ANIL KUMAR MITTAL, MUMBAI V. ACIT WD 12(1), MUMBAI

ITA 3562/MUM/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 48540 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 06-05-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SHRAVAN KUMAR
• Assessee Lawyers: RAHUL K HAKANI
• Keywords: Capital asset; Depreciation; Opportunity of being heard; Capital expenditure
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A, MUMBAI BEFORE SHRI R.S.SYAL, AM AND SHRI V.DURGA RAO, JM ITA NO.3562/MUM/2010 : ASST.YEAR 2006-2007 SHRI ANIL KUMAR MITTAL C/O.M/S.J.J.MEHRA & CO., CAS 11 LAXMI BUILDING, 2 ND FLOOR OFF. TURNER ROAD, BANDRA (WEST) MUMBAI 400 050. PAN :AABPM4779K. VS. THE ASSTT.COMMISSIONER OF INCOME-TAX CIRCLE 12(1) MUMBAI. (APPELLANT) (RESPONDENT) ITA NO.3563/MUM/2010 : ASST.YEAR 2006-2007 SMT.KIRAN MITTAL C/O.M/S.J.J.MEHRA & CO., CAS 11 LAXMI BUILDING, 2 ND FLOOR OFF. TURNER ROAD, BANDRA (WEST) MUMBAI 400 050. PAN : AAJPM6679E. VS. THE ASSTT.COMMISSIONER OF INCOME-TAX CIRCLE 12(1) MUMBAI. (APPELLANT) (RESPONDENT) APPELLANTS BY : SHRI RAHUL K.HAKANI RESPONDENT BY : SHRI SHRAVAN KUMAR O R D E R PER R.S.SYAL, AM : THESE TWO APPEALS BY TWO DIFFERENT BUT RELATED ASSE SSEES ARISE OUT OF THE ORDER PASSED BY THE CIT(A) IN RELATION TO THE ASSES SMENT YEAR 2006-2007. SINCE SOME OF THE ISSUES RAISED IN THESE APPEALS ARE COMM ON, WE ARE, THEREFORE, PROCEEDING TO DISPOSE THEM OFF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. SHRI ANIL KUMAR MITTAL : ITA NO. 3562/MUM/2010: 2. FIRST ISSUE RAISED IN THIS APPEAL IS AGAINST DIS ALLOWANCE OF EXPENSES AMOUNTING TO RS.31,534 U/S.14A OF THE ACT. THE A.O. COMPUTED DISALLOWANCE U/S.14A AT RS.31,534. NO RELIEF WAS ALLOWED IN THE FIRST APPEAL. AGGRIEVED THEREBY, THE ASSESSEE IS IN APPEAL BEFORE US. ITA NOS.3562 & 3563/MUM/2010 SHRI ANIL KUMAR MITTAL & SMT. KIRAN MITTAL 2 3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS NOTED THAT THE QUESTION OF MAKING DIS ALLOWANCE U/S 14A IS NO MORE RES INTEGRA IN VIEW OF THE JUDGMENT OF THE HONBLE BOMBAY HI GH COURT IN GODREJ & BOYCE LTD. MFG. CO. VS. DCIT (2010) 328 ITR 81 (BOM ) HOLDING THAT THE PROVISIONS OF SECTION 14A ARE APPLICABLE IN CIRCUMS TANCES AS ARE PREVAILING PRESENTLY AND THE DISALLOWANCE HAS TO BE WORKED OUT BY THE AO ON SOME `REASONABLE BASIS AND NOT RULE 8D. UNDER SUCH CIRC UMSTANCES, WE SET ASIDE THE IMPUGNED ORDER AND RESTORE THE MATTER TO THE FILE O F THE AO FOR DECIDING THE QUANTUM OF DISALLOWANCE, AS PER THE AFORE-NOTED JUD GEMENT, AFTER ALLOWING A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESS EE. 4. SECOND ISSUE RAISED IN THIS APPEAL IS AGAINST TH E CONFIRMATION OF DISALLOWANCE OF INTEREST OF RS.80,621. BRIEFLY STATED THE FACTS OF THIS GROUND ARE THAT THE ASSESSEE CLAIMED DEDUCTION FOR INTEREST PAID TO CBOP AGAINST LOAN FOR THE PURCHASE OF OFFICE PREMISES. ON BEING CALLED UPON TO EXPLAIN AS TO WHY DEDUCTION BE NOT ALLOWED TOWARDS SUCH INTEREST, THE ASSESSEE STATED THAT THE INTEREST WAS PAID FOR PURCHASING OFFICE PREMISES. THE ASSESSING OFFICER HELD THAT SINCE THE SAID EXPENDITURE IS INCURRED TOWARDS ACQUIRING A CAPITAL ASSET, WHICH B RINGS INTO BUSINESS AN ENDURING NATURE OF BENEFIT, IT IS HELD THAT SAME NEEDS TO BE TREATED AS CAPITAL EXPENDITURE . HE, THEREFORE, MADE DISALLOWANCE OF RS.80,621, WHI CH ACTION WAS UPHELD IN THE FIRST APPEAL. 5. AFTER HEARING BOTH THE PARTIES AND PERUSING THE RELEVANT MATERIAL ON RECORD IT IS SEEN THAT THE ASSESSEE TOOK LOAN FOR PURCHASING OFFICE PREMISES WHICH FACT HAS NOT BEEN DISPUTED BY THE ASSESSING OFFICER. THE ONLY GR OUND FOR DISALLOWANCE IS THAT PURCHASING OF OFFICE PREMISES LEADS TO ACQUISITION OF CAPITAL ASSET AND HENCE INTEREST CANNOT BE ALLOWED. IN OUR CONSIDERED OPINION THE AU THORITIES BELOW ERRED IN OVERLOOKING THE PRESCRIPTION OF SECTION 36(1)(III) AS PER WHICH, `THE AMOUNT OF INTEREST PAID IN RESPECT OF CAPITAL BORROWED FOR TH E PURPOSE OF BUSINESS OR ITA NOS.3562 & 3563/MUM/2010 SHRI ANIL KUMAR MITTAL & SMT. KIRAN MITTAL 3 PROFESSION IS ALLOWED AS DEDUCTION. WHAT HAS BEEN CONTEMPLATED IS THAT THE INTEREST SHOULD BE PAID IN RESPECT OF CAPITAL BORRO WED AND SUCH CAPITAL BORROWED SHOULD BE USED FOR THE PURPOSE OF BUSINESS OR PROFE SSION. IT IS TOTALLY IRRELEVANT AS TO WHETHER THE USE OF BORROWED FUNDS IS MEANT FOR A CQUIRING CAPITAL ASSET OR FOR MEETING WORKING CAPITAL REQUIREMENT. WE, THEREFORE, HOLD THAT THE LEARNED CIT(A) WAS NOT JUSTIFIED IN UPHOLDING THIS DISALLOWANCE. T HIS ADDITION IS DIRECTED TO BE DELETED. 6. THE LEARNED A.R. DID NOT PRESS DISALLOWANCE OF O THER EXPENSES MADE AND SUSTAINED TOWARDS DEPRECIATION ON FURNITURE RS.6,33 3, DEPRECIATION ON CAR RS.16,436, PROFESSIONAL FEES RS.4,000 AND DEMAT CHA RGES RS.2,438. THIS PART OF THE GROUND IS, THEREFORE, NOT ALLOWED. 7. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. SMT. KIRAN MITTAL : ITA NO. 3563/MUM/2010: 8. FIRST GROUND IS AGAINST CONFIRMATION OF DISALLOW ANCE OF RS.63,265 U/S.14A OF THE ACT. 9. BOTH THE SIDES ARE IN AGREEMENT THAT THE FACTS A ND CIRCUMSTANCES OF THIS GROUND ARE MUTATIS MUTANDIS SIMILAR TO THOSE CONSIDERED AND DECIDED ABOVE IN C ASE OF SHRI ANIL KUMAR MITTAL (SUPRA). FOLLOWING THE V IEW TAKEN HEREINABOVE WE SET ASIDE THE IMPUGNED ORDER AND RESTORE THE MATTER TO THE FILE OF A.O. FOR COMPUTING THE DISALLOWANCE IN ACCORDANCE WITH THE JUDGEMENT O F THE JURISDICTIONAL HIGH COURT IN GODREJ & BOYCE LTD. MFG. CO. (SUPRA). 10. SECOND ISSUE IS AGAINST THE CONFIRMATION OF DIS ALLOWANCE OF INTEREST PAID TO BANK AMOUNTING TO RS.63,265. HERE ALSO THE ASSESSEE PAID THE INTEREST TO CENTURION BANK AGAINST THE PURCHASE OF OFFICE PREMISES, WHICH THE ASSESSING OFFICER HELD TO ITA NOS.3562 & 3563/MUM/2010 SHRI ANIL KUMAR MITTAL & SMT. KIRAN MITTAL 4 BE NOT ALLOWABLE GIVING THE SAME REASONING AS IN TH E CASE OF SHRI ANIL KUMAR MITTAL (SUPRA). THE LEARNED CIT(A) ALSO UPHELD THE SAME. IT HAS BEEN FAIRLY CONCEDED BY BOTH THE SIDES THAT THE FACTS AND CIRCU MSTANCES OF THIS GROUND ARE SIMILAR TO THOSE OF SHRI ANIL KUMAR MITTAL (SUPRA). FOLLOWING THE VIEW TAKEN HEREINABOVE, WE ORDER FOR THE DELETION OF THIS ADDI TION. 11. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED ON THIS 29 TH DAY OF APRIL, 2011 . SD/- SD/- (V.DURGA RAO) (R.S.SYAL) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI : 29 TH APRIL, 2011. DEVDAS* COPY TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT CONCERNED 4. THE CIT(A) XXXIII, MUMBAI. 5. THE DR/ITAT, MUMBAI. 6. GUARD FILE. TRUE COPY. BY ORDER ASSISTANT REGISTRAR, ITAT, MUMBAI.