Tristar Realtors Pvt. Ltd., New Delhi V. ITO, New Delhi

ITA 4257/DEL/2009

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 58755 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 3 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-03-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 01-03-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 04-11-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: RENU JOUHRI
• Assessee Lawyers: SONAL KAPOOR
• Keywords: Business expenditure; Proportionate interest

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH H : NEW DELHI BEFORE SHRI U.B.S. BEDI, JUDICIAL MEMBER AND SHRI K.D. RANJAN, ACCOUNTANT MEMBER I.T.A.NO.4257/DEL/2009 ASSESSMENT YEAR : 2006-07 TRISTAR REALTORS PVT. LTD. ITO C-207, SARVODYA ENCLAVE, VS. WARD 16(4), NEW DELHI 110 017. NEW DELHI. AABCT8211E (APPELLANT) (RESPONDENT) APPELLANT BY : SONAL KAPOOR, ADVOCATE RESPONDENT BY : RENU JOUHRI, SR. DR O R D E R PER K.D. RANJAN, ACCOUNTANT MEMBER THIS APPEAL BY THE ASSESSEE FOR ASSTT. YEAR 2006-07 ARISES O UT OF ORDER OF CIT(A) XIX NEW DELHI. THE GROUND OF APP EAL RAISED BY ASSESSEE IS REPRODUCED AS UNDER :- 1. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD . COMMISSIONER OF INCOME TAX (APPEALS) HAVE GROSSLY ERRED BY SUSTAINING THE ADDITION OF ` 10,77,036 ON ACCOUNT OF INTEREST PAID TO THE BANK AGAINST LOAN TAKEN BY THE APPELLANT. 2. THE ONLY ISSUE FOR CONSIDERATION RELATES TO SUSTAINING THE ADDITION OF ` 10,77,036/- ON ACCOUNT OF INTEREST PAI D TO BANK AGAINST LOAN TAKING BY THE ASSESSEE. THE FACTS OF THE CASE STATED IN BRIEF ARE THAT ASSESSEE IS COMPANY INCORPORATED FOR THE PURPOSE OF CARRYING ON 2 BUSINESS OF DEALING IN AND INVESTMENT IN ALL TYPES OF RE AL ESTATE AND BUILD, CONSTRUCT, EXECUTE ALL TYPES OF INFRASTRUCTURE PROJECTS. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE DECLARED RENTA L INCOME OF ` 23,40,000/-. THE ASSESSEE HAD CLAIMED DEDUCTION OF ` 14 ,98,900/- AGAINST THE RENTAL INCOME ON ACCOUNT OF INTEREST PAID ON THE PROPERTY LOANS. THE SAID INTEREST WAS PAID ON TWO NEW LOANS OF ` 1 CORE EACH TAKEN FROM CITIBANK DURING THE YEAR UNDER CONSIDERAT ION. FURTHER AS PER THE BALANCE SHEET FOR YEAR ENDED 31 ST MARCH, 2006 THE PROPERTY LOAN WAS SHOWN AS OUTSTANDING ON 31 ST MARCH, 2005 AT ` 53,83,801/- (LOAN ACCOUNT NO. 115061). THIS LOAN WAS CONVERTED TO NEW LOAN OF ` 1,00,00,000/- (LOAN ACCOUNT NO. 118610) ON 31 ST OCTOBER 2005. IT WAS ALSO POINTED OUT THAT NO ADDITION TO THE SAID PROPERT Y WAS MADE DURING THE YEAR UNDER CONSIDERATION. IT WAS THEREFORE , CONCLUDED THAT ASSESSEE HAD NOT UTILIZED THE BORROWED CAPITAL DURING T HE YEAR FOR ACQUIRING , CONSTRUCTION, REPAIR, RENEWAL OR RECONST RUCTION OF PROPERTY GIVEN ON RENT. IN FACT THE LOANS WERE UTILIZED FOR A DVANCING LOANS AND INVESTMENTS IN OTHER CONCERNS. 3. THE AO EXAMINED THE PROVISIONS OF SECTION 24 OF INC OME TAX ACT 1961 ACCORDING TO WHICH THE ASSESSEE WAS NOT ENTITLE D TO DEDUCTION FOR INTEREST ON WHOLE OF THE BORROWED CAPI TAL. THE ASSESSEE WAS ELIGIBLE FOR DEDUCTION AGAINST RENTAL INCOME ON A CCOUNT OF INTEREST ON CAPITAL TO THE EXTENT UTILIZED FOR REPAY MENT OF THE OLD LOAN 3 TAKEN FOR THE PROJECTS OF PROPERTY. AS SUCH THE INTERE ST PAID IN RESPECT OF OLD LOAN (A/C NO. 115061) AMOUNTING TO ` 2,72,60 7/- FOR THE PERIOD 1.4.2005 TO 31 ST OCTOBER, 2005 WAS ALLOWABLE AS DEDUCTION. IN ADDITION THE ASSESSEE HAD PAID INTEREST AMOUNTING TO ` 2 ,88,791/- ON LOAN OF ` 1 CRORE FOR THE PERIOD 31.10.2005 TO 31 ST MARCH, 2006. THE ASSESSEE WAS ALLOWED DEDUCTION OF INTEREST PAID PROPORTIO NATE TO LOAN AMOUNTING TO ` 51,68,312/- I..E THE LOAN OUTSTANDING AS ON 31 ST OCTOBER, 2005. THUS THE AO ALLOWED DEDUCTION OF ` 1, 49,256/- FOR THE PERIOD 31 ST OCTOBER, 2005 TO 31.3.2006 OUT OF INTEREST PAID AT ` 2,88,791/- ON LOAN NO. 118610. NO DEDUCTION WAS ALL OWED ON ACCOUNT OF INTEREST PAID ON LOAN NO. 116884/-. THE AO THEREF ORE WORKED OUT INTEREST ON BORROWED CAPITAL AT ` 4,21,863/- AS AGAIN ST THE CLAIM OF ` 10,98,900/-. THE AO THUS DISALLOWED THE INTEREST OF ` 10,77,036/-. 4. BEFORE LD. CIT(A) SIMILAR ARGUMENTS WERE MADE. LD. CIT(A) CONFIRMED THE DISALLOWANCE BY OBSERVING AS UNDER :- 6. I HAVE GONE THROUGH THE ASSESSMENT ORDER AND THE WR ITTEN SUBMISSIONS FILED BY THE AR IN THIS REGARD. 7. THE ASSESSEE COMPANY BORROWED LOANS AS UNDER : A.Y. A.Y. A.Y. A.Y. AMOUNT AMOUNT AMOUNT AMOUNT 2005-06 56,09,600/- 2006-07 1,00,00,000/- 8. ADMITTEDLY THE LOAN OF ` 56,09,600/- WAS UTILIZED FOR ACQUIRING A PROPERTY IN A.Y. 2005-06. THE AO FOUND THAT INTEREST TOTALING OF ` 14,98,900/- INCURRED ON THE SAID TWO L OANS WAS CLAIMED AS DEDUCTION WHILE COMPUTING THE RENTAL INCO ME 4 RECEIVED FROM THE SAID PROPERTY UNDER THE HEAD INCOM E FROM HOUSE PROPERTY. SINCE THE LOAN OF ` 1,00,00,000/- WA S NOT UTILIZED FOR ACQUIRING THE PROPERTY , THE AO DISALLO WED INTEREST PORTION OF ` 10,77,036/- RELATING TO THE LOAN OF `. 1,00,00,000/-. AGAINST THE SAID DISALLOWANCE THE APPELLANT FILED THE PRESENT APPEAL. 9. THE AR, WHILE AGREEING WITH THE ACTION OF THE AO , CONTENDED THAT THE INTEREST SHOULD HAVE BEEN ALLOWED AS BUSINESS EXPENDITURE IN TERMS OF S. 36. 10. THE AO HAS NOT GIVEN ANY FINDING THAT THE AMOUNT WAS UTILIZED FOR BUSINESS PURPOSE. 11. EVEN IN THE COURSE OF THESE PROCEEDINGS, THE ASSESSEE COMPANY HAS NOT LED ANY EVIDENCE THAT THE AMOUNT BOR ROWED WAS UTILIZED FOR BUSINESS PURPOSE AS ENVISAGED IN TERMS OF S. 36 (1)(III). THE AR HAS ALSO NOT DISPUTED THE COMPUTATION OF INTEREST DISALLOWANCE. IN VIEW OF THE ABOVE DISCUSSION, THE ACTI ON OF THE AO IS JUSTIFIED. 5. BEFORE US LD. AR OF THE ASSESSEE REITERATED THE SIMIL AR ARGUMENTS AS WERE MADE BEFORE AUTHORITIES BELOW. ON TH E OTHER HAND LD. SR. DR SUPPORTED THE ORDER OF LD. CIT(A) AS ALSO O F THE AO. 6. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH T HE MATERIAL AVAILABLE ON RECORD. FROM THE FACTS STATED ABOVE IT I S CLEAR THAT ASSESSEE HAD UTILIZED LOAN OF ` 56,09,600/- FOR ACQUIRI NG THE PROPERTY IN ASSTT. YEAR 2005-06. THE ASSESSEE HAD OBTAINED LOAN O F ` 1,00,00,000/- (LOAN ACCOUNT NO. 116884 WHICH WAS NOT UTILIZED FOR ACQUISITION OF PROPERTY FROM WHICH RENTAL INCOME WAS EARNED. MOREOVER OLD LOAN ACCOUNT NO. 115061 WAS CONVERTED I NTO NEW LOAN ACCOUNT NO. 118610 OF ` ONE CRORE. THE AO HAD ALLOW ED PROPORTIONATE INTEREST ON PORTION OF LOAN UTILIZED FOR ACQUISITION OF THE PROPERTY. THE AO HAD ALSO FOUND THAT THE ENTIRE INTEREST OF ` 14,98 ,900/- WAS NOT 5 RELATED TO AMOUNT UTILIZED FOR ACQUIRING THE PROPER TY WHICH WAS CLAIMED AGAINST THE RENTAL INCOME. SINCE THE LOAN O F ` 1,43,90,400/- (` 1,00,00,000 ` 56,89,600) WHICH WAS NOT UTILIZE D FOR ACQUIRING THE PROPERTY, THE AO HAD DISALLOWED THE AMOUNT OF ` 10, 77,036/-. THERE IS NO FINDING OF FACT THAT THE AMOUNT WAS UTILIZED FOR THE PURPOSE OF BUSINESS. BEFORE LD. CIT(A) ASSESSEE HAD NOT LED ANY EVIDE NCE THAT THE AMOUNT WAS BORROWED FOR UTILIZING FOR BUSINESS PURP OSE AS ENVISAGED IN TERMS OF S. 36(1)(III). THE LD. CIT(A) H AS RECORDED SPECIFIC FINDING THAT LD. AR OF THE ASSESSEE HAD NOT DISP UTED THE COMPUTATION OF INTEREST DISALLOWANCE. BEFORE US ALSO NO EVIDENCE WAS FILED THAT THE BORROWED FUNDS WERE UTILIZED FOR CONST RUCTION OR ACQUISITION OF PROPERTY AGAINST WHICH RENTAL INCOME W AS RECEIVED. IN VIEW OF THESE FACTS WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF LD. CIT(A) CONFIRMING THE DISALLOWANCE OF ` 10,77,036/-. ACCORDINGLY NO INTERFERENCE IS CALLED FOR. 7. IN THE RESULT APPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 1 ST MARCH, 2012. SD/- SD/- (U.B.S. BEDI) JUDICIAL MEMBER (K.D. RANJAN) ACCOUNTANT MEMBER DATED : 1.3.2012 VEENA 6 COPY OF THE ORDER FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR BY ORDER DEPUTY REGISTRAR, ITAT