RAJENDRA H SALOT, MUMBAI V. ITO 15(1)(4), MUMBAI

ITA 4050/MUM/2013

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 3560 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 1 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-06-2016
• Appeal Filed By: Assessee
• Bench Allotted: D
• Next Hearing Date: 03-12-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 20-05-2013
• Court: TRIBUNAL
• Assessee Lawyers: SANJIV M SHAH

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES D, MUMBAI , , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, AND SHRI ASHWANI TANEJA, ACCOUNTANT MEMBER ITA NO.4050/MUM/2013 ASSESSMENT YEAR: 2009-10 MR. RAJENDRA H. SALOT, 18, MAHESWAR PRAKASH, BUILDING NO.1, JAIN DERASAR LANE, SANTACRUZ (WEST), MUMBAI-400054 / VS. ITO-15(1)(4), MUMBAI ( ! /ASSESSEE) ( ' / REVENUE) PAN. NO. AALPS6170L ! / ASSESSEE BY SHRI SANJIV M. SHAH ' / REVENUE BY SHRI OM PRAKASH MEENA - DR # '$ % ! & / DATE OF HEARING : 28/06/2016 % ! & / DATE OF ORDER: 05/07/2016 ITA NO.4050/MUM/2013 RAJENDRA H SALOT 2 / O R D E R PER JOGINDER SINGH (JUDICIAL MEMBER) THE ASSESSEE IS AGGRIEVED BY THE IMPUGNED ORDER DAT ED 19/03/2013 OF LD. FIRST APPELLATE AUTHORITY, MUMBAI . 2. DURING HEARING OF THIS APPEAL, THE LD. COUNSEL FOR THE ASSESSEE DID NOT PRESS GROUND NUMBER 3, CONFIRM ING THE DISALLOWANCE MADE OF LOSS ON SALE OF MOTOR CAR, CLA IM IN THE PROFIT & LOSS ACCOUNT OF PROPRIETARY CONCERN M/S RA JENDRA SALOT, AMOUNTING TO RS.1,72,481/-, THEREFORE, THIS GROUND IS DISMISSED AS NOT PRESSED. 3. THE ONLY REMAINING GROUND AGITATED BY THE LD. COUNSEL IS GROUND NO. 1 & 2, WHICH PERTAINS TO CONF IRMING THE ADDITION OF RS.19,61,649/-, ON ACCOUNT OF INTEREST, CLAIMED BY THE ASSESSEE IN HIS CAPITAL ACCOUNT. THE CRUX OF A RGUMENT ADVANCED ON BEHALF OF THE ASSESSEE IS THAT THE ENTI RE AMOUNT OF LOAN, TO WHICH INTEREST PERTAINS, WAS USED FOR B USINESS PURPOSES. RELIANCE WAS PLACED UPON THE DECISION IN 117 ITR 569 (SC). IT WAS PLEADED THAT BEFORE SECTION 40(A)( 2) IS INVOKED, IT HAS TO ESTABLISHED THAT EITHER INTEREST IS EXCESSIVE OR UNREASONABLE. IT WAS EXPLAINED THAT THESE WERE B USINESS ADVANCES. RELIANCE WAS PLACED UPON THE DECISION IN S.A. BUILDERS LTD. VS CIT (2007) 288 ITR 1(SC) AND IN HE RO CYCLES (PVT.) LTD. VS CIT (379 ITR 347)(SC). ON THE OTHER HAND, THE LD. DR, DEFENDED THE CONCLUSION ARRIVED AT IN THE I MPUGNED ORDER. 3.1. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE FACTS IN BRIEF, ITA NO.4050/MUM/2013 RAJENDRA H SALOT 3 ARE THAT THE ASSESSEE, AN INDIVIDUAL RUNNING HIS BU SINESS AS PROPRIETOR OF R.P. COMPUTECH, DECLARED TOTAL INCOME OF RS.6,51,346/- IN HIS RETURN FILED ON 30/09/2009. T HE ACCOUNTS OF THE ASSESSEE ARE AUDITED ONE. ON VERIF ICATION OF THE WORKING OF THE NET PROFIT, IT WAS FOUND THAT TH E ASSESSEE CLAIMED BANK INTEREST ON LOAN OF RS.19,61,649/-, WH ICH WAS NOT DEBITED TO THE PROFIT & LOSS ACCOUNT. IT WAS ME NTIONED IN THE ASSESSMENT ORDER THAT THE ASSESSEE DID NOT FURN ISH THE NECESSARY DETAILS IN SUPPORT OF HIS CLAIM, THUS, TH E IMPUGNED WAS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. ON A PPEAL, THE STAND TAKEN IN THE ASSESSMENT ORDER WAS AFFIRMED, A GAINST WHICH THE ASSESSEE IS IN FURTHER APPEAL BEFORE THIS TRIBUNAL. BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEAL) AND ALSO BEFORE US, IT WAS CLAIMED THAT THE IDENTICAL CLAIM OF THE ASSESSEE WAS ALLOWED BY THE ASSESSING OFFICER IN EA RLIER YEAR. BEFORE US, IT WAS EMPATHETICALLY CLAIMED BY THE ASS ESSEE THAT THE LOAN TAKEN BY THE ASSESSEE WAS UTILIZED AND DIS BURSED FOR PAYMENTS OF VARIOUS BUSINESS RELATED ACTIVITIES OF THE ASSESSEE AND THE OUTSTANDING AMOUNT OF M/S RAJPOLY PRODUCTS LTD. IS BECAUSE OF TRANSACTIONS OF SALES A ND PURCHASES ETC. AND RELATES TO THE BUSINESS. THE CRU X OF THE ARGUMENT IS THAT THE LOANS WERE UTILIZED FOR BUSINE SS PURPOSES ONLY. CONSIDERING THE TOTALITY OF FACTS, ADMITTEDLY ANY AND EVERY PAYMENT, IN THE GARB OF INTEREST, IN EXCESS OF WHAT CAN BE REALLY TERMED AS INTEREST, IS NOT ALLOW ABLE. AT THE SAME TIME THE DEDUCTION IS NOT DEPENDENT ON WHETHER RESULTING PROFIT IS TAXABLE OR NOT. THE WORD BORR OWED AND PAID IN SECTION 36(1)(III) CLEARLY POSTULATE TWO DIFFERENT ITA NO.4050/MUM/2013 RAJENDRA H SALOT 4 ENTITIES, ONE WHICH LENDS CAPITAL AND THE OTHER WHI CH BORROWS AND PAYS INTEREST. WHAT SECTION 36(1)(III) EMPHASI ZES ON ITS USER OF CAPITAL AND NOT USER OF ASSET, WHICH COMES INTO EXISTENCE AS A RESULT OF BORROWED CAPITAL, UNLIKE S ECTION 37(1), WHICH EXPRESSLY EXCLUDE AND EXPENSE OF A CAPITAL NA TURE. LEGISLATURE HAS, THEREFORE, MADE NO DISTINCTION IN SECTION 36(1)(III) BETWEEN CAPITAL BORROWED FOR REVENUE PU RPOSES AND CAPITAL BORROWED FOR CAPITAL PURPOSES AND AN ASSE SSEE IS ENTITLED TO CLAIM INTEREST PAID ON BORROWED CAPITAL PROVIDED THAT CAPITAL IS USED FOR BUSINESS PURPOSES IRRESPEC TIVE OF WHAT MAY BE RESULT OF USING SUCH BORROWED CAPITAL. OUR V IEW FIND SUPPORT FROM THE RATIO LAID DOWN IN DCIT VS CORE HE ALTH CARE LTD. (2008) 167 TAXMAN 206 (SC), CIT VS MONNET INDU STRIES LTD. (2012) 210 TAXMAN 264 (SC), VARDHMAN POLYTEX L TD. VS CIT 210 TAXMAN 261 (SC), CIT VS ANAND TECHNOLOGY RESOURCES PARK P. LTD. (2011) 202 TAXMAN 654. HONB LE M.P. HIGH COURT IN BIRLA GWALIOR PVT. LTD. 44 ITR 847 (M .P.) HELD THAT IT IS NOT NECESSARY TO SHOW FOR THE PURPOSES O F DEDUCTION UNDER CLAUSE (III) THAT THE MONEY BORROWED WAS UTIL IZED FOR A PARTICULAR BRANCH OF ASSESSEES BUSINESS. IDENTICAL RATIO WAS LAID DOWN BY HONBLE JURISDICTIONAL HIGH COURT IN C IT VS BOMBAY SAMACHAR LTED 74 ITR 723 (BOM.) AND AMMA BAI HAJEE ISSA VS CIT 51 ITR 835 (MAD.) 3.2. THE EXPRESSION FOR THE PURPOSES ON BUSINESS IS WIDER IN SCOPE THAN FOR THE PURPOSES OF EARNING IN COME (MADHAV PRASAD JATIA VS CIT (118 ITR 200)(SC) AND L .M. THAPPAR VS CIT 173 ITR 577 (CAL.). INTEREST ON BORR OWAL IS ALLOWABLE AS DEDUCTION ONLY WHEN THE BORROWALS ARE USED FOR ITA NO.4050/MUM/2013 RAJENDRA H SALOT 5 THE PURPOSE OF BUSINESS. IN S.A. BUILDERS LTD. VS C IT (SUPRA), WHERE HOLDING COMPANY HAD A DEEP INTEREST IN ITS SU BSIDIARY AND THE HOLDING COMPANY ADVANCES BORROWED MONEY TO ITS SUBSIDIARY AND THE SAME IS USED BY THE SUBSIDIARY F OR BUSINESS PURPOSES, THE HOLDING COMPANY WAS HELD TO BE ENTITLED TO DEDUCTION OF INTEREST ON ITS BORROWED L OANS. THE ONLY CONDITION IS THAT IT SHOULD BE USED FOR BUSINE SS PURPOSES. THE RATIO LAID DOWN IN CIT VS MOTOR GENER AL FINANCE LTD. 272 ITR 550 (DEL.) SUPPORTS THE CASE O F THE ASSESSEE. EVEN OTHERWISE, SECTION 40A(2)(A) CANNOT HAVE ANY APPLICATION UNLESS IT IS FIRST HELD THAT EXPENDITUR E WAS EXCESSIVE AND UNREASONABLE AS WAS HELD BY HONBLE A PEX COURT IN UPPER INDIA PUBLISHING HOUSE PVT. LTD. VS CIT (1979) 117 ITR 569 (SC) AND CORRONATION FLOUR MILLS VS ACI T (2009) 314 ITR (GUJ.). CONSIDERING THE TOTALITY OF FACTS AND THE JUDICIAL PRONOUNCEMENTS, DISCUSSED HEREINABOVE, AND MORE SPECIFICALLY THAT IT WAS A BUSINESS ADVANCE, WE FIN D MERIT IN THE CONTENTION OF THE ASSESSEE, THEREFORE, THIS GRO UND IS ALLOWED, FINALLY, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOW ED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. REPRESENTATIVE FROM BOTH SIDES AT T HE CONCLUSION OF THE HEARING ON 28/06/2016. SD/- SD/- ( ASHWANI TANEJA ) (JOGINDER SINGH) '# / ACCOUNTANT MEMBER $# / JUDICIAL MEMBER # $ MUMBAI; ( DATED : 05/07/2016 ITA NO.4050/MUM/2013 RAJENDRA H SALOT 6 F{X~{T? P.S/. . . %$&'()(*& / COPY OF THE ORDER FORWARDED TO : 1. *+,- / THE APPELLANT 2. ./,- / THE RESPONDENT. 3. 0 0 # 1! ( *+ ) / THE CIT, MUMBAI. 4. 0 0 # 1! / CIT(A)- , MUMBAI 5. 3'4 .! , 0 *+& * 5 , # $ / DR, ITAT, MUMBAI 6. 6$ / GUARD FILE. / BY ORDER, /3+! .! //TRUE COPY// / (DY./ASSTT. REGISTRAR) , # $ / ITAT, MUMBAI