ACIT, CHENNAI V. M/s. Shree Shakthi Ware House (P) Ltd., CHENNAI

ITA 505/CHNY/2011

• Counselvise Citation: 50521714 RSA 2011
• Duration Of Justice: 8 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-12-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 13-12-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 17-03-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R B NAIK
• Assessee Lawyers: M KARUNAKARAN
• Keywords: Business income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER I.T.A. NO. 505/MDS/2011 (ASSESSMENT YEAR : 2003-04) THE ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE VI(2), CHENNAI 600 034. (APPELLANT) V. M/S SHREE SHAKTHI WARE HOUSE (P) LTD., 2-C, RIAZ GARDEN, 29, KODAMBAKKAM HIGH ROAD, NUNGAMBAKKAM, CHENNAI600 034 PAN : AACCS9723M (RESPONDENT) APPELLANT BY : SHRI R.B. NAIK, CIT-DR RESPONDENT BY : SHRI M. KARUN AKARAN, ADVOCATE DATE OF HEARING : 13.12.2011 DATE OF PRONOUNCEMENT : 13.12.2011 O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : IN THIS APPEAL FILED BY THE REVENUE, ITS GRIEVANC E IS THAT CIT(APPEALS) DELETED DISALLOWANCE OF INTEREST PAYME NT OF ` 17,40,855/- MADE BY THE A.O. I.T.A. NO. 505/MDS/11 2 2. SHORT FACTS APROPOS ARE THAT ASSESSEE, WHO WAS E ARNING INCOME BY RENTING OUT WAREHOUSE, HAD CLAIMED SUCH R ENTAL INCOME IN ITS RETURN AS BUSINESS INCOME. A.O., WHILE COMPLET ING THE ASSESSMENT, SHIFTED IT TO THE HEAD INCOME FROM HOU SE PROPERTY AND DISALLOWED THE CLAIM FOR DEDUCTION OF INTEREST ` 17,40,855/-. SUCH INTEREST WAS PAID TO THE FOLLOWING PARTIES BY THE A SSESSEE:- 1. INTEREST TO TICC ` 7,58,040 2. INTEREST TO VIJAYA BANK ` 2,91,009 3. INTEREST TO UCO BANK ` 6,91,806 TOTAL ` 17,40,855 AS PER THE A.O., ASSESSEE HAD AVAILED A TERM LOAN O F ` 96,69,144/- FROM M/S UCO BANK. BUT, THIS WAS NOT UTILIZED FOR CONSTRUCTION OR IMPROVEMENT OF THE CONCERNED HOUSE PROPERTY, I.E. W AREHOUSES. ASSESSEE WAS PUT ON NOTICE IN THIS REGARD. REPLY O F THE ASSESSEE WAS AS UNDER:- THE ORIGINAL TERM LOAN FOR CONSTRUCTION OF GODOWN W AS AVAILED FROM M/S TAMILNADU INDUSTRIAL INVESTMENT CORPORATION LTD. DURING THE ASSESSMENT THE ASSESSM ENT YEAR 2003-04 THE TOTAL INTEREST PAID TO TIIC WAS ` 7,58,040/-. DURING SEPTEMBER 2002 THE TERM LOAN ACCOUNT WAS CLO SED AND TRANSFERRED TO VIJAYA BANK, VADAPALANI BRANCH THE B ALANCE AMOUNT DUE TO TIIC WAS PAID BY VIJAYA BANK DIRECTLY. THE INTEREST PAID TO VIJAYA BANK FOR THE ASSESSMENT YEAR 2003-04 I.T.A. NO. 505/MDS/11 3 WAS ` 2,91,009. THIS AMOUNT ALONG WITH PRINCIPAL OUTSTA NDING WAS AGAIN TRANSFERRED TO UCO BANK. THE LOAN WAS TRANSF ERRED TO VIJAYA BANK AND UCO BANK SUBSEQUENTLY ONLY TO AVAIL LO WER RATE OF INTEREST. THE INTEREST FOR ASSESSMENT YEAR 2003 -04 WAS ` 6,91,806. THE INTEREST CERTIFICATE HAVE ALREADY BE EN FILED AT THE TIME OF ASSESSMENT PROCEEDING. THE ORIGINAL LOAN WAS BORROWED ONLY FOR CONSTRUCTION OF GODOWN AND SUBSEQUENT THE LOANS WAS TRANSFERRED TO VIJAYA BANK AND UCO BANK FROM TIIC ONLY TO GET THE BENEFIT OF LO WER RATE OF INTEREST AND NOT FOR ANY OTHER PURPOSE. AS INTEREST ON LOAN BORROWED FOR CONSTRUCTION OF GODOWN IS ALLOWABLE U/ S 24(B), WE REQUEST YOU TO KINDLY ALLOW THE INTEREST OF ` 17,40,855 CLARIFIED AS PER SEC.24(B) AND OBLIGE. HOWEVER, THE ASSESSING OFFICER DID NOT ACCEPT THE R EPLY GIVEN BY THE ASSESSEE. ACCORDING TO HIM, THE TERM LOAN WAS NOT UTILIZED FOR ANY CONSTRUCTION OR IMPROVEMENT OF THE HOUSE PROPERTY A ND HENCE, COULD NOT BE ALLOWED UNDER THE HEAD INCOME FROM HOUSE PR OPERTY. 3. BEFORE LD. CIT(APPEALS), ASSESSEE REITERATED ITS SUBMISSION MADE BEFORE THE A.O. ACCORDING TO ASSESSEE, ORIGIN AL THE TERM LOAN WAS AVAILED FROM M/S TAMILNADU INDUSTRIAL INVESTMEN T CORPORATION LTD. (TIIC) FOR CONSTRUCTION OF WAREHOUSE GODOWNS A ND THIS LOAN ACCOUNT WAS TRANSFERRED TO VIJAYA BANK IN SEPTEMBER , 2002 AND THEREAFTER, THE LATTER ACCOUNT WAS ALSO CLOSED AND LOAN TRANSFERRED TO UCO BANK. THEREFORE, AS PER THE ASSESSEE, LOAN AV AILED FROM UCO I.T.A. NO. 505/MDS/11 4 BANK WAS ONLY FOR REPAYMENT OF EARLIER LOAN TAKEN F ROM TIIC AND VIJAYA BANK. LEARNED CIT(APPEALS) WAS APPRECIATIVE OF THIS CONTENTION. RELYING ON CBDT CIRCULAR NO. 28 DATED 20.8.1969, LD. CIT(APPEALS) HELD IN FAVOUR OF ASSESSEE AND DIRECTE D TO A.O. TO DELETE THE DISALLOWANCE OF INTEREST ` 17,40,855/-. 4. NOW BEFORE US, LEARNED D.R., ASSAILING THE ORDER OF LD. CIT(APPEALS), SUBMITTED THAT LD. CIT(APPEALS) ADMIT TED THE SUBMISSIONS OF THE ASSESSEE WITHOUT VERIFICATION. AS PER THE LEARNED D.R., THERE WAS NOTHING ON RECORD TO SHOW THAT THE LOAN TAKEN FROM UCO BANK WAS FOR SETTLEMENT OF EARLIER LOAN ON WHIC H INTEREST HAS BEEN CLAIMED BY THE ASSESSEE. 5. PER CONTRA, LEARNED A.R. SUPPORTED THE ORDER OF LD. CIT(APPEALS). 6. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL C ONTENTIONS. A LOOK AT THE ORDER OF THE A.O. TRANSPIRES THAT THE A SSESSEE HAD PRODUCED ALL THE DETAILS BEFORE THE A.O. AND IT IS CLEAR THAT THE TERM LOAN EARLIER TAKEN FROM M/S TIIC WAS PAID DIRECTLY BY VIJAYA BANK AND I.T.A. NO. 505/MDS/11 5 THE LOAN FROM VIJAYA BANK WAS LATER TAKEN OVER BY M /S UCO BANK. ASSESSEE HAD ALSO STATED THAT SWAPPING OF LOANS WER E DONE FOR REDUCING THE INTEREST LIABILITY. THERE IS NOTHING WHICH STOPS AN ASSESSEE FROM PLANNING ITS FINANCE SO AS TO KEEP IT S INTEREST LIABILITY AT THE MINIMAL. A LOOK AT CIRCULAR NO.28 RELIED ON BY LD. CIT(APPEALS) CLEARLY SHOWS THAT IF THE SUBSEQUENT BORROWINGS WER E USED FOR REPAYING ORIGINAL LOAN, THE INTEREST PAID ON THE SU BSEQUENT LOAN HAD TO BE ALLOWED UNDER SECTION 24(1)(VI) OF INCOME-TAX ACT, 1961 (IN SHORT THE ACT). A.O. SIMPLY WENT BY THE BALANCE SHEET OF THE ASSESSEE WHICH SHOWED THE BALANCE DUE BY THE ASSESS EE TO UCO BANK. NO DOUBT, THIS COULD ONLY HAVE BEEN SO BECAU SE THE EARLIER LOANS STOOD DISCHARGED. WE ARE UNABLE TO UNDERSTAN D WHAT NEW RECORDS WERE CONSIDERED BY THE LD. CIT(APPEALS) TO DECIDE THE MATTER IN FAVOUR OF ASSESSEE, WHEN ADMITTEDLY PRINCIPAL LO AN TAKEN HAD BEEN UTILIZED FOR CONSTRUCTION OF ITS GODOWNS. DEFINITE LY THE INTEREST PAYMENT HAD TO BE ALLOWED TO THE ASSESSEE AS PER SE CTION 24(1)(VI) OF THE ACT. LD. CIT(APPEALS) CORRECTLY DELETED THE DISALLOWANCE MADE BY THE A.O. THERE IS NO MERIT IN THE APPEAL FILED BY THE REVENUE. 7. IN THE RESULT, APPEAL FILED BY THE REVENUE STAND S DISMISSED. I.T.A. NO. 505/MDS/11 6 ORDER PRONOUNCED IN THE OPEN COURT AFTER CONCLUSION OF HEARING ON 13 TH DECEMBER, 2011. SD/- SD/- (HARI OM MARATHA) (ABRAHAM P. GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 13 TH DECEMBER, 2011. KRI. COPY TO: (1) APPELLANT (2) RESPONDENT (3) CIT(A)-V, CHENNAI-34 (4) CIT, CHENNAI-III, CHENNAI (5) D.R. (6) GUARD FILE