ITO 8(2)(3), MUMBAI V. STRUCTMAST REALTORS (MUMBAI) PVT. LTD., MUMBAI

ITA 5370/MUM/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 9774 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-03-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2008-2009
• Appeal Filed On: 31-08-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: POOJA SWAROOP
• Assessee Lawyers: BHUPINDRA SHAH

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH J, MUMBAI BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NOS.5370 & 5371/M/2016 ASSESSMENT YEARS: 2008-09 & 2011-12 ITO 8(2)(3), ROOM NO.618, 6 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 20 VS. M/S. STRUCTMAST REALTORS (MUMBAI) PVT. LTD., 101-A, 10 TH FLOOR, MITTAL COURT, NARIMAN POINT, MUMBAI 400 021 PAN: AAHCS 9301A (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI BHUPINDRA SHAH, A.R. REVENUE BY : MS. POOJA SWAROOP, D.R. DATE OF HEARING : 08.02.2018 DATE OF PRONOUNCEMENT : 21.03.2018 O R D E R PER RAJESH KUMAR, ACCOUNTANT MEMBER: THE ABOVE TITLED APPEALS HAVE BEEN PREFERRED BY TH E DEPARTMENT AGAINST THE ORDERS DATED 24.06.2016 OF THE COMMISSIONER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS THE CIT(A)] RELEVANT TO ASSESSMENT YEARS 2008-09 & 2011-12. ITA NO.5370/M/2016 FOR A.Y. 2008-09 2. THE VARIOUS GROUNDS RAISED BY THE REVENUE ARE AS UNDER: I) THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACT S NOT CONSIDERING THE PROVISION U/S. 24(B) OF THE ACT WHEREIN INTEREST PA ID ON MONEY BORROWED FOR THE PURPOSE OF REPAYING OLD LOAN AND NOT AN INTERES T PAID ON SECURITY DEPOSITS FROM TENANTS. II) THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACT S IN ALLOWING INTEREST PAID ON 'SECURITY DEPOSIT' FROM TENANT U/S. 24(B) OF THE I.T.ACT. III) THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FAC TS IN DIFFERENTIATING BETWEEN THE TERM 'SECURITY DEPOSIT' AND 'BORROWED C APITAL'. ITA NOS.5370 & 5371/M/2016 M/S. STRUCTMAST REALTORS (MUMBAI) PVT. LTD. 2 IV) THE LEARNED IT(A) HAS ERRED IN LAW AND ON FACTS IN CONSIDERING THE EXPRESSION 'CAPITAL BORROWED' PREDICATES THE RELATI ON OF A BORROWER AND A LENDER, WHICH RELATIONSHIP DOES NOT EXISTS IN THAT CASE. V) THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN NON APPRECIATING THAT THE INTEREST BEARING REFUNDABLE SECURITY DEPOSITS RECEI VED FROM THE TENANTS ARE ONLY TO PROTECT THE POSSIBLE DAMAGE TO THE RENTAL P ROPERTY OR NON PAYMENT OF RENT. 2 THE LD. CIT(A) ORDER IS CONTRARY IN LAW AND ON FA CTS AND DESERVES TO BE SET ASIDE. 3 THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD A NEW GROUND AND THAT MAY BE NECESSARY. 4. THE APPELLANT PRAYS THAT THE ORDER OF CIT (A) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED . 3. THE ONLY ISSUE INVOLVED IN THE PRESENT APPEAL IS THAT THE LD. CIT(A) HAS WRONGLY ALLOWED THE DEDUCTION UNDER SECTION 24(B) A MOUNTING TO RS.64,82,625/- ON ACCOUNT OF INTEREST ON SECURITY D EPOSIT FROM THE TENANTS WHILE COMPUTING THE INCOME FROM THE HOUSE PROPERTY WITHOUT APPRECIATING THE FACT THAT THE PROVISIONS OF SECTION 24(B) OF THE AC T WHICH PROVIDE FOR INTEREST ON BORROWED CAPITAL AND NOT INTEREST PAID ON SECURI TY DEPOSIT FROM THE TENANTS. 4. AT THE OUTSET, THE LD. A.R. SUBMITTED BEFORE THE BENCH THAT THE ISSUE INVOLVED IN THE PRESENT CASE IS IDENTICAL TO ONE AS DECIDED BY THE CO-ORDINATE BENCH OF THE TRIBUNAL IN ITA NO.6920/M/2012 FOR A.Y . 2009-10 BY ORDER DATED 25.03.15 IN ASSESSEES OWN CASE. THE LD. A.R . PRAYED BEFORE THE BENCH THAT SINCE THE ISSUE HAS BEEN COVERED IN ITS FAVOUR BY OWN CASE OF THE ASSESSEE, THE SAME MAY KINDLY BE FOLLOWED IN THE CURRENT YEA R AND CONSEQUENTLY THE APPEAL OF THE DEPARTMENT SHOULD BE DISMISSED. 5. THE LD. D.R., ON THE OTHER HAND, APPEARED TO BE FAIRLY ADMITTED THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE D ECISION OF THE TRIBUNAL. 6. HAVING HEARD THE RIVAL SUBMISSIONS AND AFTER PER USAL OF THE MATERIAL AVAILABLE ON RECORD, WE FIND THAT THE IDENTICAL ISS UE WAS INVOLVED IN A.Y. 2009- ITA NOS.5370 & 5371/M/2016 M/S. STRUCTMAST REALTORS (MUMBAI) PVT. LTD. 3 10 WHICH HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE VIDE ORDER DATED 23.03.15 PASSED IN ITA NO.6920/M/2012. THE RELEVANT PARA IS REPRODUCED AS UNDER: 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND ALSO PE RUSED THE RELEVANT FINDING GIVEN IN THE IMPUGNED ORDERS, THE ASSESSEE HAD PURCHASED PROPERTY BY UTILIZING THE LOAN OF RS. 11 CRORES TAKEN FROM RELIANCE INDUSTRIES LTD ., FOR A SHORT PERIOD. THIS LOAN WAS INTEREST FREE. IN ORDER TO REPAY THE LOAN, THE ASSESSEE HAD TAKEN LOAN AND ALSO DEPOSITS FROM ITS TENANTS AS PER THE DETAILS INCORP ORATED ABOVE. THE ASSESSEE HAD UTILIZED THE INTEREST BEARING SECURITY DEPOSITS FOR THE REPAYMENT OF LOAN TAKEN FROM THE RELIANCE INDUSTRIES. THE INTEREST PAID ON THE D EPOSIT @ 6% HAS BEEN CLAIMED AS DEDUCTION U/S 24(B), ON THE GROUND THAT IT IS BORRO WED CAPITAL UTILIZED FOR THE REPAYMENT OF OLD LOAN. GENERALLY UNDER A LEASE AGRE EMENT, THE SECURITY DEPOSITS ARE TAKEN AS AN ADVANCE OF RENT OF A CERTAIN PERIOD WHICH ARE GENERALLY NOT INTEREST BEARING. HERE IN THIS CASE THE DEPOSITS RECEIVED FR OM VARIOUS TENANTS ARE MORE THAN 100 TIMES OF THE ARRIVAL RENT AMOUNT. THESE DEPOSIT S HAVE BEEN TAKEN/ACCEPTED ON A PAYMENT OF INTEREST @ 6% PER ANNUM AND DEPOSIT IS TO BE REFUNDED BACK BY THE ASSESSEE. NOW, WHETHER SUCH A DEPOSIT CAN BE RECKON ED AS 'BORROWED CAPITAL' WITHIN THE MEANING OF SECTION 24(B) . THE WORD 'BORROW' AS DEFINED IN LAW LEXICON (2ND EDITION) MEANS TO TAKE OR RECEIVING FROM ANOTH ER PERSON AS A LOAN OR ON TRUST MONEY OR OTHER ARTICLE OF VALUE WITH THE INTENTION OF RETURNING OR GIVING AN EQUIVALENT FOR. A PERSON CAN BORROW ON A NEGOTIATED INTEREST WITH OR WITHOUT SECURITY. IF THE DEPOSITS ARE INTEREST BEARING AND IS TO BE REFUNDED BACK, THEN DEBT IS CREATED ON THE ASSESSEE WHICH IT IS LIABLE TO BE DI SCHARGED IN FUTURE. HERE THE CONCEPTS OF DEBT HAS TO BE UNDERSTOOD AS PER THE TE RMS OF THE PARTIES. IF THE DEPOSITS HAD BEEN SECURITY DEPOSIT SIMPLICITOR TO C OVER THE DAMAGE OF THE PROPERTY OR LAPSES ON PART OF THE TENANT EITHER FOR NON-PAYM ENT OF RENT OR OTHER CHARGES, THEN SUCH A DEPOSIT CANNOT BE EQUATED WITH THE BORR OWED MONEY, BECAUSE THEN THERE IS NO DEBT ON THE ASSESSEE. A MOMENT A DEPOSI T IS ACCEPTED ON INTEREST, THEN IT PART TAKES THE CHARACTER OF BORROWED MONEY. IT I S AN UNDISPUTED FACT HERE THAT, THESE INTEREST BEARING DEPOSITS HAS BEEN UTILIZED F OR REPAYMENT OF BORROWED CAPITAL. ACCORDINGLY, FINDING OF THE LD. CIT(A) IN THIS REGARD IS AFFIRMED. GROUND RAISED BY THE REVENUE ARE DISMISSED. 7. FOLLOWING THE DECISION OF THE COORDINATE BENCH A S STATED ABOVE, THE APPEAL OF THE DEPARTMENT FOR A.Y. 2008-09 IS DISMIS SED. ITA NO.5371/M/2016 FOR A.Y. 2011-12 8. THE ISSUE INVOLVED IN THE PRESENT APPEAL IS IDEN TICAL TO THE ONE AS STATED ABOVE IN ITA NO.5370/M/2016 FOR A.Y. 2008-09. THER EFORE, OUR FINDING IN ITA NO.5370/M/2016 FOR A.Y. 2008-09 WOULD, MUTATI M UTANDI WOULD APPLY TO THIS APPEAL AS WELL. ACCORDINGLY THE APPEAL OF THE REVENUE IS DIMISSED. ITA NOS.5370 & 5371/M/2016 M/S. STRUCTMAST REALTORS (MUMBAI) PVT. LTD. 4 9. IN THE RESULT, THE APPEALS OF THE REVENUE ARE DI SMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 21.03.2018. SD/- SD/- (MAHAVIR SINGH) (RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 21.03.2018. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.