JSL Lifestyle Ltd., Haryana V. DCIT, Gurgaon

ITA 3522/DEL/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 3562 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 4 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-11-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2011-2012
• Appeal Filed On: 14-06-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KAUSHLENDRA TIWARI
• Keywords: Opportunity of being heard; Proportionate interest; Notional interest; Capital expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G , NEW DELHI BEFORE SH. N. K. SAINI, AM AND SH . JOGINDER SINGH , JM ITA NO. 3522/DEL/2016 : ASSTT. YEAR : 2011 - 12 JSL LIFESTYLE LTD., 48 TH K.M. STONE, DELHI R OHTAK ROAD, VILLAGE ROHAD, JHAJJAR, BHADURGARH, HARYANA - 124507 VS DY. COMMISSIONER OF INCOME TAX, CIRCLE - 1(1), GURGAON, HARYANA (APPELLANT) (RESPONDENT) PAN NO. A A FCA5161Q ASSESSEE BY : NONE REVENUE BY : SH. KAUSHLENDRA TIWARI, SR . DR DATE OF HEARING : 07.11 .201 7 DATE OF PRONOUNCEMENT : 08 . 11 .201 7 ORDER PER N. K. SAINI, AM: THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDER DATED 18.03.2016 OF LD. CIT(A) - I , GURGAON . 2. DURING THE COURSE OF HEARING NOBODY W AS PRESENT ON BEHALF OF THE ASSESSEE NEITHER ANY ADJOURNMENT WAS SOUGHT. WE, THEREFORE, PROCEEDED EX - PARTE AND THE APPEAL IS DECIDED ON MERIT AFTER HEARING THE LD. DR. 3. THE ONLY GRIEVANCE OF THE ASSESSEE IN THIS APPEAL RELATES TO THE CONFIRMATION OF DIS ALLOWANCE OF RS.7,72,219/ - MADE BY THE AO U/S 36(1)(III) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT). 4 . FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSEE FILED E - FILED R ETURN OF INCOME ON 30.09.2011 DECLARING LOSS OF RS.3,40,37,051/ - . LATER ON, ITA NO. 3522 /DEL /201 6 JSL LIFESTYLE LTD. 2 THE CASE WAS SELECTED FOR SCRUTINY. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTICED THAT THE ASSESSEE HAD INCURRED INTEREST EXPENSES AMOUNTING TO RS.3,47,04,635/ - ON LOANS. HE ALSO NOTICED THAT THE ASSESSEE HAD OPENING CAPITAL WORK I N PROGRESS OF RS.77,22,190/ - AS ON 01.04.2010, OUT OF WHICH ASSETS WORTH RS.39,18,168/ - HAD NOT BEEN PUT TO USE TILL 30.03.2011, T HEREFORE, THE INTEREST EXPENSES CLAIMED BY THE ASSESSEE DESERVE TO BE DISALLOWED TO THE EXTENT OF EQUIVALENT NOTIONAL INTEREST ON EXPENDITURE ON CAPITAL WORK IN PROGRESS. HE DISALLOWED RS.7,72,219/ - BY OBSERVING AS UNDER: THE ASSESSEE HAS TAKEN LOANS AT AN AVERAGE RATE OF INTEREST OF 10% P.A. IN ORDER TO ARRIVE AT THE NOTIONAL INTEREST PROPORTIONATE TO WHICH DISALLOWANCE IS TO B E MADE, THIS RATE OF INTEREST IS TAKEN. TAKING THIS RATE, NOTIONAL INTEREST ATTRIBUTABLE TO CWIP IS RS.772219. THUS, INTEREST EXPENSES TO THE TUNE OF RS.772219 ARE DISALLOWED. 5 . BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) AND FURN ISHED THE WRITTEN SUBMISSION DATED 10.02.2015 WHICH HAS BEEN INCORPORATED IN PARA 4.2 OF THE IMPUGNED ORDER, FOR THE COST OF REPETITION, THE SAME IS NOT REPRODUCE HEREIN. THE LD. CIT(A) SUSTAINED THE DISALLOWANCE MADE BY THE AO BY OBSERVING IN PARA 4.3 OF THE IMPUGNED ORDER AS UNDER: 4 .3 IN CONSIDERATION OF THE ABOVE SUBMISSION THE APPELLANT WAS GIVEN AN OPPORTUNITY DURING THE COURSE OF HEARING ON 16.02.2016 TO CONNECT THE PAYMENT MADE FOR ACQUIRING CWIP WITH NON - INTEREST BEARING FUNDS. IN RESPONSE A WRITT EN SUBMISSION WAS SUBMITTED ON 17.03.2016 AS UNDER: - DISALLOWANCE OF PROPORTIONATE INTEREST ON CAPITAL EXPENDITURE. ITA NO. 3522 /DEL /201 6 JSL LIFESTYLE LTD. 3 'WITH REFERENCE TO YOUR HONOUR QUERY REGARDING SOURCE OF PAYMENT OF CAPITAL WORK IN PROGRESS OUTSTANDING AS AT THE BEGINNING OF THE YEAR AS AT 1ST APRIL, 2010 AND OUTSTANDING AT THE END OF THE YEAR AS AT 31 ST M ARCH, 2011, WE WOULD LIKE TO SUB MIT AS UNDER: - DETAIL OF CAPITAL WORK IN PROGRESS AS AT 31ST MARCH, 2010, OF RS.77,22,190 / - WITH VENDOR NAME AND DATE OF PAYMENT AND BANK ACCOUNT F ROM WH ICH THE SAID PAYMENT IS M ADE. (ANNE XURE 'A') WE WO ULD FURT HER LIKE TO INFORM THAT PAYMENT OF RS.77,22,190/ - IS MADE TO CREDITORS OUT OF WORKING CAPI TAL ACCOUNT, HUT WORKING CAPITAL LOAN ON THE DATE OF PAYMENT TO SUCH CAPITAL CREDITOR HAS NOT INCREASED DUE TO DEPOSIT OF MONEY FROM CUSTOMER COLLECTION ETC. ON WORKING CAPITAL ACCOUNT THEREFORE, WE REQUEST YOU PLEASE CONSIDER THE OUR POINT IN THIS MATTER' 4.3 I HAVE GIVEN CAREFUL CONSIDERATION TO THE FACTS OF THE CASE AND ARGUMENTS OF THE APPELLANT. IT HAS BEE N REPLIED IN LETTER SUBMITTED ON 1 3.03.2016 THAT THE PAYMENT HAS B EEN MADE OUT OF STATE B ANK OF PATIALA B UT NO FURTH ER DETAI LS HAS BEEN GIVEN REGARDING PAY MENT OF INTEREST IN THIS BANK ACCOUNT AND NATURE OF THIS BANK OF ACCOUNT. THE OTHER CONTENTION OF LAR GE AVAILABILITY IS NOT ACCEPTABLE MERELY BECAUSE A LARGE FREE CAPITAL IS AVAILABLE TO THE APPELLANT IT DOES NOT MEAN THAT EACH AND EVERY INTEREST WOULD BECOME ALLOWABLE. THE APPELLANT WAS SPECIFICALLY ASKED TO PROVIDE DETAILS WHICH COULD LINK THE SOURCE OF ACQUIRING CWIP TO NON INTEREST, HEARING FUNDS. THIS OPPORTUNITY WAS NOT AVAILED AND THUS NECESSARY INFERENCE IS THAT CWIP HAS BEEN ACQUIRED UTILIZING FUNDS ON WHICH INTEREST HAS BEEN PAID WHICH HAVE BEEN CHARGED TO P&L ACCOUNT, TINDER THESE CIRCUMSTANCES, THERE IS NO INFIRMITY IN THE ORDERS OF THE ASSESSING OFFICER ON THIS POINT. THE GROUND OF APPEAL IS DISMISSED. 6 . NOW THE ASSESSEE IS IN APPEAL. THE LD. DR STRONGLY SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW AND REITERATED THE OBSERVATIONS MADE IN T HEIR RESPECTIVE ORDERS. ITA NO. 3522 /DEL /201 6 JSL LIFESTYLE LTD. 4 7 . WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. IN THE PRESENT CASE, FORM THE OBSERVATION OF THE LD. CIT(A), IT IS NOTICED THAT HE HAS MENTIONED THAT THE ASSESSEE HAD FUR NISHED WRITTEN SUBMISSION DATED 17.03.2016. HOWEVER, HE CONSIDERED THE REPLY OF THE ASSESSEE SUBMITTED ON 13.03.2016 BUT NO CONTENTS OF THE SAID LETTER/REPLY OF THE ASSESSEE HAS BEEN DISCUSSED IN THE IMPUGNED ORDER. THE LD. CIT(A) HAS ALSO NOT GIVEN ANY FI NDING WITH REGARD TO THE SUBMISSION DATED 10.12.2015 OF THE ASSESSEE. WE, THEREFORE, CONSIDERING THE TOTALITY OF THE FACTS, DEEM IT APPROPRIATE TO SET ASIDE THE IMPUGNED ORDER TO THE FILE OF THE LD. CIT(A) TO BE ADJUDICATED AFRESH IN ACCORDANCE WITH LAW AF TER PROVIDING DUE AND REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 8 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES . (O RD E R PRONOUNCED IN THE COURT ON 08 /11 /2017 ) SD/ - SD/ - ( JOGINDER SINGH ) (N. K. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER DAT ED: 08 /11 /2017 *SUBODH* COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT 4 . CIT(APPEALS) 5 . DR: ITAT ASSISTANT REGISTRAR