Reginald Pathrose, CHENNAI V. ACIT, CHENNAI

ITA 453/CHNY/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 6442 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-08-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 12-06-2017
• Assessment Year: 2013-2014
• Appeal Filed On: 22-02-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SUPRIYO PAL
• Assessee Lawyers: P BALAKRISHNAN; VENKATESH KUMAR

Judgement Text

, .. , IN THE INCOME TAX APPELLATE TRIBUNAL , SMC B BENCH, CHENNAI . , BEFORE SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ I.T.A.NO.453/MDS/2017 ( / ASSESSMENT YEAR: 2013-14) SHRI REGINALD PATHROSE, C-228, 16, 11 TH STREET, PERIYAR NAGAR, CHENNAI 600 082. VS THE ACIT, NON-CORPORATE CIRCLE - 21, CHENNAI - 34. PAN: AABPR4622A ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : SHRI P. BALAKRISHNAN, CA & SHRI VENKATESH KUMAR, ADVOCATE /RESPONDENT BY : SHRI SUPRIYOPAL, JCIT /DATE OF HEARING : 12.06.2017 !' /DATE OF PRONOUNCEMENT : 08.08.2017 / O R D E R THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEA LS)- 9, CHENNAI DATED 30.11.2016 IN ITA NO.36/CIT(A)-9/2015 -16 FOR THE ASSESSMENT YEAR 2013-14 PASSED U/S.250(6) R.W.S.143 (3) OF THE ACT. 2. THE ASSESSEE HAS RAISED SEVERAL GROUNDS IN ITS APPEAL, HOWEVER THE CRUXES OF THE ISSUES ARE AS FOLLOWS:- 2 ITA NO.453/MDS/2017 I. THE LD.CIT(A) HAS ERRED IN SUSTAINING THE ORDER OF THE LD. ASSESSING OFFICER WHO HAD MADE ADDITION AMOUNTING T O RS.19,21,165/- BEING THE ACCUMULATED BALANCE RECEIV ED FROM RECOGNIZED PROVIDENT FUND BY HOLDING THAT THE ASSESSEE DOES NOT FALL UNDER CLAUSE (II) OF RULE-8 OF PART-A OF SCHEDULE-IV. II. THE LD.CIT(A) HAS ERRED IN CONFIRMING THE DISAL LOWANCE OF RS.8,61,624/- MADE BY THE LD. ASSESSING OFFICER TOW ARDS INTEREST CLAIMED U/S.24(B) OF THE ACT IN RESPECT OF HOUSING LOAN. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS AN INDIVIDUAL, FILED HIS RETURN OF INCOME FOR THE ASSE SSMENT YEAR 2013-14 ON 05.08.2013 STATING HIS INCOME TO BE NIL . THE DETAILS OF INCOME DISCLOSED IN HIS RETURN OF INCOME WAS; SA LARY INCOME OF RS.22,63,055/-, LOSS FROM HOUSE PROPERTY RS.24,29,8 96/-, INCOME FROM OTHER SOURCES RS.1,37,178/-. THE CASE WAS SELE CTED FOR SCRUTINY AND FINALLY THE ORDER WAS PASSED U/S.143(3 ) OF THE ACT ON 05.11.2015, WHEREIN THE LD.AO MADE ADDITION OF RS.19,21,165/- FOR NON-COMPLIANCE OF SEC.10(12) OF THE ACT AND 3 ITA NO.453/MDS/2017 RS.8,61,624/- TOWARDS INELIGIBLE CLAIM OF INTEREST ON HOUSING LOAN U/S.24 OF THE ACT. 4. GROUND NO.1: ADDITION OF RS.19,21,165/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS IT WAS OBSERVED BY THE LD. AO THAT THE ASSESSEE HAS RECEIV ED RS.41,84,220/- AS P.F SETTLEMENT, OUT OF WHICH THE ASSESSEE HAD INCLUDED RS.22,63,055/- AS HIS INCOME AND HE CLAIME D THE BALANCE AMOUNT OF RS.19,21,165/- AS INCOME EXEMPT F ROM TAX UNDER SEC.10(12) OF THE ACT. THE LD. AO OPINED THA T THE ASSESSEE HAD NOT COMPLIED WITH RULE 8 OF PART-A OF FOURTH SCHEDULE WHEREIN IT WAS STATED THAT THE ASSESSEE WO ULD BE ENTITLED FOR SUCH DEDUCTION IF THE FOLLOWING CONDIT IONS ARE SATISFIED:- I) THE PROVIDENT FUND SHOULD BE RECOGNIZED PROVIDEN T FUND. II) THE ASSESSEE SHOULD HAVE BEING IN CONTINUOUS SE RVICE FOR A PERIOD OF 5 YEARS OR MORE. III) IF HE HAS NOT RENDERED SUCH CONTINUOUS SERVICE , THE SERVICE SHOULD HAVE BEEN TERMINATED BY THE REASON OF HIS IL L-HEALTH OR ANY OTHER REASONS. 4 ITA NO.453/MDS/2017 SINCE THE ASSESSEE HAS RENDERED SERVICE LESS THAN 3 YEARS, FURTHER HIS SERVICE BEING TERMINATED DUE TO NON-PER FORMANCE AND NOT DUE TO THE REASONS OF ILL-HEALTH ETC., THE LD. AO OPINED THAT THE ASSESSEE IS NOT ENTITLED FOR THE BENEFIT OF DED UCTION U/S.10(12) OF THE ACT. ACCORDINGLY, THE LD. AO DENI ED THE BENEFIT OF DEDUCTION TO THE ASSESSEE FOR RS.19,21,165/- AND ADDITION WAS MADE. ON APPEAL, THE LD. CIT(A) CONFIRMED THE ORDER OF THE LD. AO BY AGREEING WITH HIS VIEW. 4.1. BEFORE ME, THE LD. AR SUBMITTED THAT DURING T HE RELEVANT ASSESSMENT YEAR THERE WAS RECESSION IN THE FINANCE MARKET DUE TO WHICH THERE WERE LAYOFFS. THE BANKS WERE CUTTING JOBS AND RETRENCHING THEIR STAFF. UNDER THAT SITUATION THE A SSESSEE WAS TERMINATED FROM HIS JOB WITH COMPENSATION. IN ORDER TO AVOID LEGAL COMPLICATIONS, FLIMSY REASONS WERE CITED FOR TERMINATION OF SERVICE WHICH THE ASSESSEE HAD NOT CONTESTED BECAUS E HE HAD AGREED FOR THE COMPENSATION. HENCE, THE LD. AR PLE ADED THAT THE ASSESSEE SHOULD NOT BE DENIED THE BENEFIT OF TH E DEDUCTION U/S.10(12) OF THE ACT WITH RESPECT TO P.F. SETTLEME NT. 5 ITA NO.453/MDS/2017 4.2 THE LD. DR RELIED ON THE ORDERS OF THE REVENUE AUTHORITIES AND VEHEMENTLY ARGUED IN SUPPORT OF THE SAME. 4.3 I HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS ON RECORD. FROM THE PAPER BOOK SUBMITTED BEFORE US BY THE ASSESSEE IN PAGE NO. 9 TO 17, IT IS OBVIOUS FRO M THE PUBLICATIONS ENCLOSED THAT THE DEUTSCHE BANK HAD ST ARTED LAYOFFS IN INDIA. FURTHER, INDUSSIND BANK WAS NEGOTIATING T O BUY DEUTSCHE BANK. MOREOVER, THE NEW YORK TIMES ALSO RE PORTED JOB CUTS IN MORGAN STANLY BANK. FROM THESE FACTS, IT IS OBVIOUS THAT THE BANKING SECTOR WAS UNDERGOING GREAT TURMOIL AND JOB CUTS WERE IMMINENT. SIMILARLY IN THE CASE OF THE ASSESSE E, THE TERMINATION WAS DUE TO THE ADVERSE SITUATIONS PREVA ILING IN THE BANKING INDUSTRY WHICH WAS BEYOND THE CONTROL OF TH E ASSESSEE AND NOT DUE TO ANY OTHER REASON INFERRED BY THE LD. REVENUE AUTHORITIES, THOUGH THE TERMINATION LETTER DID MENT IONED OTHERWISE. CONSIDERING THE FACTS AND CIRCUMSTANCES, IM OF THE CONSIDERED VIEW THAT THE ASSESSEE HAS NOT VIOLATED ANY OF THE PROVISIONS OF THE ACT AND HENCE HE SHOULD NOT BE DE NIED THE BENEFIT OF SEC.10(12) OF THE ACT FOR NON-COMPLIANCE . THEREFORE, I HEREBY, DIRECT THE LD. AO TO ALLOW THE DEDUCTION OF 6 ITA NO.453/MDS/2017 RS.19,21,165/- AS CLAIMED BY THE ASSESSEE AND ACCOR DINGLY DELETE THE ADDITION MADE THEREON. 5. GROUND NO. ADDITION OF RS. 8,61,624/- DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDI NGS, IT WAS OBSERVED BY THE LD.AO THAT THE ASSESSEE HAD CLA IMED DEDUCTION TOWARDS INTEREST PAID ON HOUSING LOAN FRO M INDIAN BULLS TO THE EXTENT OF RS.8,61,624/-. HOWEVER, IT WAS REVEALED THAT THE SANCTION LETTER ISSUED BY THE INDIAN BULLS STATED THAT THE LOAN WAS EXTENDED FOR THE PURPOSE OF THE ASSESSEES BUSINESS. IT WAS FURTHER REVEALED THAT THE NAME OF THE CO-APP LICANT FOR THE LOAN APPLICATION WAS M/S. FORTUNE PACKAGING AND MS. S. MARY AHILA. WHEN QUERIED, THE ASSESSEE REPLIED THAT HE H AD MORTGAGED HIS RESIDENTIAL FLAT FOR OBTAINING LOAN I N ORDER TO PAY THE BALANCE AMOUNT TO M/S. HIRANANDANI DEVELOPERS T OWARDS THE PURCHASE OF FLAT. HOWEVER, THE LD.AO OPINED THAT SI NCE THE ASSESSEE HAS OBTAINED THE LOAN FOR BUSINESS PURPOSE S, DEDUCTION CANNOT BE CLAIMED WITH RESPECT TO INCOME FROM HOUSE PROPERTY U/S.24 OF THE ACT. ON APPEAL, THE LD.CIT (A) SUSTAINED THE ADDITION BY AGREEING WITH THE VIEW OF THE LD.AO . 7 ITA NO.453/MDS/2017 5.1 BEFORE ME THE LD.AR SUBMITTED THAT THE ASSESSEE HAD DEPLOYED THE ENTIRE LOAN OBTAINED FROM INDIAN BULLS FOR THE PURPOSE OF PURCHASING THE FLAT AND NOT BUSINESS PUR POSES. THE LD.AR FURTHER EXPLAINED THAT HE HAD OBTAINED THE LO AN FROM INDIAN BULLS BY STATING BUSINESS REASONS BECAUSE TH E PROCESSING OF THE LOAN WAS EASIER ON THE STRENGTH OF M/S. FORT UNE PACKAGING AND MS. MARY AHILA. THE LD.AR VEHEMENTLY ARGUED ST ATING THAT THE ASSESSEE HAD NOT VIOLATED ANY OF THE PROVISIONS OF THE ACT, AND THERE WAS NO FINDING BY THE REVENUE ON THAT REG ARD. IT WAS THEREFORE PLEADED THAT THE ASSESSEE MAY BE GRANTED THE BENEFIT OF DEDUCTION U/S.24 OF THE ACT, AS THE ENTIRE LOAN AMOUNT WAS UTILIZED FOR PURCHASING THE RESIDENTIAL FLAT. THE L D.DR ON THE OTHER HAND RELIED ON THE ORDERS OF THE REVENUE AUTHORITIE S. 5.2 I HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULL Y PERUSED THE MATERIALS AVAILABLE ON RECORD. THE REVENUE HAS NOT POINTED OUT ANY VIOLATION OF THE PROVISIONS OF THE ACT, OR OTHER ACTS WITH RESPECT TO THE LOAN SANCTIONED/OBTAINED BY THE ASSE SSEE. FROM THE FACTS OF THE CASE IT APPEARS THAT THE ASSESSEE HAD SUPPLEMENTED HIS STRENGTH BY INCLUDING THE COMMERCI AL CONCERN AS THE LOAN APPLICANT M/S. FORTUNE PACKAGING IN ORD ER TO OBTAIN 8 ITA NO.453/MDS/2017 THE LOAN. IN THIS SITUATION, IF THE ASSESSEE HAS U TILIZED THE ENTIRE LOAN FOR THE PURCHASE OF THE RESIDENTIAL FLAT, THEN AS PER THE PROVISIONS OF THE ACT, HE IS ENTITLED FOR THE BENEF IT OF SECTION 24 OF THE ACT, TOWARDS THE INTEREST PAID ON SUCH LOAN. T HEREFORE, I HEREBY DIRECT THE LD.AO TO VERIFY WHETHER THE ASSES SEE HAS UTILIZED THE LOAN OBTAINED FROM INDIAN BULLS FOR TH E PURCHASE OF HIS RESIDENTIAL FLAT, AND IF FOUND SO, GRANT THE BE NEFIT OF DEDUCTION U/S.24 OF THE ACT, AND IF FOUND OTHERWISE, REINSTAT E HIS EARLIER ORDER. 6. IN THE RESULT APPEAL OF THE ASSESSEE IS PARTLY A LLOWED FOR STATISTICAL PURPOSES AS INDICATED HEREIN ABOVE. ORDER PRONOUNCED ON THE 08 TH AUGUST, 2017 AT CHENNAI. SD/- ( . ) (A. MOHAN ALANKAMONY) / ACCOUNTANT MEMBER #$ /CHENNAI, %& /DATED 08 TH AUGUST, 2017 JR & () *) /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. - ( )/CIT(A) 4. - /CIT 5. )./ 0 /DR 6. /1 /GF