JAISINGH BUILDERS, MUMBAI V. ADDL CIT 21(1), MUMBAI

ITA 3549/MUM/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 3291 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-03-2016
• Appeal Filed By: Assessee
• Bench Allotted: J
• Assessment Year: 2008-2009
• Appeal Filed On: 19-05-2014
• Court: TRIBUNAL
• Department Lawyers: AJAY
• Keywords: Business income
• Section: 143(3); 2

Judgement Text

, , J, IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES J, MUMBAI BEFORE SHRI C.N. PRASAD, JUDICIAL MEMBER, AND SHRI ASHWANI TANEJA, ACCOUNTANT MEMBER ITA NO.3549/MUM/2014 ASSESSMENT YEAR: 2008-09 JAISI NGH BUILDERS , 3, HARISH, 72, DIXIT ROAD, VILE PARLE (E) MUMBAI-400057 / VS. ACIT - 21(1) PRATYAKSHA KAR BHAVAN 601/C-10, BKC, BANDRA(E), MUMBAI-400051 (ASSESSEE ) (REVENUE) P.A. NO. AFOPJ6023P / ASSESSEE BY SANJAY PARIKH (AR) / REVENUE BY SHRI AJAY (DR) / DATE OF HEARING : 24/02/2016 / DATE OF ORDER: 16/03/2016 / O R D E R PER ASHWANI TANEJA (ACCOUNTANT MEMBER): THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS), MUMBAI- 32 {(IN SHORT CIT(A)}, ORDER DATED 26.03.2014 PAS SED AGAINST ASSESSMENT ORDER U/S 143(3) DATED 30.11.2010 FOR T HE ASSESSMENT YEAR 2008-09 ON THE FOLLOWING GROUNDS: A) DISALLOWING INTEREST CLAIMED U/S. 24 - RS. JAISINGH BUILDERS 2 12,06,997/- 1) THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) [CIT(A)] ERRED ON FACTS AND IN LAW IN UPHOLDING THE ORDER OF THE ADDITIONAL COMMISSIONER OF INCOME TAX - 21(1 ), MUMBAI (AO) DISALLOWING THE APPELLANT'S CLAIM OF INTEREST U/S. 24 AMOUNTING TO RS. 12,06,997/-. 2) THE APPELLANT PRAYS THAT THE DISALLOWANCE OF INT EREST OF RS. 12,06,997/- AS MADE BY THE AO AND AS UPHELD BY THE CIT(A) MAY BE DELETED. 3) WITHOUT PREJUDICE TO THE ABOVE, THE LEARNED CIT( A) ERRED ON FACTS AND IN LAW IN NOT ALLOWING THE INTEREST OF RS. 12,06,997/- U/S. 36(1)(III). 4) THE APPELLANT PRAYS THAT IF YOUR HONOURS ARE NOT INCLINED THE ALLOW THE APPELLANT'S CLAIM OF INTERES T OF RS. 12,06,997/- U/S. 24, THE SAME MAY BE HELD TO BE ALLOWABLE U/S. 36(1)(III) B) GENERAL 5) THE ABOVE GROUNDS OF APPEAL ARE WITHOUT PREJUDIC E TO ONE ANOTHER AND THE APPELLANT CRAVES LEAVE TO AD D, ALTER, AMEND, DELETE OR MODIFY ANY OF THE ABOVE 2. DURING THE COURSE OF HEARING, ARGUMENTS WERE MADE B Y SHRI SANJAY PARIKH, AUTHORISED REPRESENTATIVE (AR) ON BEHALF OF THE ASSESSEE AND BY SHRI AJAY, DEPARTMENTAL REPR ESENTATIVE (DR) ON BEHALF OF THE REVENUE. 3. THE EFFECTIVE ISSUE RAISED BY THE ASSESSEE IS THAT ITS CLAIM OF INTEREST U/S 24 AMOUNTING TO RS.12,06,997/- MADE AG AINST THE RENTAL INCOME FROM HOUSE PROPERTY WAS REJECTED BY THE LOWER AUTHORITIES. THE ALTERNATIVE ISSUE RAISED BY THE ASSESSEE IS THAT INTEREST IS ALTERNATIVELY ELIGIBLE U/S 36(1 )(III) AS BUSINESS JAISINGH BUILDERS 3 EXPENSES. IT WAS ARGUED THAT THE ASSESSEE IS A BUIL DER AND DEVELOPER. IN THE EARLIER YEARS PART AMOUNT OF INTE REST WAS CAPITALIZED IN THE PROJECT COST, AS THE PROJECT WAS UNDER CONSTRUCTION AND SINCE THE PROJECT WAS COMPLETED AN D THE RENTAL INCOME WAS RECEIVED IN IMMEDIATELY PRECEDING ASSESSMENT YEAR, THE CLAIM OF INTEREST WAS MADE AGA INST RENTAL INCOME WHICH WAS ALLOWED BY THE ASSESSING OFFICER I N THE ASSESSMENT ORDER PASSED U/S 143(3) DATED 30.11.2009 FOR ASSESSMENT YEAR 2007-08. IN SUPPORT OF HIS ARGUMENT S, THE ASSESSEE SUBMITTED COPIES OF RETURN AND ASSESSMENT ORDER OF ASSESSMENT YEAR 2007-08. HE ALSO PLACED BEFORE US C OPIES OF LEDGER ACCOUNTS TO SHOW THAT THE LOANS TAKEN IN EAR LIER YEARS WERE UTILIZED FOR CARRYING OUR CONSTRUCTION OF THE IMPUGNED PROPERTIES. HE PLACED RELIANCE UPON THE JUDGMENT OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. LOKHANDWAL A CONSTRUCTION IND. LTD. (2003) 260 ITR 579 (BOM) FOR THE PROPOSITION THAT IN THE CASE OF BUILDER THE CONSTRU CTION PROJECT UNDERTAKEN BY THE ASSESSEE CONSTITUTED STOCK-IN-TRA DE AND THEREFORE, THE ASSESSEE WOULD BE ENTITLED TO DEDUCT ION OF INTEREST ON LOAN U/S 36(1)(III) IN RESPECT OF INTER EST ON LOAN OBTAINED FOR EXECUTION OF SAID PROJECT. THE RELIANC E WAS ALSO PLACED ON THE JUDGMENT OF THE MUMBAI BENCH OF THE T RIBUNAL IN THE CASE OF JCIT V. K. RAHEJA (P) LTD. 102 ITD 4 14 (BOM) FOR THE PROPOSITION THAT EVEN, IF THE ASSESSEE IS FOLLO WING COMPLETION CONTRACT METHOD FOR RETURNING OF ITS INC OME, ITS CLAIM OF FINANCE COST AS A PERIOD COST, IN NATURE O F THE INTEREST WOULD BE ELIGIBLE IN THE YEAR IN WHICH IT INCURRED OR ACCRUED, IN ACCORDANCE WITH AS-7 ISSUED BY THE INSTITUTE OF CHA RTERED JAISINGH BUILDERS 4 ACCOUNTANTS OF INDIA. LASTLY, IT WAS SUBMITTED BY H IM THAT COMPLETE DETAILS WERE FURNISHED TO THE LOWER AUTHOR ITIES BUT WITHOUT APPRECIATING THE FACT PROPERLY, VALID CLAIM OF THE ASSESSEE HAS BEEN REJECTED. 4. PER CONTRA, LD. DR SUBMITTED THAT THE ONUS WAS UPO N THE ASSESSEE TO SHOW THAT ALL THE LOANS WERE USED BY TH E ASSESSEE FOR ACQUIRING THE PROPERTY FROM WHICH RENTAL INCOME HAS BEEN RECEIVED, AGAINST WHICH DEDUCTION OF INTEREST U/S 2 4 HAS BEEN CLAIMED. WITH REGARD TO ALTERNATE CLAIM OF THE ASSE SSEE FOR ALLOWING THE INTEREST U/S 36(1)(III), IT HAS BEEN S UBMITTED THAT SINCE NO BUSINESS INCOME HAS BEEN EARNED BY THE ASS ESSEE, THEREFORE, CLAIM OF INTEREST WAS NOT ALLOWABLE TO T HE ASSESSEE. 5. IN REPLY, THE ASSESSEE REITERATED ITS STAND THAT C OMPLETE DETAILS WERE FURNISHED TO THE LOWER AUTHORITIES SHO WING THAT THE LOANS WERE USED FOR ACQUIRING/ CONSTRUCTING THE HOUSE PROPERTY WHICH IS EVIDENT FROM THIS FACT THAT ASSES SEE WAS EXCLUSIVELY IN THE BUSINESS OF CONSTRUCTION/DEVELOP MENT OF PROPERTIES, AND FROM THE BALANCE SHEET SUBMITTED TO THE LOWER AUTHORITIES AS WELL AS BEFORE THE BENCH IT WAS EVID ENT THAT THESE LOANS HAVE NOT BEEN USED ELSEWHERE, AND WERE USED FOR CONSTRUCTION/ ACQUISITION OF PROPERTIES. IT WAS FUR THER EMPHASIZED BY THE LD. COUNSEL THAT IN EARLIER YEARS THE CLAIM OF THE ASSESSEE HAS BEEN ACCEPTED AND ASSESSMENT OR DER WAS PASSED U/S 143(3), THUS, THE REVENUE CANNOT TAKE A NEW STAND IN THE IMPUGNED ASSESSMENT YEAR. WITH REGARD TO ITS ALTERNATIVE CLAIM OF ALLOWING INTEREST U/S 36(1)(II I), HE JAISINGH BUILDERS 5 REITERATED HIS RELIANCE UPON THE AFORESAID JUDGMENT QUOTED BY HIM WHEREIN IN THE SIMILAR CIRCUMSTANCES CLAIM WAS HELD TO BE ALLOWABLE BY HONBLE BOMBAY HIGH COURT AND BY MUMBA I BENCH OF THE TRIBUNAL. 6. WE HAVE GONE THROUGH FACTS OF THE CASE, ORDERS OF THE LOWER AUTHORITIES, EVIDENCES BROUGHT BEFORE US AND THE JU DGMENTS RELIED UPON BY THE PARTIES. IT IS NOTED BY US THAT SIMILAR CLAIM WAS MADE BY THE ASSESSEE IN IMMEDIATELY PROCEEDINGS YEAR I.E. A.Y. 2007-08. THE CLAIM OF INTEREST HAS BEEN MADE CONSPICUOUSLY IN THE COMPUTATION SHEET FOR A.Y. 200 7-08. OUR ATTENTION WAS DRAWN ON THE ASSESSMENT ORDERS PASSED U/S 143(3) FOR ASSESSMENT YEARS 2006-07 & 2007-08 AND A LSO UPON THE DETAILS SUBMITTED TO THE AO IN THESE YEARS WITH REGARD TO CLAIM OF INTEREST MADE BY THE ASSESSEE. I T WAS SHOWN THAT FOR A.Y. 2007-08 AS WELL AS IN THE IMPUGNED AS SESSMENT YEAR COMPLETE DETAILS WERE GIVEN WITH REGARD TO SAN CTION LETTER OF LOANS ISSUED BY INDIAN BANK AND OTHER DETAILS WI TH REGARD TO OTHER LOANS AND PARTIES PURCHASED CONSTRUCTED AN D SOLD AND RETAINED IN A.Y. 2007-08. THE CLAIM OF INTEREST HAS BEEN ALLOWED BY THE AO U/S 143(3) IN THE IMPUGNED YEAR. THESE CLAIMS HAVE BEEN REJECTED BY THE LOWER AUTHORITIES ON THE GROUND THAT THE ASSESSEE COULD NOT DEMONSTRATE THAT LOANS WERE UTILIZED FOR ACQUIRING/CONSTRUCTING THESE PROP ERTIES. IT IS NOTED BY US THAT WHEN THE INTEREST CLAIMED ON THE S AME LOANS HAS BEEN FOUND TO BE ALLOWABLE BY THE AO IN EARLIER YEARS WHEN THE LOANS WERE TAKEN AND UTILIZED, IT CAN BE TAKEN THAT THE ASSESSING OFFICER HAD ALLOWED THESE CLAIMS AFTER VE RIFYING THE JAISINGH BUILDERS 6 ASPECT OF UTILIZATION OF LOANS. NOTHING HAS BEEN ME NTIONED BY THE AO IN THE ASSESSMENT ORDER OF THE IMPUGNED YEAR THAT ONCE HE HAD ALLOWED THE CLAIM OF INTEREST IN EARLIE R YEARS, THEN, HOW THE ASSESSEE CAN BE ASKED TO GO BACK IN THE EAR LIER YEARS AND DEMONSTRATE THE UTILIZATION NOW, ESPECIALLY WHE N AO HIMSELF WAS SATISFIED IN THE EARLIER YEARS ABOUT TH E CLAIM OF THE ASSESSEE. IN OUR CONSIDERED VIEW, IF THIS KIND OF A PPROACH IS ALLOWED THERE WOULD BE NOT CONSISTENCY AND HARMONY IN THE ASSESSMENTS FRAMED BY THE REVENUE OFFICERS, WHICH M AY IN TURN, LEAD TO CHAOS AND UNCERTAINTIES. THE LAW DOES NOT ENCOURAGE AND PERMIT THIS KIND OF APPROACH. FURTHER , THE ASSESSEE HAS DEMONSTRATED THAT SUFFICIENT DETAILS A ND EVIDENCES WERE SUBMITTED. UNDER THESE CIRCUMSTANCES IT WAS FOR THE LOWER AUTHORITIES TO SPECIFICALLY POINT OUT THAT WHAT MORE EVIDENCES WERE REQUIRED TO CLEAR THE DOUBTS. W E FIND THAT THE CLAIM HAS BEEN REJECTED IN UNFAIR MANNER. THE A O IS DIRECTED TO ALLOW THE SAID CLAIM. AT THIS STAGE, WE ARE NOT GOING INTO ALTERNATIVE CLAIM MADE BY THE ASSESSEE U/S 36( 1)(III). 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTL Y ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 16 TH MARCH, 2016. SD/- (C.N. PRASAD ) SD/- (ASHWANI TANEJA) ! / JUDICIAL MEMBER '! / ACCOUNTANT MEMBER MUMBAI; DATED : 16/ 03 /2016 CTX? P.S/. .. JAISINGH BUILDERS 7 # $%&'&($ / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. !'# / THE RESPONDENT. 3. $# $# % ( ) / THE CIT, MUMBAI. 4. $# $# % / CIT(A)- , MUMBAI 5. ()* # !+ , $# # +- , / DR, ITAT, MUMBAI 6. *. / / GUARD FILE. / BY ORDER, '#( ! //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI