Rajesh Gilhotra, Chandigarh V. ITO, Chandigarh

ITA 557/CHANDI/2014

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 81073 (ITAT-CHANDIGARH)
• Duration Of Justice: 6 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-12-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 08-12-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 30-05-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S K MITTAL
• Assessee Lawyers: PARVEEN KAPOOR
• Keywords: Business income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH B, CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI T.R.SOOD, ACCOUNTANT MEMBER ITA NO. 557/CHD/2014 ASSESSMENT YEAR : 2008-09 SH.RAJSH GILHOTRA VS. THE INCOME TAX OFFICER, 1471/2, SECTOR 43-B, WARD 5(2), CHANDIGARH. PAN: AEYPK9378M (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI PARVEEN KAPOOR RESPONDENT BY : SHRI S.K.MITTAL, DR DATE OF HEARING : 08.12.2014 DATE OF PRONOUNCEMENT : 11.12.2014 O R D E R PER BHAVNESH SAINI, J.M. : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEAL S), CHANDIGARH DATED 26.3.2014 FOR ASSESSMENT YEAR 2008 -09, CHALLENGING THE DISALLOWANCE OF INTEREST ON CASH CR EDIT LIMIT FROM BANK IN A SUM OF RS.3,32,317/-. 2. BRIEFLY, THE FACTS OF THE CASE ARE THAT THE ASSE SSEE HAD DEBITED INTEREST OF RS.3,32,317/- TO THE PROFIT & L OSS ACCOUNT. THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAD INVESTED AN AMOUNT OF RS.30,54,956/- IN A PLOT. THE ASSESS ING OFFICER 2 DISALLOWED THE INTEREST CLAIMED UNDER SECTION 36(1) (III) OF THE INCOME TAX ACT. 3. DURING THE COURSE OF APPELLATE PROCEEDINGS, THE ASSESSEE SUBMITTED THAT ONLY RS.18 LACS WERE INVESTED DURING THE YEAR ON PURCHASE OF LAND AND THE SAME WAS BY WAY OF UNSE CURED LOANS AND THE AMOUNT RECEIVED ON SALE OF CARS. AS PER THE ASSESSEE, THE INVESTMENT HAS NOTHING TO DO WITH THE CASH CREDIT LIMIT OF THE ASSESSEE, ON WHICH INTEREST WAS PAID. THE LEARNED CIT (APPEALS), HOWEVER, FOLLOWING THE DECIS ION OF HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. ABHISHEK INDUSTRIES LTD., 286 ITR 1 (P&H) DISMISSED THIS GROUND OF APPEAL OF THE ASSESSEE. HIS FINDINGS IN PARAS 2.3 AND 2.3.1 IN THE APPELLATE ORDER ARE REPRODUCED AS UNDER : 2.3. I HAVE CONSIDERED THE SUBMISSION OF THE LD. COUNSEL. THE ARGUMENT OF THE LD. COUNSEL THAT ONLY RS. 18,00,000 /- WAS INVESTED IN PURCHASE OF PLOT DURING THE YEAR UNDER CONSIDERATION AND THIS AMOUNT WAS PAID OUT OF UNSECURED LOANS AND BY SALE OF CARS , DOES NOT HOLD WATER IN VIEW OF THE JUDGEMENT OF PUNJAB & HARYANA HI GH COURT IN THE CASE OF M/S ABHISHEK INDUSTRIES LTD. (286 ITR 1), IN WHICH IT WAS HELD: THE ENTIRE MONEY IN A BUSINESS ENTITY COMES IN A CO MMON KITTY. THE MONEYS RECEIVED AS SHARE CAPITAL, AS TERM LOAN, AS WORKING CAPITAL LOAN, AS SALE PROCEEDS ETC, DO NOT H AVE ANY COLOUR. WHATEVER ARE THE RECEIPTS IN BUSINESS, THEY H AVE THE COLOUR OF BUSINESS RECEIPTS AND HAVE NO SEPARATE IDE NTIFICATION. SOURCES HAVE NO CONCERN WHATSOEVER. 2.3.1 IF THE INVESTMENT OF RS. 35,00,000/- WAS NO T MADE IN PURCHASE OF PLOT, WHICH WAS NOT PUT TO USE, THE AMO UNT WOULD HAVE 3 BEEN AVAILABLE FOR BUSINESS PURPOSES AND INTEREST BURD EN WOULD HAVE BEEN LESS TO THE SAME EXTENT. THEREFORE, IT IS HELD THAT THE ASSESSING OFFICER HAS RIGHTLY DISALLOWED THE INTEREST CLAIMED AND HIS ACTION IN THIS REGARD IS UPHELD. THE INTEREST TO BE DISALLOWED @ 10% PER ANNUM WORKS OUT TO MORE THAN THE INTEREST DEBITED TO THE PR OFIT 85 LOSS ACCOUNT AND SO THE ENTIRE INTEREST DEBITED TO THE PROFIT 85 LO SS ACCOUNT OF RS.3,32,317/- IS TO BE DISALLOWED U/S 36(L)(III) OF THE ACT AND THE ACTION OF THE ASSESSING OFFICER IN. THIS REGARD IS ACCORDI NGLY UPHELD. GROUND OF APPEAL NO. 1 IS DISMISSED. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSION. THE LEA RNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND SUBMITTED THAT THE ASSESSEE HAS MADE INVESTMENT OF RS.18 LACS FOR PURCHASE OF P LOT FOR BUSINESS PURPOSES DURING THE YEAR UNDER CONSIDERATI ON. THEREFORE, THE ADDITION IS UNJUSTIFIED. HOWEVER, HE HAS ADMITTED THAT THE PLOT IN WHICH INVESTMENT WAS MADE WAS NOT SUBJECT TO USE BY THE ASSESSEE FOR ANY BUSINESS PUR POSES. THE PROVISO TO SECTION 36(1)(III) OF THE ACT IS, TH EREFORE, CLEARLY ATTRACTED IN THE CASE OF THE ASSESSEE BECAUSE THE P LOT IN QUESTION WAS NOT PUT TO USE DURING THE YEAR UNDER CONSIDERATION. THE ADDITION WAS, THEREFORE, WHOLL Y JUSTIFIED IN THE FACTS AND CIRCUMSTANCES OF THE CASE. THE A SSESSING OFFICER SPECIFICALLY NOTED IN THE ASSESSMENT ORDER THAT DURING THE FINANCIAL YEAR RELEVANT TO THE ASSESSMENT YEAR IN APPEAL, THE ASSESSEE HAS UTILIZED THE LIMIT OF RS.35 LACS O BTAINED FROM STATE BANK OF PATIALA, CHANDIGARH TO CREATE NEW PER SONAL ASSETS(PLOT). AS PER SECTION 36(1)(III) OF THE AC T, IT IS VERY CLEARLY STATED THAT THE AMOUNT OF INTEREST PAID ON BORROWED CAPITAL CAN BE CLAIMED ONLY IF THE INTEREST HAS BEE N PAID IN 4 RESPECT OF CAPITAL BORROWED FOR ACQUISITION OF NEW ASSETS FOR EXTENSION OF EXISTING BUSINESS OR PROFESSION BUT IN THE INSTANT CASE, THE ASSESSEE HAS NOT CREATED ANY ASSETS FOR E XTENSION OF EXISTING BUSINESS BUT HAS ACQUIRED ALTOGETHER NE W ASSETS IN THE FORM OF PLOT, WHICH WAS AN INDIVIDUAL ASSET AND DID NOT FROM THE PART OF THE MAIN BUSINESS OF THE ASSESSEE. THE FINDINGS OF FACT RECORDED BY THE AUTHORITIES BELOW HAVE NOT BEEN CHALLENGED BY THE ASSESSEE THROUGH ANY EVIDENC E. THEREFORE, IN PRINCIPLE, THE ADDITION IS JUSTIFIED AGAINST THE ASSESSEE. HOWEVER, THE ASSESSEE HAS RAISED SPECIF IC PLEA BEFORE THE LEARNED CIT (APPEALS) THAT THE INVESTMEN T IN THE PLOT WAS MADE ONLY OF RS.18 LACS. THEREFORE, THE DISALLOWANCE SHOULD HAVE BEEN RESTRICTED TO THAT AM OUNT ONLY. THIS FACT IS NOT VERIFIED BY THE AUTHORITIES BELOW. THEREFORE, THE MATTER TO A LIMITED EXTENT BE RESTORED IN THE F ILE OF THE ASSESSING OFFICER TO VERIFY IF THE ASSESSEE HAS MAD E INVESTMENT IN A PLOT IN A SUM OF RS.18 LACS. THE ASSESSING OFFICER SHALL MAKE DISALLOWANCE ON THIS AMOUNT ONLY . IN THIS VIEW OF THE MATTER, THE ORDERS OF THE AUTHORITIES B ELOW ARE SET ASIDE TO THIS EXTENT ONLY AND THE MATTER IS RESTORE D TO THE FILE OF THE ASSESSING OFFICER TO VERIFY IF THE ASSESSEE HAS MADE INVESTMENT IN PLOT OF RS.18 LACS ONLY AND THEN THE ASSESSING OFFICER SHALL MAKE DISALLOWANCE PROPORTIONATELY ON THAT AMOUNT. WITH THESE OBSERVATIONS, THE APPEAL OF TH E ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 5 5. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 11 TH DAY OF DECEMBER, 2014. SD/- SD/- (T.R.SOOD) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 11 TH DECEMBER, 2014 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/TH E CIT/THE DR. ASSISTANT REGISTRAR, ITAT, CHANDIGARH