EXPENDITURE AND ACCORDINGLY THESE EXPENSES WERE DISALLOWED. 3. ON APPEAL BEFORE THE LD. CIT(A), IT WAS MAINLY S UBMITTED THAT EXPENSES WERE INCURRED IN THE NORMAL COURSE OF BUSINESS AND, THEREFORE, THE SAME WERE RIGHTLY CLAIMED AS BUSINESS EXPENDITURE. VARIO US OTHER SUBMISSIONS WERE MADE AND CERTAIN CASE LAWS WERE ALSO RELIED ON . THE LD. CIT(A), ON EXAMINATION OF THE SUBMISSIONS, DID NOT AGREE WITH THE SAME BY OBSERVING THAT THE ASSESSEE HAS ITSELF DECLARED THE INCOME UN DER THE HEAD INCOME FROM HOUSE PROPERTY AND EXPENSES CLAIMED ARE BASIC ALLY COVERED BY REDUCTION OF 30% ALLOWANCE FROM RETEABLE VALUE U/S .24 AND ACCORDINGLY REJECTED THE GROUND RAISED BY THE ASSESSEE. 4. BEFORE US, THE LD. COUNSEL OF THE ASSESSEE MAINL Y SUBMITTED THAT SUCH SUM SHOULD BE HELD TO BE ALLOWABLE U/S.24(1)(VII) A ND IN THIS REGARD HE RELIED ON THE DECISION OF BANWARI LAL ANAND VS. ITO (62 IT D 301). ALTERNATIVELY, HE SUBMITTED THAT SINCE THESE EXPENSES HAVE BEEN INCUR RED DIRECTLY FOR THE PURPOSE OF LETTING OUT OF THE PROPERTY AND THEREFOR E THE ASSESSEE NEVER RECEIVED THE FULL RENT AND THEREFORE THE SAME SHOUL D BE ALLOWED TO BE REDUCED FROM THE ANNUAL VALUE AND IN THIS REGARD HE RELIED ON THE DECISION OF MUMBAI BENCH OF TRIBUNAL IN THE CASE OF GOVIND S. SINGHANIA VS. ITO (ITA NO.4581/MUM/2006) AND SHARMILA TAGORE VS. JCIT (93 TTJ PAGE 483). 5. ON THE OTHER HAND, THE LD. DR SUBMITTED THAT THE ASSESSEE HAS ITSELF TREATED THE INCOME FROM LEASING CHARGES AS INCOME F ROM HOUSE PROPERTY AND THEREFORE ONLY THOSE DEDUCTIONS CAN BE ALLOWED WHI CH ARE PROVIDED UNDER THE INCOME FROM HOUSE PROPERTY. SINCE U/S.24 ONLY 30% OF STANDARD ITA NOS1715, 2072/MUM/2008 & 3370/MUM/2010 TOWNSHIP REAL ESTATE DEVELOPERS (I) P .LTD.. 6 ALLOWANCE AND FURTHER DEDUCTION ONLY ON ACCOUNT OF INTEREST IS PROVIDED, THEREFORE, NO FURTHER DEDUCTION CAN BE ALLOWED. IN THIS REGARD, HE STRONGLY RELIED ON THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. H.G. GUPTA & SONS (149 ITR 253) (DEL), ACIT VS. PIC CADILY HOTELS (P) LTD. [97 TTJ (CHD) 411] AND ANOTHER JUDGMENT OF HONBLE PUN JAB & HARYANA HIGH COURT IN THE CASE OF ARAVALI ENGINEERS (P) LTD. (23 7 CTR 312). HE ALSO SUBMITTED THAT THE DECISION OF BANWARI LAL ANAND V S. ITO (SUPRA) CANNOT BE FOLLOWED BECAUSE THAT WAS RENDERED FOR ASSESSMENT Y EAR 1989-90 WHEN SEC. 24 HAD VARIOUS CLAUSES INCLUDING CLAUSE 24(1)(VII) WHICH WAS THERE AT THE RELEVANT POINT OF TIME. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF THE LD. DR. ADMITTEDLY, THE PROPERTY ACQUIRED BY THE ASSESSEE HAS BEEN LET OUT AND INCOME HAS BEEN REFLECTED AS LEASE RENT AND COMPENSATION. THE INCOM E HAS BEEN RETURNED UNDER THE HEAD INCOME FROM HOUSE PROPERTY. UNDER SECTION 14 OF THE ACT, FIVE HEADS OF INCOME HAVE BEEN PROVIDED, NAMELY: A.SALARIES B.----------- C.INCOME FROM HOUSE PROPERTY D.PROFITS AND GAINS OF BUSINESS OR PROFESSION. E.CAPITAL GAINS. F.INCOME FROM OTHER SOURCES. TOTAL INCOME OF THE ASSESSEE HAS TO BE ASSESSED UND ER THE ABOVE HEADS. IT IS SETTLED POSITION OF LAW THAT ONLY THOSE DEDUCTIONS CAN BE ALLOWED BY COMPUTING THE INCOME WHICH ARE PROVIDED UNDER A PAR TICULAR HEAD. SAME PROPOSITION HAS BEEN APPROVED BY THE HONBLE DELHI HIGH COURT IN THE CASE ITA NOS1715, 2072/MUM/2008 & 3370/MUM/2010 TOWNSHIP REAL ESTATE DEVELOPERS (I) P .LTD.. 7 OF CIT VS. H.G. GUPTA & SONS (SUPRA). PARAGRAPH 5 OF THE JUDGMENT READS AS UNDER : 5. THE ANNUAL VALUE OF THE PROPERTY, WHICH IS THE SUBJECT OF CHARGE, WAS ORIGINALLY DEFINED IN S. 23(1) AS T HE SUM FOR WHICH THE PROPERTY MIGHT REASONABLY BE EXPECTED TO BE LET FROM YEAR TO YEAR. THE ANNUAL VALUE IS THUS THE SU M FOR WHICH A LANDLORD COULD LET THE PREMISES HAVING REGA RD TO THE CONDITION OF THE PROPERTY AND OF THE PREVAILING CIRCUMSTANCES AS THE LANGUAGE SUGGEST. THE TAXES AR E CHARGED ON THE ARTIFICIAL OR NOTIONAL INCOME. IT IS BASED ON THE ANNUAL VALUE OF THE PROPERTY. THE AUTHORITIES U NDER THE ACT, THEREFORE, HAVE TO MAKE THE ASSESSMENT ON THE BASIS OF THE NOTIONAL ANNUAL VALUE. SEC. 23 LAYS DOWN HOW TH E ANNUAL VALUE IS TO BE DETERMINED. SEC. 24 PROVIDES THAT INCOME CHARGEABLE UNDER THE HEAD INCOME FROM HOUSE PROPERTY SHALL, SUBJECT TO THE PROVISION OF SUB- S. (2), BE COMPUTED AFTER MAKING THE DEDUCTIONS SPECIFIED THEREIN. THE LEGISLATURE HAS USED THE WOR D NAMELY AND THIS SHOWS THAT THE HEADS OF EXPENDITURE WHEREFOR DEDUCTION CAN BE CLAIMED ARE EXHAUSTIVE. THE EXPENSES INCURRED IN PROVIDING THE PROPERTY STAMP PAPER IN THE CASE OF A LEASE OR AGREEMENT TO LEASE IS BY VIRTUE OF THE PROVISIONS CONTAINED IN S. 29OF THE INDIAN STAMP ACT, 1899, AND IS ON THE LESSEE OR INTENDED LESSEE, IN THE ABSENCE OF AN AGREEMENT TO THE CONTRARY. IT MAY BE FOR THIS REASO N THAT THE LEGISLATURE DID NOT INCLUDE SUCH EXPENSES IN TH E PERMISSIBLE DEDUCTIONS UNDER S. 23 OR S. 24. IF A PARTICULAR TYPE OF EXPENDITURE IS NOT SPECIFICALLY PROVIDED TO BE DEDUCTIBLE, DEDUCTION THEREFOR CANNO T BE CLAIMED FROM OUT OF THE ANNUAL VALUE. NEITHER . 23 NOR S. 24 PROVIDES FOR THE DEDUCTION OF THE EXPENSE S INCURRED TOWARDS STAMP DUTY OR REGISTRATION CHARGES IN RESPECT OF THE LEASE. AGAIN, THE CHANDIGARH BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS. PICCADILY HOTELS (P) LTD. (SUPRA) OBSERVED AS UNDER : INCOME FROM HOUSE PROPERTY ANNUAL VALUE DEDUCTION FOR COMMISSION PAID TO BROKERS THERE IS NO EXPRESS PROVISION REGARDING ALLOWANCE OF ANY, ITA NOS1715, 2072/MUM/2008 & 3370/MUM/2010 TOWNSHIP REAL ESTATE DEVELOPERS (I) P .LTD.. 8 BROKERAGE OR COMMISSION FOR DETERMINING ALV OF THE PROPERTY IT CANNOT BE INFERRED THAT ACTUAL RENT IN THE TERM ACTUAL RENT RECEIVED OR RECEIVABLE OCCURRING IN CL. (B) OF S. 23(1) MEANS NET RENT AFT ER ALLOWANCE OF EXPENDITURE IN CONNECTION WITH RENT STATUTE DOES NOT EMPOWER THE ASSESSING AUTHORITY OR THE ASSESSEE EITHER TO ADD OR SUBTRACT ANYTHING FRO M THE ALVALSO, THE PLEA OF DIVERSION BY OVERRIDING TITLE CANNOT BE ACCEPTED AS NO OBLIGATION HAS BEEN CAST ON THE ASSESSEE TO PAY BROKERAGE THEREFORE, COMMISSION NOT ALLOWABLE AS DEDUCTION. THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF ARAVALI ENGINEERS (P) LTD. (SUPRA) TOOK SIMILAR VIEW. RELEVANT PORTIO NS OF PARAS 2 AND 14 ARE AS UNDER : WITH REGARD TO COMMISSION PAYMENT OF RS.2,50,000 T HERE IS NO ELIGIBILITY UNDER ANY SECTION FOR THE ASSESSEE COMP ANY TO CLAIM THIS EXPENDITURE UNDER S. 24. THE DEDUCTIONS FROM H OUSE PROPERTY ARE AVAILABLE ONLY UNDER S. 24 AND HAVE BE EN CLEARLY SPECIFIED. THE RENT RECEIVED IN ASSESSEES CASE FOR THE FULL YEAR IS THE ANNUAL LETTING VALUE. AS THE COMMISSION IS SNOT ELIGIBLE AS A DEDUCTION UNDER S. 24 IT SHALL NOT BE ALLOWED AS AN EXPENDITURE UNDER HOUSE PROPERTY INCOME. 14. AS REGARDS QUESTION (III), LEARNED COUNSEL FOR THE ASSESSEE SUBMITS THAT RENT TO THE EXTENT OF BROKERAGE WAS AN INDEPENDENT TRANSACTION ENVISAGING PAYMENT TO THE B ROKER. WHEREVER DEDUCTIONS OUT OF INCOME FROM PROPERTY ARE PERMISSIBLE, THE SAME HAVE BEEN SPECIFIED IN S. 24. DE HORS THE SAID PROVISION, DEDUCTION FROM INCOME IS NOT PERMIS SIBLE. THEREFORE, IT IS CLEAR THAT ANNUAL VALUE CANNOT BE REDUCED BY THE AMOUNT OF EXPENSES BECAUSE SEC. 23(1) CLEARLY TALKS OF ANNUAL RENT RECEIVED AND THE EXPENDITURE CAN BE CLAIMED ONLY U/S. 24. IT IS TO B E NOTED THAT SEC. 24 HAS BEEN AMENDED W.E.F. 01-04-2002. BEFORE THE AMENDMEN T, VARIOUS CATEGORIES OF EXPENDITURE LIKE COLLECTION CHARGES, INSURANCE P REMIUM, GROUND RENT, LAND REVENUE, ETC., WERE ALLOWABLE, BUT AFTER THE AMENDM ENT, ONLY TWO TYPES OF ITA NOS1715, 2072/MUM/2008 & 3370/MUM/2010 TOWNSHIP REAL ESTATE DEVELOPERS (I) P .LTD.. 9 DEDUCTIONS ARE POSSIBLE, NAMELY, 30% OF THE TOTAL A NNUAL VALUE AND AMOUNT OF INTEREST PAID FOR ACQUISITION OF PROPERTY. NO OT HER DEDUCTION IS POSSIBLE AND ACCORDINGLY WE HOLD THAT THE AMOUNT OF EXPENDIT URE INCURRED ON ACCOUNT OF BROKERAGE, PROFESSIONAL CONSULTANCY, MAINTENANCE , ETC., RELATING TO THE PROPERTY IS NOT ALLOWABLE UNDER THE HEAD INCOME FR OM HOUSE PROPERTY. AS FAR AS THE DECISIONS RELIED ON BY THE LD. COUNSEL O F THE ASSESSEE ARE CONCERNED, THE DECISION IN THE CASE OF BANWARI LAL ANAND VS. ITO WAS RENDERED FOR ASSESSMENT YEAR 1989-90 WHEN THERE WER E VARIOUS CLAUSES U/S. 24. CLAUSE (VII) WAS A DEDUCTION IN RESPECT OF LAND REVENUE AND BROKERAGE WAS HELD TO BE COVERED UNDER CLAUSE (VII). BUT, SIN CE THE SECTION ITSELF HAS BEEN AMENDED, THEREFORE, THIS DECISION IS NO MORE A PPLICABLE. THE OTHER TWO DECISIONS I.E. GOVIND S. SINGHANIA VS. ITO (SUPRA) AND SHARMALA TAGORE V. JCIT CAN ALSO NOT BE APPLIED BECAUSE THESE DECISION S HAVE NOT CONSIDERED THE DECISION OF HONBLE DELHI HIGH COURT IN THE CAS E OF CIT VS. H.G. GUPTA & SONS. IN ANY CASE, THE LATEST DECISION ON THIS ISSU E IN THE CASE OF ARAVALI ENGINEERS (P) LTD. IS FROM HONBLE PUNJAB & HARYANA HIGH COURT AND THE SAME HAS TO BE FOLLOWED IN PREFERENCE TO THE DECISI ON OF THE TRIBUNAL. ACCORDINGLY, WE REJECT THE GROUND RAISED BEFORE US . 7. IN THE RESULT, THE ASSESSEES APPEAL IS DISMISSE D. ITA NO.2072/MUM/2008 (BY REVENUE): 8. IN THIS APPEAL, THE ASSESSEE HAS RAISED THE FOLL OWING GROUND : THE LEARNED CIT(A) ERRED IN HOLDING THAT PROCESSI NG FEE FOR RS.30,00,000/- INCLUDED UNDER THE HEAD INTERES T IS ALLOWABLE DEDUCTION U/S.24 OF THE INCOME-TAX ACT, 1 961. ITA NOS1715, 2072/MUM/2008 & 3370/MUM/2010 TOWNSHIP REAL ESTATE DEVELOPERS (I) P .LTD.. 10 9. AFTER HEARING BOTH THE PARTIES, WE FIND THAT DUR ING ASSESSMENT PROCEEDINGS THE AO NOTICED THAT THE ASSESSEE HAS CL AIMED A SUM OF RS.30 LAKHS ON ACCOUNT OF PROCESSING CHARGES FOR THE BRID GE LOAN AVAILED FROM HDFC BANK LTD. ACCORDING TO THE AO, PROCESSING CHA RGES CANNOT BE EQUATED WITH INTEREST EXPENSES AND THE SAME WAS DISALLOWED. 10. ON APPEAL, THE LD. CIT(A) HELD THAT AS PER THE DEFINITION OF INTEREST IN SEC. 2(28A), WHICH IS INCLUSIVE IN NATURE, THE PROC ESSING CHARGES HAVE TO BE CONSTRUED AS PART OF INTEREST. 11. BEFORE US, THE LD. DR STRONGLY SUPPORTED THE OR DER OF AO AND, ON THE OTHER HAND, THE LD. COUNSEL OF THE ASSESSEE SUPPORT ED THE ORDER OF LD. CIT(A). 12. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE FIN D THAT SEC. 2(28A) READS AS UNDER : 2(28A) INTEREST MEANS INTEREST PAYABLE IN ANY MA NNER IN RESPECT OF ANY MONEYS BORROWED OR DEBT INCURRED (INCLUDING A DEPOSIT, CLAIM OR OTHER SIMILAR RIGHT OR OBLIGATION) AND INCLUDES ANY SERVICE FEE OR OTHER C HARGE IN RESPECT OF THE MONEYS BORROWED OR DEBT INCURRED OR IN RESPECT OF ANY CREDIT FACILITY WHICH HAS NOT BEEN U TILIZED; THE LD. CIT(A) HAS DECIDED THE ISSUE VIDE PARA 11 W HICH IS AS UNDER : 11. I HAVE CAREFULLY CONSIDERED HE SUBMISSIONS OF THE APPELLANT AND ALSO PERUSED THE ORDER OF THE ASSESSI NG OFFICER. THE PROVISIONS OF SECTION 24 AS EXTRACTED BY THE APPELLANT IN THE SUBMISSION FOR GROUND NO. 4 NOWHER E PROVIDES FOR DEDUCTION ON ACCOUNT OF PROCESSING FEE S FOR ITA NOS1715, 2072/MUM/2008 & 3370/MUM/2010 TOWNSHIP REAL ESTATE DEVELOPERS (I) P .LTD.. 11 SANCTION OF BRIDGE LOAN AS CLAIMED BY THE APPELLANT . THE PROVISIONS OF SECTION 24 BEING SPECIFIC AND CLEAR N EEDS NO FURTHER INTERPRETATION. HOWEVER, THE WORD INTEREST HAS BEEN DEFINED UNDER SECTION 2(28A) OF THE ACT WHICH IS AN INCLUSIVE DEFINITION AND INCLUDES ANY SERVICE FEES OR OTHER CHARGES IN RESPECT OF MONEYS BORROWED OR DEBT INCUR RED OR IN RESPECT OF ANY CREDIT FACILITY WHICH HAS NOT BEEN UTILIZED. THIS BEING SO, THE PROCESSING FEES IS ALS O ADMISSIBLE FOR DEDUCTION UNDER SECTION 24 OF THE IN COME- TAX ACT. ACCORDINGLY, THE ASSESSING OFFICER IS DIRE CTED TO ALLOW DEDUCTION ON ACCOUNT OF PROCESSING FEES OF RS.30,00,000/-. THIS GROUND IS THEREFORE, DECIDED I N FAVOUR OF THE APPELLANT. THE LD. CIT(A) HAS CORRECTLY INTERPRETED THAT PROCE SSING CHARGES HAVE TO BE CONSTRUED AS PART OF INTEREST IN VIEW OF THE DEFINI TION OF INTEREST. WE FIND NOTHING WRONG WITH THE ORDER OF LD. CIT(A) AND CONF IRM THE SAME. 13. IN THE RESULT, THE REVENUES APPEAL IS DISMISSE D. ITA NO.3370/MUM/2010 ( BY ASSESSEE): 14. IN THIS APPEAL, VARIOUS GROUNDS HAVE BEEN RAISE D BUT THE ONLY DISPUTE IS REGARDING CONFIRMATION OF LEVY OF PENALTY U/S. 2 71(1)(C). 15. AFTER HEARING BOTH THE PARTIES, WE FIND THAT PE NALTY HAS BEEN LEVIED ON THE DISALLOWANCES MADE BY THE AO OUT OF EXPENSES CL AIMED. THE ACTION OF THE AO HAS BEEN CONFIRMED BY THE LD. CIT(A). 16. BEFORE US, THE LD. COUNSEL OF THE ASSESSEE SUBM ITTED THAT SINCE IT IS A DEBATABLE MATTER WHETHER SUCH EXPENSES CAN BE ALLOW ED AS A DEDUCTION UNDER THE HEAD INCOME FROM HOUSE PROPERTY, THEREF ORE, PENALTY WAS NOT LEVIABLE. THE VERY FACT THAT VARIOUS BENCHES OF TRI BUNAL HAVE TAKEN DIFFERENT VIEWS, IT IS CLEARLY A DEBATABLE MATTER. MOREOVER, THE ASSESSEE HAS NOT ITA NOS1715, 2072/MUM/2008 & 3370/MUM/2010 TOWNSHIP REAL ESTATE DEVELOPERS (I) P .LTD.. 12 CONCEALED ANY PARTICULARS OF INCOME OR FURNISHED IN ACCURATE PARTICULARS THEREOF. THE DECISION OF HONBLE SUPREME COURT IN T HE CASE OF RELIANCE PETROPRODUCTS (P) LTD. REPORTED IN 322 ITR 158 (SC ) IS APPLICABLE. 17. ON THE OTHER HAND, THE LD. DR STRONGLY SUPPORTE D THE ORDER OF LD. CIT(A). 18. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE FIN D FORCE IN THE SUBMISSIONS OF THE LD. COUNSEL OF THE ASSESSEE. FIR STLY, THE ASSESSEE HAS NOT CONCEALED ANY PARTICULARS OF INCOME OR FURNISHED IN ACCURATE PARTICULARS THEREOF. THE QUESTION REGARDING ALLOWABILITY OF CER TAIN EXPENSES FROM HOUSE PROPERTY WAS AT LEAST DEBATABLE DURING THE RELEVANT POINT OF TIME BECAUSE FEW DECISIONS WERE THERE IN FAVOUR OF THE ASSESSEE ALSO . THEREFORE, WE ARE OF THE VIEW THAT THIS IS NOT A FIT CASE FOR LEVY OF PENALT Y AND ACCORDINGLY WE DELETE THE SAME. 19. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED . ORDER PRONOUNCED ON THE 04TH DAY OF APRIL, 2 012. SD/- SD/- (VIJAY PAL RAO) (T.R. SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI: 04TH APRIL, 2012. NG: COPY TO : ITA NOS1715, 2072/MUM/2008 & 3370/MUM/2010 TOWNSHIP REAL ESTATE DEVELOPERS (I) P .LTD.. 13 1. ASSESSEE. 2. DEPARTMENT. 3 CIT(A)-XXX,MUMBAI. 4 CIT-2,MUMBAI. 5.DR,J BENCH,MUMBAI. 6.MASTER FILE. (TRUE COPY) BY ORDER, ASST. REGISTRAR, ITAT, MUMBAI. ITA NOS1715, 2072/MUM/2008 & 3370/MUM/2010 TOWNSHIP REAL ESTATE DEVELOPERS (I) P .LTD.. 14 DETAILS DATE INITIALS DESIGN ATION 1. DRAFT DICTATED ON 30-03-12 SR.PS/ 2. DRAFT PLACED BEFORE AUTHOR 03-04-12 SR.PS/ 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/A M 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/A M 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/ 6. KEPT FOR PRONOUNCEMENT ON SR.PS/ 7. FILE SENT TO THE BENCH CLERK SR.PS/ 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9. DATE ON WHICH FILE GOES TO THE AR 10. DATE OF DISPATCH OF ORDER