Neelesh Satish Kanade, Pune V. ACIT, Cir-2[1] Pune, Pune

ITA 360/PUN/2012

• Counselvise Citation: 36024514 RSA 2012
• Duration Of Justice: 3 year(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-03-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2004-2005
• Appeal Filed On: 22-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K MODI
• Keywords: Salary income
• Section: 43B; 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH SMC, PUNE BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER ITA NOS.359 & 360/PN/2012 ASSESSMENT YEARS: 2003-04 & 2004-05 NEELESH SATISH KANADE 1073, BHOSALE MYSTIQA, MODEL COLONY, PUNE 411016 . APPELLANT PAN: AGDPK4376L VS. THE ASST. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE -2 (1), PUNE . RESPONDENT APPELLANT BY : SMT. DEEPA KHARE DEPARTMENT BY : SHRI A.K. MODI, CIT DATE OF HEARING : 19-03-2015 DATE OF PRONOUNCEMENT : 19-03-2015 ORDER PER G.S. PANNU, AM: THE CAPTIONED TWO APPEALS RELATE TO THE SAME ASSESS EE AND INVOLVE A COMMON ISSUE, THEREFORE, THEY HAVE BEEN CLUBBED AND HEARD TOGETHER, AND A CONSOLIDATED ORDER IS BEING PASSED FOR THE SAKE OF CONVENIENCE AND BREVITY. 2. THE CAPTIONED APPEALS ARE DIRECTED AGAINST TWO S EPARATE ORDERS OF CIT(A)-CENTRAL, PUNE DATED 25.10.2011 FOR ASSESSMEN T YEARS 2003-04 AND 2004-05, WHICH IN TURN ARISE FROM THE RESPECTIVE OR DERS OF ASSESSMENT PASSED BY THE ASSESSING OFFICER UNDER SECTION 143(3) / 153 A OF THE INCOME TAX ACT, 1961 ((IN SHORT THE ACT), DATED 31.12.2009. ITA NO.79/PN/2012 ITA NOS.359 & 360/PN/2012 3. IN BOTH THE APPEALS, THE ONLY ISSUE RELATES TO I NTEREST EXPENDITURE DISALLOWED BY THE INCOME-TAX AUTHORITIES AMOUNTING TO RS.2,45,904/- AND RS.43,258/- FOR ASSESSMENT YEARS 2003-04 AND 2004-0 5, RESPECTIVELY. 4. AT THE TIME OF HEARING, IT WAS A COMMON POINT BE TWEEN BOTH THE AUTHORIZED REPRESENTATIVES THAT IDENTICAL CONTROVER SY IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEARS 2006-07 TO 2008-09, VIDE I TA NOS.1702 TO 1704/PN/2013, DATED 03.03.2015 HAS BEEN CONSIDERED BY THE DIVISION BENCH B, PUNE AND ACCORDINGLY, THE CLAIM OF THE ASSESSE E FOR DEDUCTION OF AFORESAID INTEREST EXPENDITURE IS ALLOWABLE. 5. BRIEFLY PUT, THE RELEVANT FACTS ARE THAT ASSESSE E INDIVIDUAL DERIVES INCOME FROM SALARY AS WELL AS THROUGH A PROPRIETARY BUSINESS CONCERN OF FINIX CONSTRUCTIONS. IN THE COURSE OF IMPUGNED ASSESSMEN T PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT IN THE PROFIT & LOSS A CCOUNT OF FINIX CONSTRUCTIONS, ASSESSEE HAD CLAIMED EXPENDITURE BY WAY OF INTEREST OF RS.2,45,904/- AND RS.43,258/- FOR ASSESSMENT YEARS 2003-04 AND 2004-05, RESPECTIVELY, WHICH WAS NOT ALLOWABLE AS ASSESSEE H AD FAILED TO ESTABLISH THAT THE CORRESPONDING LOAN FUNDS WERE UTILIZED FOR THE PURPOSES OF BUSINESS. THE CIT(A) HAS ALSO AFFIRMED THE AFORESAID DECISION OF ASSESSING OFFICER. 6. THE TRIBUNAL IN ITS ORDER DATED 03.03.2015 (SUPR A) CONSIDERED SIMILAR DISALLOWANCE FOR ASSESSMENT YEARS 2006-07 TO 2008-0 9 AND ALLOWED DEDUCTION WHILE MAKING THE FOLLOWING DISCUSSION:- 12. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE RECORD. THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION HA D CLAIMED LOSS FROM HIS PROPRIETARY CONCERN I.E. M/S. FINIX CONSTR UCTIONS. ADMITTEDLY, DURING THE YEAR UNDER CONSIDERATION, NO BUSINESS RE CEIPTS WERE SHOWN BY THE ASSESSEE. THE CLAIM OF THE ASSESSEE WAS THA T IT WAS ENGAGED IN THE CONSTRUCTION ACTIVITY, BUT FOR THE CAPTIONED AS SESSMENT YEAR THOUGH THE BUSINESS WAS CONTINUING, BUT THERE WERE NO RECE IPTS FROM THE ITA NO.79/PN/2012 ITA NOS.359 & 360/PN/2012 PROPRIETARY BUSINESS. THE ISSUE BEFORE US IS IN RE LATION TO THE ALLOWABILITY OF THE EXPENDITURE CLAIMED TO HAVE BEE N INCURRED IN THE YEAR UNDER APPEAL. THE ASSESSEE HAD OBTAINED LOAN FROM SRI SUVARNA SAHAKARI BANK LTD. IN THE EARLIER YEARS AND SUM OF RS.6,88,171/- WAS DEBITED AS INTEREST DUE ON SUCH LOAN. THE ASSESSEE IN THE PRECEDING YEARS AND ALSO IN THE SUCCEEDING YEARS HAD DEBITED SAME AMOUNT OF INTEREST I.E. RS.6,88,171/- AS INTEREST PAYABLE TO THE BANK. THE CLAIM OF THE ASSESSEE WAS THAT THE SAID INTEREST WAS NOT TO BE DISALLOWED UNDER THE PROVISIONS OF SECTION 43B OF THE ACT SINCE THE BANK WAS NOT A SCHEDULED BANK. ANOTHER ISSUE RAISED BY THE ASSESS EE WAS THAT EVEN WHERE THE ACCOUNT HAD BECOME NPA, THE RECOGNITION O F THE LIABILITY IN CASES WHERE THE PERSON WAS MAINTAINING THE BOOKS OF ACCOUNT ON MERCANTILE BASIS HAD TO BE MADE IN THE YEAR OF ACCR UAL ITSELF, IRRESPECTIVE OF THE AMOUNT BEING PAID IN THE YEAR O R NOT. ANOTHER PLEA RAISED BY THE ASSESSEE WAS THAT THE LIABILITY WAS E XISTING ON THE CLOSE OF THE YEAR AS IS EVIDENT FROM THE FACT THAT THE SAID LIABILITY WAS SETTLED BY WAY OF OTS IN ASSESSMENT YEAR 2009-10 AND DIFFERENC E ON SETTLEMENT OF THE LOAN ACCOUNT WAS OFFERED TO TAX. THE ASSESS EE HAS PLACED ON RECORD THE COPY OF THE BANK STATEMENT REFLECTING TH E STATEMENT OF LOAN AND INTEREST THEREON AT PAGE 439 OF THE PAPER BOOK AND THE ENTRIES PASSED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE AS P ER THE COPY OF ACCOUNTS PLACED AT PAGE 440 OF THE PAPER BOOK. THE INTEREST DEBITED TO THE PROFIT & LOSS ACCOUNT IN THE EARLIER YEARS T O THE EXTENT OF RS.25,70,909/- WAS OFFERED FOR TAXATION IN ASSESSME NT YEAR 2009-10 AS IS EVIDENT FROM THE COMPUTATION OF INCOME FILED FOR THE SAID YEAR, WHICH IS PLACED AT PAGES 418 AND 419 OF THE PAPER BOOK. ADMITTEDLY, DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD NO C ONTRACT RECEIPTS BUT THE LOAN RAISED BY THE ASSESSEE IN THE EARLIER YEAR S FOR THE PURPOSE OF CARRYING ON THE BUSINESS WAS STILL PAYABLE AND THE INTEREST ON SUCH LOAN WAS BOOKED BY THE ASSESSEE IRRESPECTIVE OF THE ACCO UNT HAVING BECOME NPA. THE ASSESSEE HAS RECOGNIZED THE LIABIL ITY AND HAS FURTHER IN ASSESSMENT YEAR 2009-10 HAS ENTERED INTO OTS WITH THE BANK, UNDER WHICH THERE WAS WAIVER OF INTEREST LIAB ILITY, WHICH HAS BEEN OFFERED TO TAX AS INCOME OF THE ASSESSEE IN ASSESSM ENT YEAR 2009-10. IN VIEW OF THE ABOVE SAID FACTS AND CIRCUMSTANCES, WE FIND MERIT IN THE CLAIM OF THE ASSESSEE AND ACCORDINGLY, DIRECT THE A SSESSING OFFICER TO ALLOW THE EXPENDITURE OF RS.6,88,171/- AS INTEREST DUE ON THE LOAN OUTSTANDING DURING THE YEAR UNDER CONSIDERATION. T HE GROUND OF APPEAL NO.1 RAISED BY THE ASSESSEE IS THUS, ALLOWED. 7. IN VIEW OF THE AFORESAID FINDINGS OF THE DIVISIO N BENCH, THE IMPUGNED CLAIM OF ASSESSEE RELATING TO THE INTEREST DEBITED IN THE PROFIT & LOSS ACCOUNT IS AN ALLOWABLE DEDUCTION. AS A CONSEQUENCE, THE I MPUGNED ORDERS OF CIT(A) ARE SET-ASIDE AND THE ASSESSING OFFICER IS DIRECTED TO ALLOW DEDUCTION OF RS.2,45,904/- AND RS.43,258/- ON ACCOUNT OF INTERES T PERTAINING TO ASSESSMENT YEARS 2003-04 AND 2004-05, RESPECTIVELY. AS A CONS EQUENCE, THE CAPTIONED APPEALS OF THE ASSESSEE ARE ALLOWED. ITA NO.79/PN/2012 ITA NOS.359 & 360/PN/2012 8. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED. ABOVE DECISION WAS PRONOUNCED IN THE OPEN COURT AT THE CONCLUSION OF HEARING IN THE PRESENCE OF BOTH PARTIES I.E. ON 19. 03.2015. SD/- (G.S. PANNU) ACCOUNTANT MEMBER PUNE, DATED: 19 TH MARCH, 2015. GCVSR COPY OF THE ORDER IS FORWARDED TO: - 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A)-CENTRAL, PUNE; 4) THE CIT-CENTRAL, PUNE; 5) THE DR SMC BENCH, I.T.A.T., PUNE; 6) GUARD FILE. BY ORDER //TRUE COPY// ASSISTANT REGISTRAR I.T.A.T., PUNE