M/s. Siva Compulink Limited, CHENNAI V. ACIT, CHENNAI

ITA 48/CHNY/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 64699 (ITAT-CHENNAI)
• Duration Of Justice: 11 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-12-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2007-2008
• Appeal Filed On: 06-01-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: T N BETGIRI JT
• Assessee Lawyers: S DEEPA
• Keywords: Depreciation; Additional evidence; Cost of acquisition; Wrong claim; Bad and doubtful debts; Bonafide mistake; Revenue expenditure
• Section: 27

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH : CHENNAI [BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER] I.T.A.NOS. 46, 47 & 48/MDS/2012 ASSESSMENT YEARS : 2005-06, 2006-07 AND 2007-08 M/S SIVA COMPULINK LTD. 113-114, MENA COMPALA ARCADE 3 RD FLOOR, A BLOCK, B WING SIR THEYAGARAYA ROAD T. NAGAR CHENNAI 600 017 [PAN AABCS 3099K] VS THE ACIT COMPANY CIRCLE VI(3) CHENNAI (APPELLANT) (RESPONDENT) APPELLANT BY : MS. S.DEEPA, CA RESPONDENT BY : SHRI T.N.BETGIRI, JT. CIT DATE OF HEARING : 18-12-2012 DATE OF PRONOUNCEMENT : 21-12-2012 O R D E R PER N.S. SAINI, ACCOUNTANT MEMBER THESE ARE THE APPEALS FILED BY THE A SSESSEE AGAINST SEPARATE ORDERS OF THE CIT(A)-VI, CHENNAI, DATED 31.10.2011 FOR ASSESSMENT YEARS 2005-06, 2006-07 AND 2007-08. 2. IN ASSESSMENT YEAR 2005-06, THE SOLE ISSUE INVOL VED IN THE APPEAL IS THAT THE CIT(A) ERRED IN CONFIRMING THE P ENALTY OF ` 3,44,590/- LEVIED BY THE ASSESSING OFFICER U/S 27 1(1)(C) OF THE ACT. I.T.A.NO. 46,47&48/12 :- 2 -: 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE-C OMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURE AND SALE OF COMPUTERS, PERIPHERALS, PROPERTY DEVELOPMENT AND MONEY LENDING . FOR THE ASSESSMENT YEAR 2005-06, THE ASSESSEE-COMPANY FILED RETURN OF INCOME DECLARING INCOME OF ` 17,98,710/-. THE ASSESSING OFFICER FOUND THAT IN THE PROFIT & LOSS ACCOUNT THE ASSESS EE HAS SHOWN INTEREST RECEIPT OF ` 16,77,090/- WHICH WAS INTEREST CREDITED IN RESPECT OF DEPOSIT OF ` 2.05 CRORES WITH CORPORATION BANK ON THE DIRECTION S OF THE DEBTS RECOVERY TRIBUNAL ON THE PETITION FILED B Y THE SAID BANK. AFTER DELIBERATIONS, THE SAID BANK AGREED TO RECEIV E ` 2.50 CRORES WHICH WAS ADJUSTED TOWARDS DEPOSIT OF ` 2.05 CRORES AND ` 19,98,750/- TOWARDS INTEREST ACCRUED AND THE BALANCE OF ` 25,01,250/- WAS PAID BY THE ASSESSEE AND THE ACCOUNT WAS SETTLED. THE AS SESSEE CREDITED ` 16,77,090/- AS INTEREST BUT IN THE STATEMENT OF INC OME FILED, IT REDUCED THIS AMOUNT STATING THAT THIS AMOUNT WAS NOT RECEIV ED BY IT. THE ASSESSING OFFICER OBSERVING THAT INTEREST ACCRUED W AS TAKEN AS PORTION OF MONEY IN THE SAID SETTLED SUM OF ` . 2.5 CRORES, LEVIED PENALTY U/S 271(1)(C) OF THE ACT FOR MAKING WRONG CLAIM. AGGRI EVED, THE ASSESSEE FILED APPEAL BEFORE THE CIT(A). 4. THE CIT(A) OBSERVED THAT THE DETAILS RELATING TO TH E TRANSACTION WERE CALLED FOR AND EXAMINED DURING APP EAL PROCEEDINGS. I.T.A.NO. 46,47&48/12 :- 3 -: THE AMOUNT OF ` 16,77,090/- COMPRISES OF INTEREST RECEIVABLE FROM CORPORATION BANK OF ` 13,32,500/- FOR THE PERIOD 1.4.2005 AND INTEREST ON INCOME TAX REFUND OF ` 3,44,590/- RECEIVED DURING THE YEAR. THE CIT(A) OBSERVED THAT THE A.R OF THE ASSESSEE FILED DETAILS OF ACCOUNT WITH CORPORATION BANK. ON 27.9.2005 AN AMOUNT OF ` 45 LAKHS WAS PAID TO CORPORATION BANK VIDE CHEQUE NO.439825 WHIC H CONFIRM THE STAND OF THE ASSESSEE THAT THE INTEREST ACCRUED ON DEPOSIT OF ` 2.05 CRORES WAS NOT REDUCED WHILE SETTLING WITH CORPORAT ION BANK. THEREFORE, THE AMOUNT TO THE EXTENT OF ` 13,32,500/- CLAIMED IN THE RETURN OF INCOME OUT OF ` 16,77,090/- WAS ALLOWABLE SINCE THE BANK DID NOT RECOGNIZE INTEREST AND DID NOT CONSIDER REDUCIN G THIS AMOUNT IN FINAL SETTLEMENT. FURTHER HE OBSERVED THAT INTERES T ON INCOME TAX REFUND HAVING BEEN RECEIVED AND ACCOUNTED FOR IN TH E BOOKS REQUIRES TO BE OFFERED FOR TAX AND CLAIMING THIS AMOUNT AS D EDUCTION IN COMPUTATION OF INCOME IN HIS OPINION, AMOUNTS TO FU RNISHING OF INACCURATE PARTICULARS AND ACCORDINGLY, HE CONFIRME D THE LEVY OF PENALTY U/S 271(1)(C) OF THE ACT FOR CONCEALMENT TO THE EXTENT OF INCOME OF ` 3,44,590/-. 5. THE A.R OF THE ASSESSEE, BEFORE US, ARGUED THAT TH E CIT(A) OUGHT TO HAVE SEEN THAT THE ASSESSEE HAS NOT CONCE ALED ANY INCOME OR FURNISHED ANY INACCURATE PARTICULARS OF INCOME F OR LEVY OF PENALTY I.T.A.NO. 46,47&48/12 :- 4 -: U/S 271(1)(C) OF THE ACT AND THIS WAS JUST A CASE OF MINOR TECHNICAL AND VENIAL BREACH OF THE PROVISIONS OF THE ACT. IT WAS SUBMITTED THAT THIS WAS AN INADVERTENT MISTAKE COMMITTED IN THE PR EPARATION OF THE STATEMENT OF TOTAL INCOME WHEREIN THE INTEREST ON I NCOME TAX REFUND WAS ACCIDENTALLY DEDUCTED. SHE FURTHER SUBMITTED T HAT THE INFORMATION REGARDING THE INTEREST ON INCOME TAX REFUND WAS ALR EADY AVAILABLE WITH THE ASSESSING OFFICER AND HENCE, CANNOT BE SAID THA T INFORMATION WAS CONCEALED WITH THE INTENTION TO DECEIVE AS THE ASS ESSEE DURING THE COURSE OF HEARING BROUGHT IT TO THE NOTICE OF THE A SSESSING OFFICER. IT WAS ARGUED THAT AS PER VARIOUS DECISIONS OF THE COU RTS IMPOSITION OF PENALTY IS NOT AUTOMATIC. THE ASSESSING OFFICER SH OULD BE FAIR AND OBJECTIVE. SHE RELIED ON THE DECISION OF HON'BLE S UPREME COURT IN THE CASE OF T. ASHOK PAI VS CIT, 161 TAXMAN 340, WHEREI N IT WAS HELD THAT CONCEALMENT REFERS TO DELIBERATE ACT. A MERE OMISS ION OR NEGLIGENCE WOULD NOT CONSTITUTE DELIBERATE ACT OF SUPPRESSION. THE OMISSION OF THE WORD DELIBERATE MAY NOT BE OF MUCH SIGNIFICAN CE. THE ASSESSEE HAS VOLUNTARILY OFFERED ADDITIONAL INCOME TO BUY PE ACE OF MIND AND TO AVOID LITIGATION HENCE, PENALTY PROCEEDINGS U/S 27 1 SHALL NOT APPLY. IT WAS SUBMITTED THAT THIS WAS LAID DOWN IN THE CASE O F SURESH CHANDRA MITTAL VS CIT, 251 ITR 9 (SC). IT WAS ALSO SUBMITT ED THAT THE HON'BLE SUPREME COURT IN THE RECENT DECISION IN THE CASE OF CIT VS RELIANCE PETROPRODUCTS PVT. LTD, 322 ITR 158, HAS HELD THAT THE LAW LAID DOWN IN I.T.A.NO. 46,47&48/12 :- 5 -: DILIP N. SHROFF AS TO THE MEANINGS OF THE WORDS CO NCEAL AND INACCURATE CONTINUES TO BE GOOD IN LAW. THEREFOR E, IT WAS PRAYED THAT THE PENALTY RELATING TO THE ADDITION OF ` 3,44,590/- CONCEDED IN THE COURSE OF ASSESSMENT PROCEEDINGS SHOULD BE CANC ELLED. 6. ON THE OTHER HAND, THE DR SUPPORTED THE ORDERS OF T HE LOWER AUTHORITIES. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RECORD. THE CIT(A) HAS CONFIRMED THE LEVY OF PENALTY U/S 271(1)(C) O F THE ACT IN RESPECT OF INTEREST INCOME ON REFUND OF INCOME TAX. ACCORD ING TO THE CIT(A), INTEREST ON INCOME TAX REFUND HAVING BEEN RECEIVED AND ACCOUNTED FOR IN THE BOOKS REQUIRES TO BE OFFERED FOR TAX AND CLA IMING THIS AMOUNT AS DEDUCTION IN THE COMPUTATION OF INCOME, IN HIS OPIN ION, AMOUNTED TO FURNISHING OF INACCURATE PARTICULARS OF INCOME AND THEREFORE, HE CONFIRMED THE PENALTY U/S 271(1)(C) OF THE ACT FO R CONCEALMENT OF INCOME OF ` 3,44,590/-. 8. THE A.R OF THE ASSESSEE EXPLAINED BEFORE US THAT T OTAL INTEREST OF ` 16,77,090/- WAS CREDITED BY THE ASSESSEE IN ITS P ROFIT & LOSS ACCOUNT WHICH INCLUDED ` 13,32,500/- ON ACCOUNT OF BANK INTEREST. AS THE INTEREST ON BANK DEPOSIT WAS NOT REAL INCOME RECEIVED BY THE ASSESSEE, THE ASSESSEE WAS TO CLAIM DEDUCT ION OF THAT AMOUNT I.T.A.NO. 46,47&48/12 :- 6 -: IN THE COMPUTATION OF INCOME TO DETERMINE THE TOTAL INCOME. HOWEVER, BECAUSE OF A BONAFIDE MISTAKE, INSTEAD OF CLAIMING DEDUCTION OF ` 13,32,500/-, DEDUCTION OF THE ENTIRE AMOUNT OF ` 16,77,090/- WAS CLAIMED BY THE ASSESSEE IN THE COMPUTATION OF INCO ME. THE ABOVE BONAFIDE MISTAKE ON THE PART OF THE ASSESSEE WAS M ERELY IN THE COMPUTATION OF TOTAL INCOME AND THEREFORE, THE CIT( A) SHOULD NOT HAVE CONFIRMED THE LEVY OF PENALTY IN RESPECT OF THE SAI D BONAFIDE MISTAKE. 9. WE FIND THAT IT IS NOT IN DISPUTE THAT THE ASSESSE E HAS DULY DISCLOSED THE FACT OF EARNING OF INTEREST INCOME OF ` 3,44,590/- ON INCOME TAX REFUND. THUS, THE PRIMARY FACTS OF EARN ING OF INTEREST INCOME WERE DULY DISCLOSED IN THE RETURN. IT IS ON LY WHILE COMPUTING THE TOTAL INCOME THE ASSESSEE, DUE TO BONAFIDE MIS TAKE, CLAIMED DEDUCTION OF ` 16,77,090/- IN PLACE OF ` 13,32,500/-. IT IS NOT IN DISPUTE THAT THE ASSESSEE WAS ENTITLED TO CLAIM DED UCTION OF ` 13,32,500/- OUT OF ` 16,77,090/- CREDITED BY IT AS INTEREST INCOME IN I TS PROFIT & LOSS ACCOUNT. IN THE ABOVE CIRCUMSTANCES, IT CANNOT BE HELD THAT THE ASSESSEE HAS EITHER CONCEALED ANY INCOME OR FURNISHED ANY INACCURATE PARTICULARS OF ITS INCOME. OUR ABOVE VI EW FINDS SUPPORT FROM THE DECISION OF THE HON'BLE SUPREME COURT IN T HE CASE OF PRICE WATER HOUSE COOPERS PVT. LTD VS CIT, CIVIL APPEAL N O.6924 OF 2012 [ARISING OUT OF SLP C.NO10700 OF 2009] ORDER DATED 25.9.2012. WE, I.T.A.NO. 46,47&48/12 :- 7 -: THEREFORE, DELETE THE LEVY OF PENALTY U/S 271(1)(C ) OF THE ACT IN RESPECT OF INTEREST ON INCOME TAX REFUND OF ` 3,44,590/- AND ALLOW THE APPEAL OF THE ASSESSEE. 10. THE COMMON ISSUE RAISED VIDE GROUND NO.2 IN ASSESS MENT YEAR 2006-07 AND GROUND NO.I OF ASSESSMENT YEAR 200 7-08 IS THAT THE CIT(A) ERRED IN NOT ALLOWING THE BUSINESS LOSS CLA IMED AMOUNTING TO ` 41,19,585/- IN ASSESSMENT YEAR 2006-07 AND ` 4,56,05,891/- IN ASSESSMENT YEAR 2007-08 ON THE GROUND THAT THERE WA S NO BUSINESS ACTIVITY DURING THE YEAR AND THAT THE EXPENSES CLAI MED PERTAINED TO RENTAL INCOME FROM LET OUT OF PROPERTIES. 11. THE BRIEF FACTS OF THE CASE ARE THAT DURING THE COU RSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER OBSERV ED THAT THE ASSESSEE HAD CLAIMED TO BE ENGAGED IN THE BUSINESS OF MANUFACTURING AND SALE OF COMPUTERS, PROPERTY DEVELOPMENT AND MON EY LENDING. HOWEVER, IT WAS FOUND THAT IN THE LAST FEW YEARS AN D IN THE CURRENT YEAR THE ASSESSEE DERIVED INCOME MAINLY FROM REN T. OUT OF THE TOTAL RECEIPT OF ` 1,42,20,592/-, RENT RECEIPT CONSTITUTE ` 1,29,11,222/- OTHER RECEIPTS BEING INTEREST OF ` 2,40,533/-, PROFIT FROM SALE OF ASSET OF ` 9,64,337/-, MAINTENANCE RECEIPT OF ` 20,000/- AND MISCELLANEOUS RECEIPTS OF ` 84,500/-. HE ALSO OBSERVED THAT IN COMPARISON MAJ OR EXPENSES WERE INCURRED UNDER THE HAD ADMINISTRATIVE AND OTHER I.T.A.NO. 46,47&48/12 :- 8 -: EXPENSES OF ` 55,84,422/-, FINANCIAL CHARGES OF ` 15,17,334/- AND DEPRECIATION OF ` 27,41,451/-. THE ASSESSING OFFICER OBSERVED THAT THE ARGUMENT OF THE COMPANY WAS THAT IT HAD INVESTED A SUBSTANTIAL AMOUNT IN LAND AT PORUR FOR FURTHER DEVELOPMENT AND AS LONG AS THE LANDS ARE HELD BY THEM IT CANNOT BE SAID THAT THEY ARE NOT IN BUSINESS IS NOT TENABLE AS PER LAW. THE ASSESSING OFFICER O BSERVED THAT ANY EXPENDITURE INCURRED TOWARDS THE DEVELOPMENT OF THE LAND SHOULD BE SHOWN UNDER THE HEAD WORK-IN-PROGRESS TO BE ADJUS TED AGAINST THE INCOME SHOWN FROM THE INCOME OF THE PROPERTY AND CA NNOT BE CLAIMED AS REVENUE EXPENSE IN THE CURRENT YEAR. HENCE, HE DISALLOWED THE BUSINESS LOSS OF ` 44,64,522/- IN ASSESSMENT YEAR 2006-07. SIMILARLY , FOR ASSESSMENT YEAR 2007-08, HE DISALLOWED ` 4,56,05,891/-. 12. ON APPEAL, THE CIT(A) HELD THAT COMPUTER BUSINESS O F THE ASSESSEE HAS BEEN TAPERED OFF QUOTE SOMETIME BACK A ND ASSESSEE INVESTED SUBSTANTIAL AMOUNT ON LAND AT PORUR AND WA S IN CONTEMPLATION TO EXPLOIT THE SAME COMMERCIALLY. HE OBSERVED THAT THE CRUX OF THE MATTER WAS WHETHER THE EXPENDITURE CLAIMED BY THE A SSESSEE-COMPANY WAS ALLOWABLE AS DEDUCTION IN THE FACTUAL MATRIX. HE NOTED THAT SUBSTANTIAL EXPENDITURE INCURRED BY THE ASSESSEE R ELATES TO FURTHERING THE OBJECTIVE OF MAINTAINING, SECURING, SECURING AN D ADMINISTERING THE LAND AT PORUR AND HENCE ALL THE DIRECT COSTS ATTRIB UTABLE TO THE LAND AT I.T.A.NO. 46,47&48/12 :- 9 -: PORUR INCLUDING THE BORROWING COSTS ATTRIBUTABLE TO THE LAND WERE REQUIRED TO BE CAPITALIZED AND HENCE THE CLAIM OF T HE ASSESSEE- COMPANY RELATING TO THIS CATEGORY OF EXPENDITURE AS REVENUE WAS NOT ADMISSIBLE AS PER LAW. THE ASSESSEE-COMPANY HAVING CLAIMED DEDUCTION U/S 24(A) WAS NOT ELIGIBLE FOR CLAIM OF EXPENDITURE INCURRED RELATING TO PROPERTIES FROM WHICH THE ASSESSEE-COMP ANY DERIVES RENTAL INCOME. AS THE ASSESSEE-COMPANY WAS CARRYING ON AC TIVITIES OF LETTING OUT PROPERTIES AND NURTURING THE LAND AT PORUR FOR THE BUSINESS OF CONSTRUCTION, COMMON EXPENDITURE INCURRED DURING TH E YEAR BY THE ASSESSEE-COMPANY WAS ALLOWABLE AS REVENUE DURING TH E YEAR. HE, THEREFORE, DIRECTED THE ASSESSING OFFICER TO EXAMIN E THE NATURE OF EXPENDITURE INCURRED AND REVISE THE ASSESSMENT AND PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. 13. THE A.R OF THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES AND THE DR SUPPORTED T HE ORDERS OF THE LOWER AUTHORITIES. 14. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RECORD. IN THE INSTANT CASE, THE FINDING OF THE CIT(A) IS AS UNDER : I.T.A.NO. 46,47&48/12 :- 10 -: 8. THE LEARNED AR FILED WRITTEN SUBMISSION IN SUPP ORT OF THE GROUNDS OF APPEAL. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE APPELLANT COMPANY. WHILE THERE APPEAL NO DOUBT THAT THE COMPUTER BUSINESS HAS TAPERED OFF QUITE SOME TIME BACK, THE APPELLANT HAS INVESTED SUBSTANTIAL AMOUNT ON LAND AT PORUR AND IS IN CONTEMPLATION TO EXPLOIT THE SAME COMMERCIALLY. HOWEVER, THE CRUX OF THE MATTER IS WHETHER THE EXPENDITURE CLAIMED BY THE APPELLANT COMPANY IS ALLOWABLE AS DEDUCTION IN THE FACTUAL MATRIX. I AM OF THE CONSIDERED VIEW THAT SUBSTANTIAL EXPENDITURE INCURR ED BY THE APPELLANT RELATE TO FURTHERING THE OBJECTIVE OF MAINTAINING, SECURING, SECURING AND ADMINISTERING T HE LAND AT PORUR AND HENCE ALL THE DIRECT COSTS ATTRIB UTABLE TO THE LAND AT PORUR INCLUDING THE BORROWING COSTS ATTRIBUTABLE TO THE LAND IS REQUIRE TO BE CAPITALIZ ED AND HENCE THE CLAIM OF THE APPELLANT COMPANY RELATING T O THIS CATEGORY OF EXPENDITURE AS REVENUE IS NOT ADMISSIBL E AS PER LAW. FURTHER, THE APPELLANT COMPANY HAVING CLAI MED DEDUCTION U/S 24(A) IS NOT ELIGIBLE FOR CLAIM OF EXPENDITURE INCURRED RELATING TO PROPERTIES FROM WH ICH THE APPELLANT COMPANY DERIVES RENTAL INCOME. AS THE APPELLANT COMPANY IS STILL CARRYING ON ACTIVITIES O F LETTING OUT PROPERTIES AND NURTURING THE LAND AT PORUR FOR THE BUSINESS OF CONSTRUCTION, COMMON EXPENDITURE INCURR ED DURING THE YEAR BY THE APPELLANT COMPANY IS ALLOWAB LE AS REVENUE DURING THE YEAR. THEREFORE, I DIRECT THE AO TO EXAMINE THE NATURE OF EXPENDITURE INCURRED AND REVI SE THE ASSESSMENT AS OBSERVED. THIS GROUND OF THE APPEAL IS TREATED AS PARTLY ALLOWED. 15. BEING AGGRIEVED BY THE ORDER OF THE CIT(A), THE AS SESSEE IS IN APPEAL BEFORE US. THE ASSESSEE CONTENDED BEFOR E US THAT BUSINESS LOSS OF ` 44,64,522/- IN ASSESSMENT YEAR 2006-07 AND ` 4,56,05,891/- IN ASSESSMENT YEAR 2007-08 SHOULD BE ALLOWED TO THE ASSESSEE. WHEN THE BENCH ASKED THE A.R TO PRODUCE THE DETAILS OF VARIOUS EXPENSES FORMING PART OF THE BUSINESS LOSS AS CLAIM ED AND TO SHOW HOW THE EXPENSES WERE INCURRED FOR THE BUSINESS OF THE ASSESSEE, THE I.T.A.NO. 46,47&48/12 :- 11 -: A.R EXPRESSED HER INABILITY TO PROVIDE THE DETAILS OF THE EXPENSES. NO SPECIFIC MISTAKE IN THE ORDER OF THE CIT(A) WAS POI NTED OUT BY THE A.R AND NO OTHER ARGUMENT WAS PUT FORWARD BY THE A.R. IN THE ABOVE CIRCUMSTANCES, WE DO NOT FIND ANY GOOD AND JUSTIFIA BLE REASON TO INTERFERE WITH THE ORDER OF THE CIT(A) WHICH IS CON FIRMED AND THE GROUNDS OF APPEAL OF THE ASSESSEE FOR BOTH THE ASS ESSMENT YEARS ARE DISMISSED. 16. GROUND NO.3 IN ASSESSMENT YEAR 2006-07 IS DIRECTED AGAINST THE ORDER OF THE CIT(A) IN NOT CONSIDERING THE LONG TERM LOSS OF ` 1,40,376/- CLAIMED ON THE SALE OF UNDIVIDED SHARE O F LAND. 17. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE RECEIVED TOTAL CONSIDERATION OF ` 66,10,280/- ON SALE OF THREE FLATS. THE ASSESSEE RELIED ON THE SALE DEED FOR THE PURPOSES O F SALE OF UNDIVIDED PORTION OF LAND AT ` 26,73,764/- AND THE BALANCE ` 33,36,516/- TOWARDS THE BUILDING COMPONENT. WHILE ARRIVING AT THE COST OF ACQUISITION OF 1/3 RD CONSIDERATION PAID WAS TAKEN AS COST OF LAND AND T HE BALANCE ATTRIBUTED TO THE BUILDING. ACCORDINGLY, THE ASSES SEE-COMPANY ARRIVED AT LONG TERM CAPITAL LOSS OF ` 1,40,370/- IN RESPECT OF LAND AFTER CLAIMING INDEXATION BENEFIT. WITH REGARD TO THE BU ILDING COMPONENT THE ASSESSEE-COMPANY REDUCED THE SALE PROCEEDS OF T HE BUILDING IN THE I.T.A.NO. 46,47&48/12 :- 12 -: BLOCK OF BUILDING AND AFTER ADJUSTING THE ADDITION OF NEW FLAT BOUGHT DURING THE YEAR OFFERED SHORT TERM CAPITAL GAIN OF ` 13,98,824/-. THE ASSESSING OFFICER OBSERVED THAT THERE WAS NO DISPUT E THAT THE ASSESSEE-COMPANY CLAIMED DEPRECIATION ON THE FLATS AND HENCE AT THE TIME OF SALE OF THE FLAT, THE ACT OF THE ASSESSEE-C OMPANY SEGREGATING THE LAND COMPONENT AND BUILDING COMPONENT AND TREAT ING EACH COMPONENT AS SEPARATE ASSET WAS NOT LEGALLY TENABLE AS WHAT HAS BEEN SOLD WAS ONLY FLAT WHICH ALSO CONSISTS OF UNDIVIDED SHARE OF LAND. AS THE FLATS SOLD WAS PART OF BLOCK OF ASSETS ON WHICH DEPRECIATION HAD BEEN CLAIMED, ON SALE OF THE FLATS THE SALE PROCEED S WERE REQUIRED TO BE ADJUSTED AGAINST THE BLOCK OF ASSETS. 18. THE CIT(A) ALSO CONFIRMED THE ABOVE ACTION OF THE A SSESSING OFFICER BY OBSERVING THAT SEGREGATING THE LAND COMP ONENT AND BUILDING COMPONENT AND TREATING EACH COMPONENT AS SEPARATE A SSET IS NOT LEGALLY TENABLE AS WHAT HAS BEEN SOLD IS ONLY FLAT WHICH ALSO CONSISTS OF UNDIVIDED SHARE OF LAND. 19. THE A.R OF THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES. SHE SUBMITTED THAT WHEN THE SALE DEED CLEARLY AND SEPARATELY INDICATED THE SALE VALUE OF UNDIVIDED SHARE VALUE OF LAND AND THE SALE VALUE OF SUPER STRUCTURE, THE CIT(A) SHOULD HAVE I.T.A.NO. 46,47&48/12 :- 13 -: TAKEN ONLY THE SALE VALUE OF SUPER STRUCTURE FOR TH E PURPOSE OF SHORT TERM CAPITAL GAINS. 20. THE DR, ON THE OTHER HAND, SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES. 21. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RECORD. THE A.R CONTENDED BEFORE US THAT THE ASSESSEE HAS SOLD TWO DISTINCT ASSETS I.E FLAT AS ONE ASSET AND UNDIVIDED RIGHT IN LAND ON WH ICH FLAT WAS CONSTRUCTED AS A SEPARATE ASSET. WE FIND THAT NO M ATERIAL HAS BEEN BROUGHT BEFORE US BY THE A.R TO SHOW THAT UNDIVIDED RIGHT IN THE LAND IS LEGALLY AN ASSET SEPARATE AND DISTINCT FROM THE FLAT. NO MATERIAL HAS BEEN BROUGHT BEFORE US TO SHOW THAT UNDIVIDED RIGHT IN THE LAND CAN BE SOLD SEPARATELY WITHOUT TRANSFER OR SALE OF THE FLA T. IN THE ABSENCE OF ANY MATERIAL BROUGHT BEFORE US TO SHOW THAT UNDIVID ED RIGHT IN THE LAND IS NOT A PART AND PARCEL OF THE ASSET WHICH IS KNOW N AS FLAT, WE FIND NO ERROR IN THE ORDER OF THE CIT(A). ACCORDINGLY, THI S GROUND OF APPEAL OF THE ASSESSEE IS DISMISSED. 22. GROUND NO.II OF THE APPEAL FOR ASSESSMENT YEAR 2007 -08 IS DIRECTED AGAINST THE ORDER OF THE CIT(A) IN CONFIRM ING THE DISALLOWANCE OF BAD DEBTS OF ` 3,75,62,045/- RECOVERABLE FROM M/S SIPANI AUTOMOBILES LTD. I.T.A.NO. 46,47&48/12 :- 14 -: 23. THE FACTS OF THE CASE ARE THAT THE ASSESSING OFFICE R DISALLOWED THE CLAIM OF BAD DEBTS OF ` 3,75,62,045/- ON ACCOUNT OF THE FAILURE OF THE ASSESSEE-COMPANY TO FURNISH THE PAN OF M/S SIPANI AUTOMOBILES LTD. 24. BEFORE THE CIT(A) THE ASSESSEE SUBMITTED THAT IT F URNISHED FULL DETAILS OF THE BIFR REFERENCE CORRESPONDENCE A ND THE COMPLAINT FILED BEFORE THE HON'BLE MADRAS HIGH COURT. THE CO MPANY ALSO FURNISHED THE PAN OF THE DEFAULTING COMPANY IN THE STATEMENT OF FACTS AS BLRS01201E. THE CIT(A) OBSERVED THAT THE ASSESS ING OFFICER HAS NOT CORRECTLY APPROACHED THE ISSUE. NON-FURNISHING OF PAN BY ITSELF DOES NOT WARRANT DISALLOWANCE OF LOSS CLAIMED IN VI EW OF THE OTHER SUPPORTING PAPERS FILED BY THE ASSESSEE-COMPANY. HE HELD THAT THE LARGER ISSUE WAS WHETHER THE CLAIM WAS ALLOWABLE AS REVENUE EXPENDITURE. HE OBSERVED THAT THE ASSESSING OFFICE R HAS NOT EXAMINED THIS POINT AT ALL. THE CIT(A) OBSERVED THAT THE AS SESSEE IS IN THE BUSINESS OF MANUFACTURING/SELLING OF COMPUTERS AND PROPERTY DEVELOPMENT, AND DERIVING RENTAL, INTEREST INCOME. THE MAIN BUSINESS OF THE ASSESSEE-COMPANY WAS LETTING OUT OF PROPERTY AND THE COMPANY WAS IN THE PROCESS OF STARTING CONSTRUCTION BUSINES S HAVING INVESTED IN LAND AT PORUR. HE OBSERVED THAT THE LOSS ON ACCOUN T OF AMOUNT ADVANCED TO M/S SIPANI AUTOMOBILES LTD. WHICH COULD NOT BE RECOVERED I.T.A.NO. 46,47&48/12 :- 15 -: IN HIS OPINION, WAS A CAPITAL LOSS AND CANNOT BE AL LOWED AS A REVENUE LOSS. HE OBSERVED THAT THE PRINCIPLES OF ALLOWABIL ITY OF WRITING OFF OF LOANS AS LAID DOWN BY THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS MYSORE SUGAR COMPANY LTD, 46 ITR 649. THE HON'BLE SUPREME COURT HAS HELD THAT WHEN THE MONEY WAS LOST DURING THE CO URSE OF ACQUISITION OF AN ASSET OF AN ENDURING NATURE, THEN THE LOSS WAS ON CAPITAL FIELD. THE CIT(A) HELD THAT AS THE MAJOR B USINESS OF THE ASSESSEE-COMPANY WAS LET OUT OF PROPERTY AND PROPER TY DEVELOPMENT AND THE AMOUNT ADVANCED WAS CAPITAL IN NATURE HENCE , ANY LOSS ON ACCOUNT OF IRRECOVERABILITY OF THE SAID AMOUNT WAS CAPITAL LOSS AND NOT ALLOWABLE AS REVENUE LOSS. 25. THE A.R REITERATED THE SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES. IT WAS SUBMITTED THAT THE LOAN OF ` 3,75,62,045/- WAS ADVANCED TO M/S SIPANI AUTOMOBILES LTD BY THE ASSE SSEE IN THE COURSE OF ITS FINANCE BUSINESS WHICH WAS CLAIMED AS BAD DEBT AND WRITTEN OFF DURING THE YEAR. THE LENDING WAS IN TH E COURSE OF ORDINARY BUSINESS OF THE ASSESSEE. SHE SUBMITTED THAT THE CIT(A) FAILED TO APPRECIATE THE FACTS IN HOLDING THE AMOUNT AS CAPIT AL LOSS. 26. THE DR, ON THE OTHER HAND, SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES. I.T.A.NO. 46,47&48/12 :- 16 -: 27. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RECORD. IN THE INSTANT CASE, THE ASSESSEE CLAIMED DEDUCTION ON A CCOUNT OF BAD DEBT OF ` 3,75,62,045/- BEING RECEIVABLE FROM M/S SIPANI AU TOMOBILES LTD. THE ASSESSING OFFICER DISALLOWED THE CLAIM OF BAD D EBT ON THE GROUND THAT PAN OF M/S SIPANI AUTOMOBILES LTD. WAS NOT FUR NISHED BY THE ASSESSEE. 28. ON APPEAL, THE CIT(A) HELD THAT THE BAD DEBT WAS A LOSS ON CAPITAL FIELD AND THAT THE ASSESSING OFFICER WAS NO T JUSTIFIED IN DISALLOWING THE CLAIM FOR NON-FURNISHING OF PAN, BU T STILL AS THE LOSS WAS ON CAPITAL FIELD, AND THEREFORE, NOT ALLOWABLE TO THE ASSESSEE. 29. BEFORE US, THE CONTENTION OF THE A.R OF THE ASSESS EE IS THAT THE CIT(A) WAS NOT CORRECT IN OBSERVING THAT THE LO SS WAS ON CAPITAL FIELD. SHE EXPLAINED THAT ADVANCE WAS MADE TO M/S SIPANI AUTOMOBILES LTD. DURING THE COURSE OF ITS BUSINESS OF FINANCE I N EARLIER YEARS ON WHICH INTEREST INCOME WAS OFFERED TO TAX, THEREFOR E, THE SAME IS BAD DEBT ALLOWABLE AS DEDUCTION. 30. WE FIND THAT BOTH THE LOWER AUTHORITIES HAVE NOT BR OUGHT ON RECORD THE PURPOSE FOR WHICH MONEY WAS OWED BY THE ASSESSEE FROM M/S SIPANI AUTOMOBILES LTD. THUS, THE CIT(A) WAS N OT JUSTIFIED IN HOLDING THAT THE LOSS WAS ON CAPITAL FIELD WITHOUT BRINGING ON RECORD I.T.A.NO. 46,47&48/12 :- 17 -: THE NATURE OF THE AMOUNT WHICH WAS OWED BY THE ASS ESSEE. HOWEVER, WE ALSO FIND THAT NO MATERIAL WAS EVEN PLACED BEFOR E US IN SUPPORT OF THE CONTENTION OF THE ASSESSEE THAT THE DEBT OWED FROM M/S SIPANI AUTOMOBILES LTD. WAS DEBT RELATING TO FINANCING BUS INESS OF THE ASSESSEE. IN THE ABOVE CIRCUMSTANCES, IN OUR CONSI DERED OPINION, IT SHALL BE IN THE INTEREST OF JUSTICE, TO RESTORE THI S ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER FOR ADJUDICATION AFRESH AFTER PROPER VERIFICATION AS PER LAW BY PASSING A SPEAKING ORDER. NEEDLESS TO M ENTION THAT THE ASSESSING OFFICER SHALL ALLOW REASONABLE OPPORTUNIT Y OF HEARING TO THE ASSESSEE BEFORE ADJUDICATING THE ISSUE AFRESH. THU S, THE GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 31. GROUND NO.III OF ASSESSMENT YEAR 2007-08 RELATES T O DISALLOWANCE OF PROPERTY TAX OF ` 9,06,568/-. 32. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER DISALLOWED PROPERTY TAX PAYMENT ON THE GROUND THAT PROPERTY TAX RECEIPTS WERE NOT PRODUCED. 33. THE CIT(A) OBSERVED THAT EVEN DURING THE APPEAL PROCEEDINGS THE ASSESSEE-COMPANY DID NOT FURNISH PR OPERTY TAX RECEIPTS. THE CIT(A) OBSERVED THAT AS THE CLAIM OF PROPERTY TAX WAS REQUIRED TO BE SUBSTANTIATED WITH EVIDENCE DURING T HE ASSESSMENT AS SOUGHT BY THE ASSESSING OFFICER AND FAILURE ON THIS COUNT ON THE PART OF I.T.A.NO. 46,47&48/12 :- 18 -: THE ASSESSEE-COMPANY, THE ASSESSING OFFICER HAS RIG HTLY DISALLOWED THE AMOUNT AND CONFIRMED THE ACTION OF THE ASSESSING OF FICER. 34. BEFORE US, THE ASSESSEE HAS FILED A PAPER BOOK TOG ETHER WITH AN APPLICATION FOR ADMISSION OF ADDITIONAL EVIDENCE WHICH ARE THE PROPERTY TAX RECEIPTS AND LEDGER COPY OF THE PROPER TY TAX ACCOUNT. THE A.R OF THE ASSESSEE REQUESTED FOR ADMISSION OF THE ADDITIONAL EVIDENCES WHICH WERE STATED TO HAVE BEEN MISPLACED AND SO COULD NOT BE PRODUCED BEFORE THE LOWER AUTHORITIES. THE ASS ESSEE PRAYED THAT THE SAME ARE NOW AVAILABLE AND SHOULD BE ADMITTED. 35. THE DR HAD NO OBJECTION TO ADMISSION OF THE ADDITIO NAL EVIDENCES, BUT HIS ONLY PRAYER WAS THAT THE ISSUE S HOULD BE RESTORED BACK TO THE FILE OF THE ASSESSING OFFICER FOR FRESH ADJUDICATION AFTER VERIFYING THE EVIDENCES FILED BY THE ASSESSEE. 36. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERUSIN G THE MATERIAL AVAILABLE ON RECORD, WE ADMIT THE ADDITION AL EVIDENCES FILED BY THE ASSESSEE AND AS PRAYED BY THE DR, WE RESTORE T HE ISSUE OF ALLOWABILITY OF PROPERTY TAX EXPENDITURE BACK TO TH E FILE OF THE ASSESSING OFFICER FOR FRESH CONSIDERATION AFTER VER IFYING THE ADDITIONAL EVIDENCES AND THEREAFTER DECIDING THE ISSUE AS PER LAW. THUS, THE GROUND RAISED BY THE ASSESSEE IS ALLOWED FOR STATI STICAL PURPOSES. I.T.A.NO. 46,47&48/12 :- 19 -: 37. TO SUMMARIZE THE RESULT, I.T.A.NO. 46/MDS/2012 FOR ASSESSMENT YEAR 2005-06 IS ALLOWED. I.T.A.NO. 47/M DS/2012 FOR ASSESSMENT YEAR 2006-07 IS DISMISSED WHEREAS I.T.A .NO. 48/MDS/2012 FOR ASSESSMENT YEAR 2007-08 IS PARTLY A LLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON FRIDAY, THE 21 ST OF DECEMBER, 2012, AT CHENNAI. SD/- SD/- (CHALLA NAGENDRA PRASAD) JUDICIAL MEMBER (N.S.SAINI) ACCOUNTANT MEMBER DATED: 21 ST DECEMBER, 2012 RD COPY TO: APPELLANT/RESPONDENT/CIT(A)/CIT/DR