DCIT 9(1)(2), MUMBAI V. ASIAN INFRA PROJECTS P.LTD, MUMBAI

ITA 5584/MUM/2016

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 9970 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 3 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-01-2020
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2009-2010
• Appeal Filed On: 14-09-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S MICHAEL JERALDLD
• Assessee Lawyers: PARAS NATH; JITENDRA TRIVEDILD ARS
• Keywords: Reopening of assessment; Business income; Rule of consistency; Source of fund; Condonation of delay; Set aside; Liquidation
• Section: 37(1); 251; 13; 144

Judgement Text

1 ITA NOS.5583-84/MUM/2016 ASIAN INFRAPROJECTS PRIVATE LIMITED ASSESSMENT YEARS-2009-10 & 2011-12 IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI , , BEFORE SHRI SAKTIJIT DEY, JM AND SHRI MANOJ KUMAR AGGARWAL, AM ./ I.T.A. NO.5584/MUM/2016 ( / ASSESSMENT YEAR:2009-10) & ./ I.T.A. NO.5583/MUM/2016 ( / ASSESSMENT YEAR:2011-12) D CIT - 9(1 ) ( 2) ROOM NO.260-A, 2 ND FLOOR AAYKAR BHAVAN, M.K. ROAD MUMBAI-400 020 / VS. M/S. ASIAN INFRA PROJECTS P RIVATE LIMITED A-501, KOTIA NIRMAN OPP. LAXMI INDUSTRIAL ESTATE NEW ANDHERI LINK ROAD ANDHERI (W), MUMBAI-400 053. '# ! ./ ! ./PAN/GIR NO. AABCL-1351-P ( #% /APPELLANT ) : ( &'#% / RESPONDENT ) #% / APPELLANT BY : SHRI S. MICHAEL JERALD-LD. DR &'#% / RESPONDENT BY : S/SHRI PARAS NATH & JITENDRA TRIVEDI-LD. ARS DATE OF HEARING : 14/10/2019 DATE OF PRONOUNCEMENT : 03/01/2020 / O R D E R MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER): - 1. AFORESAID APPEALS BY REVENUE FOR ASSESSMENT YEAR S [IN SHORT REFERRED TO AS AY] 2009-10 & 2011-12 CONTEST SEPARATE ORDERS OF LEARNED FIRST 2 ITA NOS.5583-84/MUM/2016 ASIAN INFRAPROJECTS PRIVATE LIMITED ASSESSMENT YEARS-2009-10 & 2011-12 APPELLATE AUTHORITY. SINCE THE FINDINGS IN AY 2011- 12 FORMS THE BASIS FOR REOPENING OF ASSESSMENT IN AY 2009-10, WE TAKE UP A PPEAL FOR AY 2011- 12, ITA NO. 5583/MUM/2016 AS THE LEAD YEAR AND PROC EED TO ADJUDICATE THE SAME. CONDONATION OF DELAY 2.1 THE REGISTRY HAS NOTED A DELAY OF 251 DAYS IN F ILING OF THE APPEAL, THE CONDONATION OF WHICH HAS BEEN SOUGHT BY THE REVENUE VIDE CONDONATION PETITION DATED 14/09/2016. IT HAS BEEN SUBMITTED TH AT THE APPELLATE ORDER FOR THIS YEAR FORMED THE BASIS TO PROVIDE RELIEF IN AYS 2009-10 & 2012-13. WHILE PROCESSING THE APPELLATE ORDERS FOR AYS 2009- 10 & 2012-13, IT WAS OBSERVED THAT THE DECISION NOT TO FILE THE APPEAL F OR AY 2011-12 WAS TAKEN BASED ON CATEGORICAL REPORT OF LOWER AUTHORITIES TH AT THERE WAS NEXUS BETWEEN FUNDS BORROWED AND THE FUNDS ADVANCED. HOWE VER, THERE COULD NOT HAVE BEEN A COMPLETE NEXUS WHICH WAS EVIDENT FROM Q UANTUM OF INTEREST EARNED AND INTEREST EXPANDED, WHICH FACT WAS NOT BR OUGHT TO THE NOTICE AND THE SAME RESULTED INTO DELAY IN FILING OF APPEAL. A NOTHER PLEA RAISED IS THE FACT THAT LD. CIT(A) FAILED TO APPRECIATE THAT NEIT HER THE BUSINESS HAD COMMENCED NOT IT WAS CARRIED OUT DURING THE YEAR UN DER CONSIDERATION. IN THE ABOVE BACKGROUND, THE LD. DR PLEADED FOR CONDON ATION OF DELAY. THE LD. AUTHORIZED REPRESENTATIVE FOR ASSESSEE (AR), ON THE OTHER HAND, OPPOSED THE CONDONATION FOR WANT OF SUFFICIENT CAUS E FOR DELAY IN FILING OF APPEAL. AS PER LD. AR, LIMITATION COULD NOT BE COND ONED ON THE GROUND OF COMPASSION OR EQUITABLE CONSIDERATIONS OR WHERE THE PARTY SEEKING CONDONATION APPEARS TO BE CALLOUS OR NEGLIGENT. REL IANCE HAS BEEN PLACED, 3 ITA NOS.5583-84/MUM/2016 ASIAN INFRAPROJECTS PRIVATE LIMITED ASSESSMENT YEARS-2009-10 & 2011-12 INTER-ALIA, ON THE DECISION OF HONBLE SUPREME COURT RENDERED I N OFFICE OF THE CHIEF POST MASTER GENERAL & OR V/S LIVING MEDIA INDIA LTD. & ANR. (348 ITR 7) FOR THE PLEA THAT CONDONATION OF DELAY IS AN EXCEPT ION AND SHOULD NOT BE USED AS AN ANTICIPATED BENEFIT FOR GO VERNMENT DEPARTMENTS. RELIANCE HAS ALSO BEEN PLACED ON THE DECISION OF HO NBLE SUPREME COURT RENDERED IN P.K.RAMACHANDRAN V/S STATE OF KERALA & ANR. (7 SCC 556). THE LD. AR ALSO DREW ATTENTION TO THE FACT THAT DUR ING APPELLATE PROCEEDINGS, THE ASSESSEE HAD SUBMITTED THAT THERE WAS DIRECT NEXUS BETWEEN INTEREST INCOME AND INTEREST EXPENDITURE AS THE ASSESSEE HAD GIVEN INTEREST YIELDING LOANS OUT OF INTEREST-BEARI NG FUNDS. THE LEARNED FIRST APPELLATE AUTHORITY, ALLOWED THE SAME TO BE ASSESSA BLE UNDER THE HEAD BUSINESS INCOME AFTER CATEGORICAL FINDINGS / OBSERV ATIONS AND RELYING UPON VARIOUS JUDICIAL DECISIONS. 2.2 WE HAVE CAREFULLY CONSIDERED THE RIVAL ARGUMENT S ON CONDONATION OF DELAY. IT IS QUITE EVIDENT THAT THE SUBJECT MATTER OF DISPUTE UNDER APPEAL SPREAD OVER MULTIPLE YEARS AND THEREFORE, NO USEFUL PURPOSE WOULD BE SERVED BY DISMISSING THE APPEAL MERELY FOR WANT OF CONDONATION OF DELAY. NO DOUBT, THE PARTIES ARE EXPECTED TO BE VIGILANT I N THE MATTER OF APPELLATE PROCEEDINGS, HOWEVER, AS PER SETTLED LEGAL POSITION , A LIBERAL APPROACH MAY BE ADOPTED BY APPELLATE AUTHORITIES IN THE INTEREST OF JUSTICE. WE ARE GUIDED BY THE PRINCIPLES LAID DOWN BY HONBLE SUPREME COUR T IN THE CASE OF 167 ITR 471 (SC) COLLECTOR, LAND ACQUISITION VS. KATIJI AS UNDER: - 1. ORDINARILY A LITIGANT DOES NOT STAND TO BENEFIT BY LODGING AN APPEAL LATE. 2. REFUSING TO CONDONE DELAY CAN RESULT IN A MERITO RIOUS MATTER BEING THROWN OUT AT THE VERY THRESHOLD AND CAUSE OF JUSTICE BEING DEFEATED. AS AGAINST THIS WHEN DELAY IS 4 ITA NOS.5583-84/MUM/2016 ASIAN INFRAPROJECTS PRIVATE LIMITED ASSESSMENT YEARS-2009-10 & 2011-12 CONDONED THE HIGHEST THAT CAN HAPPEN IS THAT A CAUS E WOULD BE DECIDED ON MERITS AFTER HEARING THE PARTIES. 3. 'EVERY DAY'S DELAY MUST BE EXPLAINED' DOES NOT M EAN THAT A PEDANTIC APPROACH SHOULD BE MADE. WHY NOT EVERY HOUR'S DELAY, EVERY S ECOND'S DELAY? THE DOCTRINE MUST BE APPLIED IN A RATIONAL COMMON-SENSE PRAGMATIC MAN NER. 4. WHEN SUBSTANTIAL JUSTICE AND TECHNICAL CONSIDERA TIONS ARE PITTED AGAINST EACH OTHER, CAUSE OF SUBSTANTIAL JUSTICE DESERVES TO BE PREFERR ED FOR THE OTHER SIDE CANNOT CLAIM TO HAVE VESTED RIGHT IN INJUSTICE BEING DONE BECAUSE O F A NON-DELIBERATE DELAY. 5. THERE IS NO PRESUMPTION THAT DELAY IS OCCASIONED DELIBERATELY, OR ON ACCOUNT OF CULPABLE NEGLIGENCE, OR ON ACCOUNT OF MALA FIDES. A LITIGANT DOES NOT STAND TO BENEFIT BY RESORTING TO DELAY. IN FACT, HE RUNS A SERIOUS RISK . 6. IT MUST BE GRASPED THAT JUDICIARY IS RESPECTED N OT ON ACCOUNT OF ITS POWER TO LEGALIZE INJUSTICE ON TECHNICAL GROUNDS BUT BECAUSE IT IS CA PABLE OF REMOVING INJUSTICE AND IS EXPECTED TO DO SO. KEEPING IN MIND THE AFORESAID PRINCIPLES, THE BENCH FORMED AN OPINION THAT THE DELAY WAS TO BE CONDONED AND THE APPEAL WAS TO BE PROCEEDED WITH AS PER THE MERITS OF THE CASE. DECISION ON MERITS 3. THE GROUNDS RAISED BY THE REVENUE READ AS UNDER: - I) WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN HOLDING THAT THERE WAS A NEXUS BETWEEN INT EREST BEARING BORROWINGS AND INTEREST YIELDING ADVANCES IGNORING THAT, AT BEST, THERE WAS ONLY PARTIAL NEXUS AND NOT COMPLETE NEXUS AS EVIDENCED BY THE FACT THAT IN TEREST EARNED WAS RS.1,44,41,920/- WHEREAS INTEREST PAID ON BORROWING S MADE FOR MAKING THE INTEREST YIELDING ADVANCES WAS RS.2,38,56,459/-? II) WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) FAILED TO APPRECIATE THAT NOTWITHSTANDING A PARTIAL NEXUS BETWEEN INTEREST PAID ON BORROWINGS UTILIZED FOR INTEREST YIELDING ADVANCES, THE ENTIRE INTEREST ATTRIBUTABLE TO BORROWINGS NOT UTILIZED FOR MAKING INTEREST YIEL DING ADVANCES COULD NOT HAVE BEEN ALLOWED AS BUSINESS LOSS IN VIEW OF THE FACT T HAT NEITHER THE BUSINESS HAD COMMENCED NOR WAS IT CARRIED ON DURING THE YEAR?' THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF THE DCIT 9(1)(2) BE RESTORED. 4. WE HAVE CAREFULLY HEARD THE RIVAL SUBMISSIONS IN CLUDING WRITTEN SUBMISSIONS AND DOCUMENTS PLACED ON RECORD. WE HAVE ALSO DELIBERATED ON 5 ITA NOS.5583-84/MUM/2016 ASIAN INFRAPROJECTS PRIVATE LIMITED ASSESSMENT YEARS-2009-10 & 2011-12 JUDICIAL PRONOUNCEMENTS AS CITED BEFORE US INCLUDIN G DECISION RENDERED BY TRIBUNAL IN ASSESSEES OWN CASE FOR AY 2012-13 IN A N APPEAL FILED BY THE REVENUE VIDE ITA NO.5582/MUM/2016 ORDER DATED 06/02 /2017. 5.1 FACTS ON RECORD WOULD REVEAL THAT THE ASSESSEE BEING RESIDENT CORPORATE ASSESSEE STATED TO BE ENGAGED IN THE BUSI NESS OF REAL ESTATE, WAS ASSESSED FOR YEAR UNDER CONSIDERATION ON 14/03/ 2014, WHEREIN THE INCOME OF THE ASSESSEE WAS DETERMINED AT RS.146.65 LACS AFTER CERTAIN ADDITIONS / ADJUSTMENTS AS AGAINST RETURNED LOSS OF RS.95.60 LACS E-FILED BY THE ASSESSEE ON 27/09/2011. 5.2 DURING ASSESSMENT PROCEEDINGS, THE PERUSAL OF P ROFIT & LOSS ACCOUNT FOR THE YEAR UNDER CONSIDERATION AS WELL AS FOR THE PRECEDING YEAR REVEALED THAT THE ASSESSEE DID NOT CARRY OUT ANY BUSINESS AC TIVITY OF REAL ESTATE. HOWEVER, THE ASSESSEE REFLECTED INTEREST INCOME OF RS.144.41 LACS WHICH MAINLY CONSISTED-OFF OF INTEREST ON LOANS FOR RS.13 6.57 LACS AND INTEREST ON INCOME TAX REFUND FOR RS.7.77 LACS. THE SAID INCOME WAS OFFERED AS BUSINESS INCOME DESPITE THE FACT THAT THE BUSINESS ACTIVITY OF THE ASSESSEE WAS THAT OF REAL ESTATE AND NOT MONEY LENDING. AGAI NST INTEREST INCOME, THE ASSESSEE CLAIMED ADMINISTRATIVE AND OTHER EXPENSES OF RS.1.64 LACS AS WELL AS INTEREST EXPENDITURE OF RS.238.56 LACS. 5.3 AS PER THE OBSERVATIONS OF LD. AO, THE LOANS OB TAINED BY THE ASSESSEE APPEARED TO HAVE BEEN DIVERTED TO DIRECTOR S / SISTER CONCERNS. THE ASSESSEE PAID INTEREST OF 12% TO COUPLE OF LEND ERS AND INTEREST OF 16% TO ONE LENDER WHEREAS IT WAS RECEIVING INTEREST OF 12% ON ITS OWN LENDING WHICH WAS EVIDENT FROM THE FACT THAT INTEREST INCOM E WAS RS.136.57 LACS 6 ITA NOS.5583-84/MUM/2016 ASIAN INFRAPROJECTS PRIVATE LIMITED ASSESSMENT YEARS-2009-10 & 2011-12 AGAINST INCOME EXPENDITURE OF RS.238.58 LACS. IT WA S NOTED THAT THE ASSESSEE WAS NOT A FINANCING COMPANY AND IT HAD NO LICENSE OF MONEY LENDING AND THEREFORE, THE INTEREST INCOME WAS ASSE SSABLE UNDER THE HEAD INCOME FROM OTHER SOURCES AS AGAINST BUSINESS INCOME OFFERED BY THE ASSESSEE . THE FAILURE OF THE ASSESSEE TO DEFEND THE SAME DURI NG THE COURSE OF ASSESSMENT PROCEEDINGS LED LD. AO TO TREA T THE INTEREST INCOME AS INCOME FROM OTHER SOURCES. CONSEQUENTLY, INTEREST EXPENDITURE WAS NOT ALLOWED AS DEDUCTION SINCE THE ASSESSEE FAILED TO SUBSTANTIATE THE NEXUS OF INTEREST EXPENDITURE WITH THE INTEREST INCOME EARNE D BY THE ASSESSEE. 5.4 THE INTEREST EXPENDITURE WAS ALSO NOT ALLOWED B Y INVOKING EXPLANATION TO SECTION 37(1) SINCE THE ASSESSEE, IN THE OPINION OF LD.AO, COULD NOT CARRY OUT THE BUSINESS OF MONEY LENDING AND SUCH AC TIVITY WAS IN VIOLATION OF PROVISIONS OF THE BOMBAY MONEY LENDERS ACT. IN THE ALTERNATIVE, LD. AO HELD THAT THE EXCESS INTEREST OF 4% AMOUNTING TO RS .40.96 LACS BEING PAID TO ONE OF THE LENDER ENTITIES WAS TO BE DISALLOWED U/S 36(1)(III) / 57 OF THE ACT. 5.5 FINALLY, THE INTEREST INCOME WAS ASSESSED UNDER THE HEAD INCOME FROM OTHER SOURCES AND TOTAL INCOME WAS DETERMINED AT RS.146.65 LACS. THE INTEREST EXPENDITURE OF RS.238.56 LACS WAS NOT ALLOWED AS DEDUCTION EITHER U/S 36(1)(III) OR U/S 57 OF THE ACT. 6.1 BEFORE LEARNED CIT(A), THE ASSESSEE, INTER-ALIA, SUBMITTED THAT THE ASSESSEE HAD BORROWED FUNDS FOR THE PURPOSE OF ITS BUSINESS. HOWEVER, DUE TO SLOWDOWN IN THE MARKET, THE PROJECTS COULD N OT BE COMMENCED WHEREAS THE ASSESSEES LIABILITY TO PAY INTEREST ON BORROWED FUNDS HAD 7 ITA NOS.5583-84/MUM/2016 ASIAN INFRAPROJECTS PRIVATE LIMITED ASSESSMENT YEARS-2009-10 & 2011-12 STARTED. THEREFORE, THE LOANS WERE ADVANCED BY THE ASSESSEE SO AS TO REDUCE THE OVERALL INTEREST COST. IT WAS ALSO SUBMI TTED THAT UNDER NORMAL CIRCUMSTANCES WHEN THE ASSESSEE DID NOT EARN ANY IN COME DURING THE YEAR, STILL THE EXPENSES WOULD BE ALLOWABLE WHICH WOULD U LTIMATELY RESULT INTO LOSSES TO THE ASSESSEE. TO AVOID HUGE FINANCIAL LOS SES AND TO REDUCE OVERALL FINANCIAL BURDEN TOWARDS INTEREST LIABILITY , THE ASSESSEE ADVANCED MONEY OUT OF THE BORROWED FUNDS TO ITS ASSOCIATED E NTITIES. IF SUCH LOANS WERE NOT GIVEN, THE RESULTANT ACCUMULATED LOSSES WO ULD EVEN LEAD TO BANKRUPTCY OR LIQUIDATION OF THE ASSESSEE. IN THE A FORESAID BACKGROUND, THE ASSESSEE PLEADED THAT THE INTEREST WAS ASSESSABLE U NDER THE HEAD BUSINESS INCOME AND INTEREST EXPENDITURE WOULD BE A N ALLOWABLE DEDUCTION. 6.2 REGARDING NEXUS BETWEEN BORROWED FUNDS VIS--VI S LENDING MADE BY THE ASSESSEE, THE ATTENTION WAS DRAWN TO THE FACT T HAT REQUISITE DETAILS WERE FILED BY THE ASSESSEE DURING THE COURSE OF ASSESSME NT PROCEEDINGS VIDE LETTER DATED 05/03/2014 WHICH WERE NOT CONSIDERED B Y LD. AO WHILE FRAMING THE ASSESSMENT ORDER. IT WAS SUBMITTED THAT THE FUN DS WERE BORROWED FOR BUSINESS PURPOSES AND THE LENDING WERE MADE TO REDU CE OVERALL INTEREST COST AS THE PROJECT COULD NOT BE STARTED. THEREFORE , THE INTEREST EXPENDITURE HAVING DIRECT NEXUS WITH INTEREST INCOME WAS AN ALL OWABLE DEDUCTION. 6.3 WITHOUT PREJUDICE, IT WAS SUBMITTED THAT EVEN IF INTEREST INCOME WAS TO BE ASSESSED AS INCOME FROM OTHER SOURCES, THE CORRESPONDING INTEREST EXPENSES HAVING DIRECT NEXUS WITH SUCH INCOME OUGHT TO HAVE BEEN ALLOWED TO BE REDUCED / SET-OFF THEREFROM SINCE THE PRIME INTENT OF THE ASSESSEE WAS TO REDUCE THE INTEREST COST SO AS TO A VOID DEFAULT IN TIMELY 8 ITA NOS.5583-84/MUM/2016 ASIAN INFRAPROJECTS PRIVATE LIMITED ASSESSMENT YEARS-2009-10 & 2011-12 SERVICING OF LOANS BY WAY OF REPAYMENT OF PRINCIPAL AND INTEREST ON FUNDS BORROWED. THE ATTENTION WAS DRAWN TO THE FINANCIAL STATEMENTS TO SUPPORT THE FACT THAT THERE WAS DIRECT NEXUS BETWEEN BORROW INGS AND LENDING. 6.4 FINALLY, THE ASSESSEE ALSO ASSAILED THE PROPORT IONATE DISALLOWANCE OF RS.40.96 LACS AS PROPOSED BY LD.AO, IN THE ALTERNAT IVE, BY SUBMITTING THAT INTEREST EXPENSES WERE INCURRED FOR THE EXISTENCE O F BUSINESS. 7.1 AFTER DUE CONSIDERATION OF FACTUAL MATRIX, IT W AS OBSERVED BY LEARNED FIRST APPELLATE AUTHORITY THAT THE ASSESSEE HAD ALR EADY STARTED REAL ESTATE BUSINESS AND GIVEN AND RECEIVED ADVANCES FOR THIS P URPOSE IN EARLIER YEARS ALSO. IN FACT, THE ASSESSEE EARNED PROFIT FROM REAL ESTATE BUSINESS IN AY 2008-09. TO SUPPORT THE SAME, THE DETAILS OF INCOME EARNED BY THE ASSESSEE DURING AYS 2008-09 TO 2010-11 HAS ALREADY BEEN TABULATED IN PARA 5.1.1 OF THE IMPUGNED ORDER. 7.2 UPON PERUSAL OF VARIOUS CLAUSES OF MEMORANDUM O F ASSOCIATION (MOA), IT WAS SEEN THAT ALTHOUGH THE PRIMARY BUSINE SS OF THE ASSESSEE WAS TO ACQUIRE / DEVELOP PROPERTIES BUT THE ASSESSEE CO ULD INVEST AND DEAL WITH THE MONEY OF THE COMPANY NOT IMMEDIATELY REQUIRED. THE ASSESSEE COULD RECEIVE DEPOSITS AS WELL AS ADVANCE MONEY AND THERE FORE, IT COULD NOT BE SAID THAT THE SAID ACTIVITY VIOLATED THE OBJECTIVES OF THE ASSESSEE. RELIANCE WAS PLACED, INTER-ALIA, ON THE DECISION OF HONBLE BOMBAY HIGH COURT RENDERED IN CIT V/S LOK HOLDINGS (308 ITR 356) WHEREIN IT WAS HELD THAT INTEREST RECEIVED BY THE ASSESSEE PROPERTY DEVELOPE R, ON TEMPORARY DEPOSITS OF SURPLUS MONEY OUT OF ADVANCES RECEIVED BY FROM INTENDING PURCHASES WAS BUSINESS INCOME AND NOT INCOME FROM O THER SOURCES. IN THE 9 ITA NOS.5583-84/MUM/2016 ASIAN INFRAPROJECTS PRIVATE LIMITED ASSESSMENT YEARS-2009-10 & 2011-12 ABOVE BACKGROUND, IT WAS ALSO NOTED THAT INTEREST I NCOME AS WELL AS INTEREST EXPENDITURE WAS ACCEPTED BY THE DEPARTMENT IN EARLI ER YEARS TO BE THE BUSINESS INCOME OF THE ASSESSEE. THEREFORE, LD. AO WAS DIRECTED TO TREAT THE INTEREST INCOME AS BUSINESS INCOME AND ALLOW IN TEREST EXPENDITURE AGAINST THE SAME. ALTERNATIVELY, IF THE INTEREST IN COME WAS TO BE TREATED AS INCOME FROM OTHER SOURCES, THEN INTEREST EXPENDITUR E WOULD STILL BE ALLOWABLE U/S 57 OF THE ACT. AT THE SAME TIME, LD. CIT(A) CONFIRMED THE STAND OF LD. AO IN MAKING PROPORTIONATE DISALLOWANC E OF RS.40.96 LACS, BEING INTEREST PAID AT EXCESS RATES SINCE THE BORRO WED CAPITAL WAS DIVERTED AT LOWER RATES OF INTEREST. 7.3 THE PERUSAL OF ORDER GIVING EFFECT DATED 27/11/ 2015 PASSED BY LD. AO WOULD REVEAL THAT ULTIMATELY, THE INCOME OF THE ASS ESSEE WAS DETERMINED AT A LOSS OF RS.53.85 LACS, INTER-ALIA, AFTER DISALLOWANCE OF INTEREST EXPENDITURE OF RS.40.96 LACS. THE INTEREST INCOME WAS ASSESSED UNDER THE HEAD BUSINESS INCOME. AGGRIEVED BY AFORESAID ADJUDICATION, THE REVENUE IS UNDER FURTHER APPEAL BEFORE US. 8. UPON DUE CONSIDERATION OF FACTUAL MATRIX AS ENUM ERATED IN PRECEDING PARAGRAPHS, WE FIND THAT LD. CIT(A) HAS CLINCHED TH E ISSUE IN THE RIGHT PERSPECTIVE. IT IS QUITE EVIDENT THAT THE BUSINESS OF THE ASSESSEE WAS ALREADY SET-UP SINCE THE ASSESSEE HAD ALREADY REFLE CTED INCOME FROM REAL ESTATE BUSINESS DURING AY 2008-09. THE PERUSAL OF A SSESSEES FINANCIAL STATEMENTS FOR YEAR UNDER CONSIDERATION WOULD SHOW THAT THE ASSESSEE HAS OBTAINED UNSECURED LOANS OF RS.583.56 LACS WHICH HA S SUBSTANTIALLY BEEN 10 ITA NOS.5583-84/MUM/2016 ASIAN INFRAPROJECTS PRIVATE LIMITED ASSESSMENT YEARS-2009-10 & 2011-12 ADVANCED TO DIRECTORS & OTHERS (TO THE EXTENT OF RS .185.45 LACS) AND TO MAKE-UP FOR THE ACCUMULATED LOSSES OF RS.317.31 LAC S INCURRED BY THE ASSESSEE OVER THE YEARS. THE ASSESSEE DO NOT HAVE A NY OTHER SOURCE OF FUND EXCEPT SHARE CAPITAL OF RS.1 LAC. THEREFORE, T HERE WAS COMPLETE NEXUS BETWEEN THE BORROWINGS AND LENDING MADE BY TH E ASSESSEE. THIS BEING THE CASE, THE INTEREST EXPENDITURE HAVING DIR ECT NEXUS WITH INTEREST INCOME WAS CLEARLY ALLOWABLE TO THE ASSESSEE. 9. SO FAR AS THE QUESTION OF APPLICABILITY OF HEAD OF INCOME IS CONCERNED, RULE OF CONSISTENCY FAVORS ASSESSEES STAND WHICH IS EVIDENT FROM THE FACT THAT THE ASSESSEE WAS FOLLOWING CONSISTENT METHOD O F OFFERING SUCH INCOME AS BUSINESS INCOME. THE LD. AR HAS PLACED ON RECORD STATUS OF ASSESSMENT FOR AYS 2008-09 TO 2015-16, THE PERUSAL OF WHICH WOULD REVEAL THAT SIMILAR INTEREST INCOME HAS BEEN ACCEPTED BY R EVENUE AS BUSINESS INCOME IN SCRUTINY ASSESSMENT PROCEEDINGS U/S 143(3 ) FOR AYS 2013-14 TO 2014-15. IN AYS 2008-09, 2010-11 & 2015-16, THERE W AS NO SCRUTINY ASSESSMENT AND ASSESSEES CLAIM WAS ACCEPTED IN SEL F-ASSESSMENT. FURTHER, RELYING UPON AY 2011-12, SIMILAR VIEW WAS TAKEN BY LD. CIT(A) IN AY 2012-13, AGAINST WHICH REVENUE PREFERRED FURTHER APPEAL BEFORE THIS TRIBUNAL VIDE ITA NO. 5582/MUM/2016 ORDER DATED 06/ 02/2017 WHEREIN THE APPEAL OF THE REVENUE WAS DISMISSED. 10. FINALLY, THE UNDISPUTED FINDINGS ARE THAT THE A SSESSEE, IN TERMS OF ITS MEMORANDUM OF ASSOCIATION, COULD RECEIVE DEPOSITS A S WELL AS ADVANCE MONEY AND THEREFORE, IT COULD NOT BE SAID THAT THE SAID ACTIVITY VIOLATED THE OBJECTIVES OF THE ASSESSEE. THE RATIO OF DECISION O F HONBLE BOMBAY HIGH 11 ITA NOS.5583-84/MUM/2016 ASIAN INFRAPROJECTS PRIVATE LIMITED ASSESSMENT YEARS-2009-10 & 2011-12 COURT RENDERED IN CIT V/S LOK HOLDINGS (308 ITR 356) WAS CLEARLY APPLICABLE WHEREIN IT WAS HELD THAT INTEREST RECEIV ED BY THE ASSESSEE PROPERTY DEVELOPER, ON TEMPORARY DEPOSITS OF SURPLU S MONEY OUT OF ADVANCES RECEIVED BY FROM INTENDING PURCHASES WAS B USINESS INCOME AND NOT INCOME FROM OTHER SOURCES. THEREFORE, NO FAULT COULD BE FOUND IN THE IMPUGNED ORDER, IN THIS REGARD. 11. KEEPING IN VIEW THE ENTIRETY OF FACTS AND CIRCU MSTANCES, WE FIND THAT LD. CIT(A) WAS CORRECT IN DIRECTING LD.AO TO ASSESS THE INTEREST INCOME AS BUSINESS INCOME AND ALLOW INTEREST EXPENDITURE AGAI NST THE SAME TO THE EXTENT AS SPECIFIED IN THE IMPUGNED ORDER. THE GROU ND STAND DISMISSED TO THAT EXTENT. 12. HAVING SAID SO, WE FIND THAT FACTUAL MATRIX WOU LD REQUIRE OUR INDULGENCE ONLY TO THE EXTENT OF INTEREST ON TAX RE FUND OF RS.7.77 LACS EARNED BY THE ASSESSEE WHICH IS A PART OF OVERALL I NTEREST INCOME OF RS.144.41 LACS. THE SAID INTEREST INCOME, UNDISPUTE DLY, COULD NOT BE HELD TO BE BUSINESS INCOME FOR THE ASSESSEE RATHER IT WA S ASSESSABLE AS INCOME FROM OTHER SOURCES . THEREFORE, WE DIRECT LD.AO TO MODIFY ORDER GIVING EFFECT DATED 27/11/2015 ACCORDINGLY. THE GROUND STA ND PARTLY ALLOWED TO THAT EXTENT. RESULTANTLY, THE APPEAL STANDS PARTLY ALLOWED IN TE RMS OF OUR ABOVE ORDER. ITA NO.5584/MUM/2016: AY 2009-10 13. FACTS ARE PARI-MATERIA THE SAME IN THIS YEAR. T HE ASSESSMENT WAS FRAMED U/S 144 R.W.S.147 ON 21/03/2015. THE ASSESSM ENT FRAMED IN AY 2011-12 FORMED THE BASIS TO TRIGGER REASSESSMENT PR OCEEDINGS IN THIS AY. 12 ITA NOS.5583-84/MUM/2016 ASIAN INFRAPROJECTS PRIVATE LIMITED ASSESSMENT YEARS-2009-10 & 2011-12 THE ASSESSMENT WAS FRAMED ON BEST JUDGMENT BASIS SINCE THE ASSESSEE FAILED TO RESPOND TO HEARING NOTICES. CONSEQUENTLY, THE ASSESSMENT WAS FRAMED ON SIMILAR LINES WHEREIN THE INTEREST INCOME WAS BROUGHT TO TAX AS INCOME FROM OTHER SOURCES AND INTEREST EXPENDITURE WAS DISALLOWED. THE LEARNED CIT(A), RELYING UPON THE ORDER OF ITS PREDE CESSOR FOR AY 2011-12, TOOK SIMILAR VIEW. IT WAS ALSO NOTED THAT NO APPEAL WAS FILED BY REVENUE AGAINST APPELLATE ORDER FOR AY 2011-12. THE PROPORT IONATE DISALLOWANCE OF RS.75.39 LACS WAS CONFIRMED U/S 36(1)(III). AGGRIEV ED, THE REVENUE IS UNDER FURTHER APPEAL BEFORE US. 14. THE ISSUE AS WELL AS FACTUAL MATRIX BEING IDENT ICAL AS IN AY 2011-12 AND SINCE WE HAVE DECIDED THE ISSUE ON MERITS IN AY 2011-12, TAKING THE SAME, WE CONFIRM THE STAND OF LD. CIT(A) IN DIRECTI NG LD.AO TO ACCEPT INTEREST INCOME AS BUSINESS INCOME. THE INTEREST ON TAX REFUND, IF ANY, WOULD BE ASSESSABLE AS INCOME FROM OTHER SOURCES. NO INDULGENCE WOULD BE REQUIRED AGAINST PROPORTIONATE DISALLOWANCE OF R S.75.39 LACS U/S 36(1)(III) AS CONFIRMED BY LD. CIT(A). 15. THE APPEAL STANDS PARTLY ALLOWED IN THE SAME MA NNER. CONCLUSION 16. BOTH THE APPEALS STAND PARTLY ALLOWED IN TERMS OF OUR ABOVE ORDER. ORDER PRONOUNCED IN THE OPEN COURT ON 03 RD JANUARY, 2020. SD/- SD/- (SAKTIJIT DEY) (MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 03/01/2020 SR.PS:-JAISY VARGHESE 13 ITA NOS.5583-84/MUM/2016 ASIAN INFRAPROJECTS PRIVATE LIMITED ASSESSMENT YEARS-2009-10 & 2011-12 / COPY OF THE ORDER FORWARDED TO : 1. #% / THE APPELLANT 2. &'#% / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT CONCERNED 5. + ,&- , - , / DR, ITAT, MUMBAI 6. , /01 / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI.