Faith Real Estate (P) Ltd., New Delhi V. ITO, New Delhi

ITA 5181/DEL/2011

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 0199 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 6 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-06-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 19-02-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 21-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GURMEET SINGH GREWAL
• Assessee Lawyers: PARWINDER KAUR
• Keywords: Depreciation; Business expenditure; Commercial expediency

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH B, NEW DELHI) BEFORE SHRI G. C. GUPTA, HONBLE VICE PRESIDENT AND SHRI T.S. KAPOOR, ACCOUNTANT MEMBER I.T.A. NO.5070 /DEL/2011 ASSESSMENT YEAR : 2006-07 ITO, WARD 11(2), VS. M/S. FAITH REAL ESTATES P. LTD., NEW DELHI C-66, NDSE, PART II, NEW DELHI-110 049 GIR / PAN:AAACF1927C I.T.A. NO. 5181/DEL2011 (ASSESSMENT YEAR 2006-07) M/S. FAITH REAL ESTATES P. LTD., VS. ITO, WARD 11( 2), C-66, NDSE PART II, NEW DELHI NEW DELHI-110 049 (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI PARWINDER KAUR, SR. DR RESPONDENT BY : SHRI GURMEET SINGH GREWAL, CA DATE OF HEARING : 05.06.2015 DATE OF PRONOUNCEMENT : 11.06.2015 ORDER PER T.S. KAPOOR, AM: THESE ARE CROSS APPEALS FILED BY REVENUE AS WELL A S BY ASSESSEE AGAINST THE ORDER OF LD. CIT(A) DATED 21.09.2011. THE GROUNDS OF APPEAL TAKEN BY REVENUE AS WELL AS BY ASSESSEE ARE REPRODU CED BELOW: I. I.T.A.NO. 5070/DEL/2011: REVENUES APPEAL: ITA NO.5070, 5181/DEL/2011 2 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN REDUCING THE AMOUNT OF ADDITION U/S 24(B) ON ACCOUNT OF INTEREST ON BORROWED FUNDS FROM RS. 39,4 1.374/- TO RS. 22.16.3701- AND THEREBY GRANTING REL IEF OF RS. 17,25,004/- TO THE ASSESSEE. 2. THE CIT(A) HAS ERRED IN ACCEPTING THE CONTENTION OF THE ASSESSEE THAT THE ENTIRE AMOUNT OF LOAN OF RS. 3.16 CRORES IN THE FY 97-98 WAS UTILIZED FOR THE PURPOSE OF CONSTRUCTION OF THE PROPERTY. 3. THE CITCA) HAS ALSO ERRED IN IGNORING THE FACT T HAT THE VALUE OF BUILDING (GROSS BLOCK) AS PER THE DEPRECIATION CHAR T UP TO FY 02-03 WAS RS.1.11 CRORES ONLY. II. I.T.A.NO. 5181/DEL/2011: (ASSESSEES CROSS APPEAL): THE LD. CIT(A) XIII, NEW DELHI HAS ERRED IN NOT AL LOWING INTEREST U/S 24(B) OF THE I. T. ACT, 1961 OF RS.22,16,370/- OUT OF RS.39,41,374/- BEING INTEREST ON BORROWED CAPITAL. 2. THE BRIEF FACTS AS NOTED IN THE ASSESSMENT ORDER ARE THAT THE ASSESSEE DECLARED A LOSS FROM HOUSE PROPERTY AT RS.20.64 LAC S AFTER DEDUCTION OF INTEREST PAYMENT AMOUNTING TO RS.39.40 LACS. THE C ASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY. DURING ASSESSMENT PROCEEDIN GS THE ASSESSEE COMPANY WAS ASKED TO FURNISH DETAILS OF INTEREST EXPENSES A ND TO JUSTIFY CLAIM OF INTEREST MADE AGAINST RENTAL INCOME. IN REPLY, VID E LETTER DATED 30.10.2008, THE ASSESSEE STATED THAT DURING FINANCIAL YEAR 1997 -98, THE ASSESSEE COMPANY HAD OBTAINED A LOAN OF RS.18.80 LACS FROM M/S. D. S . CONSTRUCTION LTD. WHICH WAS INCREASED TO RS.16456230/- UP TO FINANCIA L YEAR 2003-04. THIS LOAN AMOUNT WAS USED FOR THE PURPOSE OF CONSTRUCTIO N OF BUILDING. IT WAS FURTHER SUBMITTED THAT DURING THE YEAR 2004-05, THE ASSESSEE HAD OBTAINED LOAN OF RS.3.76 CRORES FROM M/S. LORD KRISHNA BANK WHICH WAS USED FOR THE ITA NO.5070, 5181/DEL/2011 3 PURPOSE OF REPAYMENT OF LOAN TAKEN BY THE COMPANY. THUS, IT WAS SUBMITTED THAT IN FACT, NEW LOAN WAS FOR THE PURPOSE OF CONST RUCTION OF BUILDING AND OBVIOUSLY, THE ASSESSEE COMPANY HAD CLAIMED INTERES T ON BORROWED CAPITAL AS DEDUCTION U/S 24(B) OF THE I. T. ACT, 1961. THE A. O., HOWEVER DID NOT AGREE WITH THE SUBMISSIONS OF THE ASSESSEE COMPANY AND DI SALLOWED THE INTEREST BY HOLDING AS UNDER: I HAVE CONSIDERED THE REPLY FURNISHED BY THE ASSE SSEE. HOWEVER, THE ASSESSEE HAD OBTAINED INTEREST FREE LO ANS FROM ITS ASSOCIATED CONCERN SEVERAL YEARS AGO FOR THE PURPOS E OF ITS BUSINESS. THESE WERE NOT INTEREST BEARING LOANS AND TILL THE REPAYMENT OF SUCH LOANS, NO INTEREST HAD BEEN PAID ON SUCH LOANS. THE BANK LOANS OBTAINED BY THE ASSESSEE COMPANY WERE UTILIZED TO R ETIRE THE UNSECURED LOANS FROM ITS ASSOCIATED CONCERN AND THE INTEREST PAYMENTS SO INCURRED WERE PRIMARILY MOTIVATED BY TH E DESIRE TO RETURN THE INVESTMENT OF FUNDS OF THE ASSOCIATED CONCERN W HICH WERE, AS MENTIONED, INTEREST FREE. AS PER SECTION 24(B) OF I T ACT, INTEREST PAYABLE FOR THE PURPOSE OF BORROWING FOR ACQUIRING THE LET OUT PROPERTY IS ALONE ELIGIBLE TO BE SET OFF AGAINST TH E RENTAL RECEIPTS. SINCE, AS POINTED OUT ABOVE, THE ASSESSEE HAD NOT B ORROWED FUNDS FROM THE BANK FOR ACQUIRING OR CONSTRUCTING THE LET OUT PREMISES, THE CLAIM OF DEDUCTION ON ACCOUNT OF INTEREST PAYMENT C ANNOT BE ALLOWED UNDER SECTION 24 OF I T ACT. THE SAID INTEREST PAYM ENT WAS ALSO NOT INCURRED FOR THE PURPOSE OF THE BUSINESS CARRIED ON BY THE ASSESSEE AS NO BUSINESS INTEREST OF THE ASSESSEE WAS SERVED BY RETIRING THE INTEREST FREE FUNDS OF THE BUSINESS BY BORROWING INTEREST BE ARING FUNDS FROM THE BANK. IN VIEW OF THIS, THE INTEREST PAYMENT CAN ALSO NOT BE CLAIMED AS DEDUCTION U/S 36(I)(III) OF I T ACT. ACCORDINGLY , THE CLAIM OF INTEREST PAYMENT AMOUNTING TO RS 39,41,374/- IS DISALLOWED U NDER THE HEAD 'INCOME FROM HOUSE PROPERTY' AS WELL AS A BUSINESS EXPENSES. 3. AGGRIEVED, THE ASSESSEE FIELD APPEAL BEFORE LD. CIT(A). HOWEVER, LD. CIT(A), ON THE BASIS OF SUBMISSIONS OF ASSESSEE, PA RTLY ALLOWED THE CLAIM BY HOLDING AS UNDER: ITA NO.5070, 5181/DEL/2011 4 6.5 FROM THE ABOVE FACTUAL DETAILS IT IS EVIDENT T HAT THE OUT OF THE LOAN OF RS.31695184 TAKEN FROM MIS. D.S. CONSTRUCTI ON, WHICH WAS UTILIZED FOR CONSTRUCTING THE RENTAL PROPERTY, A SU M OF RS.1,52,38,954/- HAS ALREADY BEEN REPAID BY THE APPELLANT IN F YR 20 03-04 BY TAKING A LOAN OF RS.2 CRORES FROM GROUP COMPANY EBONY RETAIL HOLDING LTD.- THE COMPANY TO WHOM THE RENTED PREMISES WERE LET OU T. THEREFORE AS ON 31.03.2004 ONLY RS.1,64,56,2301- OF THE LOAN AMO UNT IS OUTSTANDING. SUBSEQUENTLY IN FY 2004-05 I.E. AY 200 5-06 MIS. D.S. CONSTRUCTION GAVE RS.2 CRORE TO THE APPELLANT TO RE PAY THE LOAN TAKEN FROM MIS. ERHL. APPARENTLY THE APPELLANT IS TREATIN G THIS AMOUNT AS PART OF THE ORIGINAL CONSTRUCTION LOAN. HOWEVER THE SUM OF RS.2 CRORES RECEIVED FROM MIS. D.S. CONSTRUCTION IN F.Y. 2004-0 5 IS NOT THE LOAN UTILIZED IN THE CONSTRUCTION OF THE BUILDING. NEITH ER IS IT IN THE NATURE OF LOAN TAKEN TO REPAY THE LOAN UTILIZED IN THE CON STRUCTION OF THE BUILDING. THEREFORE THE SUM OF RS.2 CRORES CANNOT B E ADDED BACK TO THE LOAN AMOUNT OF RS.3,16,95,184/- TAKEN FROM D.S. CONSTRUCTIONS FOR CONSTRUCTION OF PROPERTY. NOR CAN IT BE TREATED AS A PART OF THE ORIGINAL AMOUNT OF RS.3, 16,95,184/-. FURTHERMORE A S PER LD. COUNSEL'S SUBMISSIONS, OF THE SUM OF RS.2 CRORES TA KEN FROM ERHL IN F.Y. 2003-04 ONLY RS.1,52,38,954/- WAS UTILIZED FOR REPAYING THE CONSTRUCTION LOAN TAKEN FROM D.S. CONSTRUCTION- BAL ANCE AMOUNT WAS PUT TO SOME OTHER USE- WHICH REMAINS UNSTATED SO FA R. 6.6 THE ABOVE DETAILS CLEARLY INDICATE THAT OUT O F THE LOAN OF RS.3,76,00,000/- TAKEN FROM LORD KRISHNA BANK IN AC TUAL TERMS ONLY RS.1,64,56,230/- WAS UTILIZED FOR RETURNING THE REM AINING CONSTRUCTION LOAN - AS ONLY RS. 1,64,56,2301- PERTAINING TO THE ORIGINAL LOAN REMAINED TO BE REPAID (TO MIS. D.S. CONSTRUCTION) D URING THE P. YR. RELEVANT TO A.Y. 2006- 07). NO EXPLANATION HAS BEEN PROVIDED AS TO HOW THE LOAN REPAID IS BEING CLAIMED AT RS.3,76,00, 000/-. APPELLANT'S SUBMISSIONS AS EVIDENCED BY THE BALANCE SHEET FOR V ARIOUS YEARS SHOWS THE LOAN AMOUNT FORM M/S. D.S. CONSTRUCTIONS FOR THE CONSTRUCTION OF BUILDING TO BE ONLY RS.3, 16,95,184 /-. HOWEVER THE INTEREST OF RS.39,41 ,374/- HAS BEEN CLAIMED ON THE ENTIRE SUM OF RS.3,76,00,0001-. AS IS EVIDENT FROM THE APPELLANT' S OWN RECORD THE LOAN TAKEN FROM M/S. D.S. CONSTRUCTIONS WAS ONLY RS .3, 16,95, 184/- ITA NO.5070, 5181/DEL/2011 5 OUT OF WHICH RS.1,52,38,954/- STOOD REPAID IN F. YR . 2003-04. THEREFORE BALANCE AMOUNT REPAYABLE WAS ONLY RS.1,64 ,56,2301-. THE CLAIM OF UTILIZATION OF THE LOAN OF RS.3,76,00,000/ - FROM THE LORD KRISHNA BANK, EXCLUSIVELY FOR RETURNING THE OUTSTAN DING LOAN USED FOR CONSTRUCTION IS THEREFORE INCORRECT. 6.7 . IN VIEW OF THE FACTS ON RECORD AS DISCUSSED I N PRECEDING PARAS, IT IS .HELD THAT APPELLANT IS ENTITLED TO IN TEREST ONLY ON THE LOAN AMOUNT OF RS.1 ,64,56,230/- AND NOT RS.3,76,00,000/ - . THEREFORE ASSESSING OFFICER IS DIRECTED TO RESTRICT THE INTER EST CLAIM TO INTEREST PAYABLE ON THE REPAYMENT OF LOAN OF RS.1,64,56,2301 -, WHICH WORKS OUT TO BE RS.17,25,004/-. THE BALANCE INTEREST OF R S.22,16,3701- IS HELD TO BE NOT ELIGIBLE FOR DEDUCTION U/S 24(B). TH US OUT OF THE DISALLOWANCE OF RS.39,41,374/- MADE BY THE AO, THE DISALLOWANCE OF RS.22163701- IS CONFIRMED. APPELLANT IS ALLOWED REL IEF OF RS.17,25,004/- . THE INTEREST OF RS.22,16,3701- PER TAINING TO THE SUM OF RS.2, 1143770/- (RS.3,76,00,000 - RS.16456230) I S HELD TO BE NOT ADMISSIBLE FOR DEDUCTION U/S 36(1 )(III) OF THE IT ACT, AS APPELLANT HAS MADE THE PAYMENT TO M/S. D.S. CONSTRUCTIONS WITHOUT ANY JUSTIFICATION AND NOT BASED ON COMMERCIAL EXPEDIENCY. 4. AGGRIEVED WITH THE ORDER OF LD. CIT(A), BOTH THE PARTIES ARE IN APPEAL BEFORE US. THE CASES WERE EARLIER HEARD ON 19.02.2 015 HOWEVER, DURING DICTATION, IT WAS OBSERVED THAT CERTAIN CLARIFICATI ONS WERE REQUIRED TO DISPOSE OF THE CASES, THEREFORE THE CASES WERE FIXED FOR CL ARIFICATION AND FINALLY THE CASES WERE HEARD ON 05.06.2015. 5. LD. A.R. FIRST TOOK UP THE ASSESSEES APPEAL AND SUBMITTED THAT ENTIRE LOAN OF RS.3.76 CRORES WAS OBTAINED BY ASSESSEE FOR M LORD KRISHNA BANK TO REPAY, THE LOAN RAISED FROM M/S. D. S. CONSTRUCTION COMPANY AND M/S. ERHL WHICH WAS A GROUP COMPANY. TO SUPPORT HIS ARG UMENT, LD. A.R. TOOK US TO PAPER BOOK PAGES 52-53 WHERE A COPY OF A NNUAL ACCOUNTS FOR FINANCIAL YEAR 2003-04 WAS PLACED. LD. A.R. SUBMIT TED THAT ON PAGE 52, AN ITA NO.5070, 5181/DEL/2011 6 AMOUNT OF RS.1,64,56,230/- WAS OUTSTANDING UNDER TH E HEAD UNSECURED LOAN WHICH WAS PAYABLE TO M/S. D. S. CONSTRUCTION COMPAN Y. HE SUBMITTED THAT IMMEDIATELY BEFORE THE CLOSE OF THE YEAR, AMOUNT OU TSTANDING TO M/S. D. S. CONSTRUCTION COMPANY WAS RS.3,72,56,230/-/- OUT OF WHICH RS.2.08 CRORES WAS REPAID TO THE ABOVE LOANEE BY BORROWING AN AMOU NT OF RS.2 CRORES FORM M/S. ERHL WHICH IS THE COMPANY UNDER THE SAME MANAG EMENT AND IN THIS RESPECT, HE INVITED OUR ATTENTION TO PAPER BOOK PAG E 53 WHERE THE AMOUNT OF RS.2 CRORES WAS REFLECTED AS CURRENT LIABILITY. LD . A.R. ALSO INVITED OUR ATTENTION TO PAPER BOOK PAGE 12 TO DEMONSTRATE THAT AS ON 01.04.2003, THE AMOUNT DUE TO M/S. D.S. CONSTRUCTION CO. WAS RS.3,7 2,56,230/- AND DURING THE YEAR RS.2,08,00,000/- WAS REPAID. LD. A.R. SU BMITTED THAT THE FINDINGS OF LD. CIT(A) ARE NOT CORRECT TO THE EXTENT THAT HE HAD HELD THAT AMOUNT DUE TO M/S. D. S. CONSTRUCTION COMPANY AS ON 31.03.2004 WAS ONLY RS.1,64,56,230/- AND HE HAS IGNORED AN IMPORTANT FA CT THAT AN AMOUNT OF RS.2 CRORES WAS REPAID TO IT BY BORROWING FROM A SISTER CONCERN AN AMOUNT OF RS.2 CRORES. HE SUBMITTED THAT AS PER CIRCULAR 28 ISSUE D BY THE DEPARTMENT, IF AN ASSESSEE REPAYS THE NON INTEREST BEARING LOAN BY BO RROWING AN INTEREST BEARING LOAN THEN HE IS ELIGIBLE TO CLAIM DEDUCTION U/S 24(B). LD. A.R. INVITED OUR ATTENTION TO THE FIXED ASSET CHART PLAC ED AT PAPER BOOK PAGE 54 AND SUBMITTED THAT ONLY ASSETS ACQUIRED BY THE ASSE SSEE WAS LAND AND BUILDING AND FIRE EXTINGUISHERS AND LIFT FITTED IN THE BUILDING AND THERE WAS NO OTHER ASSET OTHER THAN A SMALL INVESTMENT IN CAR. THEREFORE, IT WAS SUBMITTED THAT THE ENTIRE LOAN WAS USED FOR CONSTRUCTION OF L AND AND BUILDING AND INCOME OF WHICH WAS ASSESSABLE UNDER THE HEAD INCOM E FROM HOUSE PROPERTY AND, THEREFORE, INTEREST PAID TO LORD KRISHNA BANK WAS FULLY ALLOWABLE. ITA NO.5070, 5181/DEL/2011 7 6. LD. D.R. ON THE OTHER HAND SUBMITTED THAT LD. CI T(A) HAS PASSED EXHAUSTIVE AND SPEAKING ORDER AND HAS ALLOWED RELIE F TO THE ASSESSEE WHICH WAS AVAILABLE AND, THEREFORE, THE APPEAL OF ASSESSE E NEEDS TO BE DISMISSED AS THERE ARE NUMBER OF ENTRIES IN THE ACCOUNT OF GROUP COMPANIES AND IT CANNOT BE ASCERTAINED AS TO WHETHER THE MULTIPLE ENTRIES B Y ASSESSEE REALLY REPRESENT INVESTMENT IN LAND AND BUILDING. 7. AS REGARDS REVENUES APPEAL, LD. D.R. HEAVILY RE LIED UPON THE ORDER OF A.O. WHEREAS, LD. A.R. HEAVILY RELIED UPON THE ORDE R OF LD. CIT(A) TO THE EXTENT RELIEF ALLOWED BY HIM. 8. WE HAVE HEARD RIVAL PARTIES AND HAVE GONE THROUG H THE MATERIAL PLACED ON RECORD. WE FIND THAT UP TO FINANCIAL YEAR ENDIN G 31.03.2004, THERE WAS TOTAL INVESTMENT IN FIXED ASSETS AMOUNTING TO RS.9, 24,08,822/- WHICH IS APPARENT FROM PAPER BOOK PAGE 54. THE ABOVE FIXED ASSETS INCLUDED LAND, BUILDING, LIFT, FIRE EXTINGUISHERS AND CAR. THE AM OUNT OF INVESTMENT IN CAR IS SMALL AMOUNT OF RS.5,79,926/-. THEREFORE, REST OF THE INVESTMENT CAN BE CONSIDERED TO BE MADE IN LAND AND BUILDING. THE AB OVE INVESTMENT IN FIXED ASSET WAS MADE BY ASSESSEE FROM ITS OWN FUNDS AS WE LL AS LOAN FROM M/S. D. S. CONSTRUCTION COMPANY AMOUNT OF WHICH WENT UP TO RS.3,72,56,230/-, WHICH IS APPARENT FORM PAPER BOOK PAGE 12 WHEREIN A S ON 01.04.2003, THE OPENING BALANCE OF M/S. D. S. CONSTRUCTION COMPANY LOAN ACCOUNT HAS BEEN REFLECTED. DURING THE YEAR UNDER CONSIDERATION, AN AMOUNT OF RS.2.08 CRORES WAS REPAID TO ABOVE SAID COMPANY WHICH IS ALSO APPA RENT FROM PAPER BOOK PAGE 12. OUT OF RS.2.08 CRORES REPAID BY ASSESSEE TO M/S. D. S. CONSTRUCTION COMPANY, RS.2 CRORES WAS BORROWED FROM M/S. ERHL WH ICH HAS BEEN REFLECTED AS A CURRENT LIABILITY IN THE BALANCE SHE ET AS ON 31.03.2004 WHICH IS ITA NO.5070, 5181/DEL/2011 8 APPARENT FROM PAPER BOOK PAGE 53. THEREFORE, IN AL L, THE ASSESSEE HAD REPAID TO M/S. D.S. CONSTRUCTION COMPANY AN AMOUNT OF RS.3 ,72,56,230/-, WHICH INCLUDED RS.2.08 CRORES REPAID IN FINANCIAL YEAR 20 03-04 AND RS.1,63,99,000/- IN FINANCIAL YEAR 2004-05. HOWEVE R, THE FACT REMAINS THAT IN FINANCIAL YEAR 2003-04, OUT OF REPAYMENT OF RS.2 .08 CRORES, RS.2 CRORES WAS BORROWED AS A SHORT TERM LOAN FROM ERHL ( A GRO UP COMPANY OF ASSESSEE). THIS SHORT TERM LOAN OF RS.2 CRORES WAS REPAID TO ERHL IN FINANCIAL YEAR 2004-05 BY AGAIN BORROWING RS.2 CROR ES FROM D. S. CONSTRUCTION COMPANY. THESE FACTS ARE VERIFIABLE F ROM PAPER BOOK PAGE 8, WHERE THESE ENTRIES ARE RECORDED. THERE IS ONE MOR E ENTRY OF RS.12.96 LACS AS RECEIVED FROM D. S. CONSTRUCTION COMPANY AND FUR THER, THERE IS ANOTHER ENTRY OF RS.9,500/-, WHICH WAS PAID TO D S CONSTRUC TION COMPANY. THEREFORE, IN ALL, THE BALANCE DUE TO D S CONSTRUCT ION COMPANY WAS RS.3,77,52,230/- OUT OF WHICH RS.3,76,00,000/- WAS PAID AFTER BORROWING FROM LORD KRISHNA BANK. THE ABOVE FACTS ARE VERIFI ABLE FORM THE BALANCE SHEET OF ASSESSEE FOR THE YEAR ENDING 31.03.2005 WH ERE AN AMOUNT OUTSTANDING FROM BANK LOAN IS REFLECTED AT RS.3.76 CRORES AND UNSECURED LOAN FROM D.S. CONSTRUCTION COMPANY HAS REDUCED FROM RS. 1,64,56,230/- TO RS.57,230/-. THEREFORE, IN FACT, THE ENTIRE LOAN OF RS.3.76 CRORES HAS BEEN UTILIZED TO REPAY THE DEBTS RAISED BY ASSESSEE FOR CONSTRUCTION OF PROPERTY THE INCOME OF WHICH WAS OFFERED UNDER THE HEAD INCOME FROM HOUSE PROPERTY. LD. CIT (A) WHILE GRANTING PARTIAL RELIEF TO THE AS SESSEE ONLY CONSIDERED THE AMOUNT OF OUTSTANDING AS ON 31.03.2004 OF RS.1.64 C RORES DUE TO M/S. D. S. CONSTRUCTION COMPANY. HOWEVER, HE MISDIRECTED HIMS ELF IN NOT CONSIDERING THE AMOUNT OF RS.2 CRORES WHICH WAS RAISED BY ASSES SEE AS A SHORT TERM ITA NO.5070, 5181/DEL/2011 9 LIABILITY TO REDUCE THE LOAN COMPONENT OF M/S. D.S. CONSTRUCTION COMPANY AND ALSO IGNORED THE OTHER TRANSACTIONS ENTERED DUR ING FINANCIAL YEAR 2004- 05. THE TRANSACTIONS ENTERED INTO BY ASSESSEE IN 2 004-05 ALSO RELATE TO ACQUISITION OF PROPERTY. THEREFORE IN ALL, THE ENT IRE INTEREST ON THE TERM LOAN FROM BANK SHOULD HAVE BEEN CONSIDERED BY LD. CIT(A) FOR ALLOWING RELIEF TO THE ASSESSEE. CIRCULAR 28 AS RELIED UPON BY LD. A. R. AND AS NOTED BY LD. CIT(A), CLEARLY STATE THAT IF THE INTEREST FREE LOA N IS REPAID BY INTEREST BEARING LOAN FUNDS, THE INTEREST ON SUCH LOAN IS ALLOWABLE FOR DEDUCTION U/S 24(B) OF THE ACT. IN VIEW OF ABOVE, GROUND NOS.1 & 2 OF APP EAL OF REVENUE ARE DISMISSED WHEREAS APPEAL OF ASSESSEE IS ALLOWED. 9. VIDE 3 RD GROUND OF APPEAL THE REVENUE HAS CHALLENGED THAT A S ON 31.03.2003, ONLY AN AMOUNT OF 1.11 CRORES WAS INVES TED IN BUILDING THEREFORE, INTEREST ON ENTIRE LOAN OF RS.3.76 CRORE S CANNOT BE CONSIDERED. HOWEVER, WE FIND THAT BESIDES BUILDING, THERE IS AN INVESTMENT IN LAND ALSO WHICH IS AT RS.7,97,88,679/- AND INVESTMENT IN PROP ERTY ALWAYS INCLUDES INVESTMENT IN LAND ALSO. IN VIEW OF THE ABOVE, GRO UND NO.3 OF REVENUES APPEAL IS ALSO DISMISSED. 10. IN NUTSHELL, THE APPEAL FILED BY ASSESSEE IS AL LOWED WHEREAS APPEAL FILED BY REVENUE IS DISMISSED. 11. ORDER PRONOUNCED IN THE OPEN COURT ON 11 TH JUNE, 2015. SD./- SD./- ( G. C. GUPTA) (T.S. KAPOO R) VICE PRESIDENT ACCOUNTANT MEMBER DATE: 11 TH JUNE, 2015 SP ITA NO.5070, 5181/DEL/2011 10 COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT (A)-, NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DEL HI. TRUE COPY. BY ORDER (ITAT, NEW DELHI). S.NO. DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 9/6 SR. PS/PS 2 DRAFT PLACED BEFORE AUTHOR 10,11,11 SR. PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM/AM 5 APPROVED DRAFT COMES TO THE SR. PS/PS 11/6/2015 SR. PS/PS 6 KEPT FOR PRONOUNCEMENT 11/6 SR. PS/PS 7 FILE SENT TO BENCH CLERK 11/6 SR. PS/PS 8 DATE ON WHICH THE FILE GOES TO HEAD CLERK 9 DATE ON WHICH FILE GOES TO A.R. 10 DATE OF DISPATCH OF ORDER