HORIZON ENTERPRISES, MUMBAI V. ITO WD-25(3)(2), MUMBAI

ITA 3469/MUM/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 4526 (ITAT-MUMBAI)
• Duration Of Justice: 10 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-03-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 22-05-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANISH KUMAR SINGH
• Keywords: Cost of acquisition

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH SMC, MUMBAI BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NO.3469/M/2018 ASSESSMENT YEAR: 2009-10 M/S. HORIZON ENTERPRISES, SUPREME TRADE CENTRE, NEAR EKVIRA SCHOOL, CHARKOP, SECTOR 1, KANDIVALI (E), MUMBAI 400 101 PAN: AAEFH7789P VS. ITO WARD 25(3)(2), MUMBAI (APPELLANT) (RE SPONDENT) PRESENT FOR: ASSESSEE BY : SHRI PARESH SHAPARIA, A.R. REVENUE BY : SHRI MANISH KUMAR SINGH, D.R. DATE OF HEARING : 19.03.2019 DATE OF PRONOUNCEMENT : 22.03.2019 O R D E R PER RAJESH KUMAR, ACCOUNTANT MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSES SEE AGAINST THE ORDER DATED 31.01.2014 OF THE COMMISSIO NER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS TH E CIT(A)] RELEVANT TO ASSESSMENT YEAR 2009-10. 2. THE ASSESSEE HAS RAISED THREE GROUNDS OF APPEAL. AT THE TIME OF HEARING, THE ASSESSEE DID NOT PRESS GROUND NOS.1 & 2. THEREFORE, THE SAME ARE DISMISSED AS NOT PRESSED. THE ISSUE RAISED IN GROUND NO.3 IS AGAINST THE ORDER OF LD. C IT(A) NOT ALLOWING THE INTEREST EXPENDITURE INCURRED OF RS.23 ,15,662/- ON LOAN TAKEN FOR ACQUISITION OF OFFICE PREMISES AS PART OF THE COST OF ASSETS UNDER THE PROVISIONS OF SECTION 48 OF THE ACT. ITA NO.3469/M/2018 M/S. HORIZON ENTERPRISES 2 3. THE FACTS IN BRIEF ARE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO OBSERVED FROM THE COMPUTATION O F CAPITAL GAIN THAT ASSESSEE HAS CLAIMED DEDUCTION OF INTERES T ON LOAN BORROWED FOR ACQUISITION OF THE PROPERTY IN QUESTIO N OF RS.23,15,662/- CONSISTING OF RS.13,80,516/- IN A.Y. 2009-10 WHICH WAS SHOWN UNDER THE HEAD DEFERRED REVENUE EXP ENSES AND RS.9,35,146/- WAS INCURRED IN F.Y. 2010-11. TH E LD. A.R. SUBMITTED THAT THE SAID EXPENSES WERE NOT CLAIMED I N THE PROFIT & LOSS ACCOUNT AT ALL. HOWEVER, THE AO BRUSHED ASI DE THE CONTENTIONS OF THE ASSESSEE BY HOLDING THAT THE IN TEREST EXPENDITURE CAN NOT BE REDUCED FROM THE SALE CONSID ERATION WHILE COMPUTING THE CAPITAL GAIN AS THE SECTION 48 ESPECIALLY PROVIDES FOR THE DEDUCTIONS WHICH ARE ADMISSIBLE TO BE DEDUCTED FROM THE SALES CONSIDERATION AS EXPENDITURE INCURRE D WHOLLY AND EXCLUSIVELY IN CONNECTION WITH TRANSFER AND COST OF ACQUISITION OF THE ASSETS AND COST OF IMPROVEMENT THEREOF. 4. IN THE APPELLATE PROCEEDINGS, THE LD. CIT(A) DID NOT ALLOW THE INTEREST PAID TO BANK ON LOAN TAKEN AS STATED A BOVE AS DEDUCTION WHILE COMPUTING THE CAPITAL GAIN BY REJEC TING THE CONTENTIONS OF THE ASSESSEE. 5. THE LD. A.R. SUBMITTED BEFORE THE BENCH THAT TH E ASSESSEE HAS BOUGHT THIS OFFICE PREMISES OUT OF LOAN TAKEN FROM NKGSB CO-OPERATIVE BANK LTD. OF RS.73,00,000/- AGAINST M ARGIN OF 25% AND THE SAID LOAN WAS TO BE REPAID IN 84 EMIS O F RS.1,37,000/- EACH. THE LD. A.R. SUBMITTED THAT TH E INTEREST OF RS.23,15,662/- WAS NOT CLAIMED IN THE PROFIT & LOSS ACCOUNT AS INTEREST INCURRED OF RS.13,80,516/- INCURRED IN F. Y. 2009-10 AND RS.9,35,146/- INCURRED IN F.Y. 2010-11 WERE NOT CLAIMED IN ITA NO.3469/M/2018 M/S. HORIZON ENTERPRISES 3 THE PROFIT & LOSS ACCOUNT AT ALL. THE LD. A.R. ARG UED THAT SINCE THE SAID INTEREST WAS INCURRED IN CONNECTION WITH T HE LOAN TAKEN FOR THE ACQUISITION OF THE OFFICE PREMISES, THE SAI D INTEREST CONSTITUTE A PART OF THE COST OF THE PROPERTY WHICH HAS TO BE ALLOWED IN THE COMPUTATION OF CAPITAL GAIN UNDER TH E PROVISIONS OF SECTION 48 OF THE ACT. THE LD. A.R., IN DEFENCE OF HIS ARGUMENTS RELIED ON A SERIES OF DECISIONS WHICH ARE AS UNDER: 1. CIT VS. TRISHUL INVESTMENTS LTD. 305 ITR 434 (MA DRAS HC) AS AFFIRMED BY THE HONBLE SUPREME COURT BY DISMISSING THE SLP FILED B Y THE DEPARTMENT. SLP NO.CC 8665OF 2008 DATED 11.07.2008. 2. CIT VS. MAITHREYI PAI 152 ITR 247 (KAR. HC) 3. CIT VS. MITHILESH KUMARI 92 ITR 9 (DELHI HC) 4. GAYATRI MAHESHWARI VS. ITO (2017) 88 TAXMANN.COM 757 (JODHPUR) 5. ACIT VS. MRS. SHEELA CHOPRA ITA NO.169/KOL/2014 6. THE LD. A.R. FINALLY PRAYED BEFORE THE BENCH THA T IN VIEW OF THE RATIO LAID DOWN IN THE AFORESAID DECISIONS, THE APPEAL OF THE ASSESSEE MAY BE ALLOWED AND AO BE DIRECTED ACCORDIN GLY. 7. THE LD. D.R., ON THE OTHER HAND, RELIED ON THE O RDER OF AO AND LD. CIT(A) BY SUBMITTING THAT THE INTEREST PAID ON LOAN FOR ACQUISITION OF PROPERTY IS NOT PART OF THE COST OF ACQUISITION AND PRAYED FOR THE UPHOLDING THE ORDER OF LD. CIT(A). 8. AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATERIAL ON RECORD, WE FIND THAT THE ASSESSEE HAS BOUGHT OFFICE PREMISES BY TAKING LOAN FROM NKGSB CO-OPERATIVE BANK LTD. OF RS.73,00,000/- AGAINST A MARGIN OF 25% WHICH WAS TO BE REPAID IN 84 EMIS OF RS.1,37,000/- EACH AND THUS INTEREST PAID TO THE BANK IN TWO YEARS IN F.Y. 2009-10 RS.13,80,516/- AN D IN F.Y. 2010-11 RS.9,35,146/- WERE NOT CLAIMED IN THE PROFI T & LOSS ITA NO.3469/M/2018 M/S. HORIZON ENTERPRISES 4 ACCOUNT. NOW WHEN THE ASSESSEE SOLD THE PROPERTY, ASSESSEE HAS CLAIMED THE DEDUCTION OF THE SAID INTEREST FROM THE SALE PROCEEDS AS BEING PART OF COST OF ACQUISITION IN TE RMS OF PROVISIONS OF SECTION 48 OF THE ACT. THE REVENUE A UTHORITIES HAVE DISALLOWED THE CLAIM OF THE ASSESSEE BY HOLDIN G THAT THE INTEREST PAID ON LOAN IS NOT AN ALLOWABLE DEDUCTION UNDER THE PROVISIONS OF SECTION 48 OF THE ACT. THE SAID CONC LUSION OF THE AUTHORITIES BELOW IS NOT ACCEPTABLE FOR THE REASONS THAT ANY INTEREST PAID ON LOAN TAKEN FOR ACQUISITION OF PROP ERTY HAS TO BE ALLOWED AS DEDUCTION AS PART OF THE COST OF THE ASS ETS. THE VIEW HAS BEEN UPHELD BY THE VARIOUS HIGH COURTS AND CO-O RDINATE BENCHES OF THE TRIBUNAL. IN THE CASE OF CIT VS. TR ISHUL INVESTMENTS LTD. (SUPRA) IT HAS BEEN HELD THAT INTE REST PAID FOR ACQUISITION OF SHARES WOULD PARTAKE THE CHARTER OF COST OF SHARES AND THEREFORE SAME WAS RIGHTLY CAPITALIZED ALONG WI TH THE COST OF ACQUISITION OF THE SHARES WHICH HAS TO BE ALLOWED U NDER SECTION 48 WHILE COMPUTING THE CAPITAL GAIN ON THE SALE OF SHARES. THE SAID DECISION OF THE HONBLE MADRAS HIGH COURT HAS BEEN AFFIRMED BY THE HONBLE SUPREME COURT BY DISMISSING THE SLP FILED BY THE REVENUE IN SLP NO.CC8665/2008 VIDE ORD ER DATED 11.07.2008. IN THE CASE OF CIT VS. MITHILESH KUMAR I (SUPRA) IT HAS BEEN HELD THAT INTEREST ON AMOUNT BORROWED WAS EXPENDITURE INCURRED FOR ACQUISITION OF CAPITAL ASS ETS (LAND) AND IT HAS TO BE CONSIDERED WHILE COMPUTING THE CAPITAL GAIN UPON SALE OF THE SAID ASSETS. IN THE CASE OF GAYATRI MA HESHWARI VS. ITO (SUPRA) THE CO-ORDINATE BENCH OF THE TRIBUNAL H ELD THAT WHERE THE PROPERTY WAS PURCHASED OUT OF BORROWED FU NDS THE INTEREST PAID ON SUCH BORROWING WOULD BE PART OF CO ST OF ACQUISITION. CONSIDERING THE RATIO LAID DOWN BY TH E HONBLE HIGH ITA NO.3469/M/2018 M/S. HORIZON ENTERPRISES 5 COURTS AND CO-ORDINATE BENCH OF THE TRIBUNAL, WE SE T ASIDE THE ORDER OF THE LD. CIT(A) AND DIRECT THE AO TO TREAT THE INTEREST PAID RS.23,15,662/- AS PART OF COST OF ACQUISITION UNDER SECTION 48 AND COMPUTE THE CAPITAL GAIN ACCORDINGLY. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 22.03.2019. SD/- SD/- (SAKTIJIT DEY) (RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 22.03.2019. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY /ASSTT. REGISTRAR, ITAT, MUMBAI.