Sh. Harjeet Singh Arora, Ludhiana V. DCIT, Ludhiana

ITA 58/CHANDI/2012

• Counselvise Citation: 5821514 RSA 2012
• Duration Of Justice: 1 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-02-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 18-01-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES B CHANDIGARH BEFORE SHRI H.L.KARWA, HON'BLE, VICE PRESIDENT AND SHRI MEHAR SINGH, ACCOUNTANT MEMBER ITA NO. 58/CHD/2012 ASSESSMENT YEAR: 2007-08 SHRI HARJEET SINGH ARORA, VS THE DCIT, LUDHIANA CIRCLE VI, LUDHIANA PAN NO. AAMPA0474C & ITA NO. 59/CHD/2012 ASSESSMENT YEAR: 2007-08 MRS HARNEESH KAUR ARORA, VS THE DCIT, LUDHIANA CIRCLE VI, LUDHIANA PAN NO. ACJPA6923B (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI ASHWANI KUMAR RESPONDENT BY : SHRI AKHILESH GUPTA DATE OF HEARING : 29.02.2012 DATE OF PRONOUNCEMENT : 29.02.2012 ORDER PER H.L.KARWA, VP THESE TWO APPEALS RELATING TO ASSESSMENT YEAR 2007- 08, INVOLVING COMMON ISSUES, WERE HEARD TOGETHER AND ARE BEING DI SPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. THE CIT( A)-II, LUDHIANA PASSED SEPARATE ORDERS ON 18.11.2011. 2 2. THE COMMON GROUND OF APPEALS READS AS UNDER:- THAT ORDER PASSED U/S 250(6) BY THE LD. CIT(A)-II, LUDHIANA IS AGAINST LAW AND FACTS ON THE FILE IN A S MUCH AS HE WAS NOT JUSTIFIED TO ARBITRARILY UPHOLD THE DISALLOWANCE OF RS. 1,56,000/- OUT OF INTEREST ACCO UNT MADE BY THE LD. ASSESSING OFFICER BY RESORT TO PROVISIONS OF SECTION 36(1)(III). 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE SHRI HARJEET SINGH ARORA, IS ENGAGED IN THE BUSINESS OF TRADING OF SHARES / SECURITIES ETC. FOR THE ASSESSMENT YEAR 2007-08, SHRI HARJEET SING H ARORA (INDIVIDUAL) FILED HIS RETURN ON 31.10.2007, DECLARING AN INCOME OF RS . 6,25,628/-. THE ASSESSEE HAS GIVEN CERTAIN ADVANCES FOR PURCHASE OF IMMOVABLE PROPERTY ON WHICH NO INTEREST HAS BEEN RECEIVED, WHEREAS ON THE OTHER HAND, THE ASSESSEE WAS PAYING INTEREST ON HOUSING LOAN AVAILED FROM I CICI HOME FINANCE. THE ASSESSING OFFICER BY APPLYING RATIO OF DECISION OF HON'BLE PUNJAB & HARYANA HIGH COURT IN CIT V ABHISHEK INDUSTRIES LTD [2006] 286 ITR 1 (P&H) DISALLOWED THE ENTIRE AMOUNT OF INTEREST I.E. RS. 1 ,56,000/- U/S 36(1)(III) OF THE INCOME TAX ACT, 1961 (IN SHORT 'THE ACT'). 4. IN ITA NO. 59/CHD/2012, SMT. HARNEESH KAUR AROR A, IS AN INDIVIDUAL ENGAGED IN THE BUSINESS OF TRADING OF SHARES / SECU RITIES ETC. RETURN OF INCOME FOR ASSESSMENT YEAR 2007-08 WAS FILED ON 31. 10.2007 DECLARING INCOME AT RS. 5,96,196/-. THE ASSESSING OFFICER W HILE FRAMING ASSESSMENT DISALLOWED A SUM OF RS. 1,56,000/- OUT OF INTEREST ACCOUNT BY RESORTING TO PROVISIONS OF SECTION 36(1)(III) OF THE INCOME TAX ACT. THE ASSESSEE HAS GIVEN CERTAIN ADVANCES FOR PURCHASE OF IMMOVABLE PR OPERTY ON WHICH NO 3 INTEREST HAS BEEN RECEIVED, WHEREAS ON THE OTHER HA ND, THE ASSESSEE WAS PAYING INTEREST ON HOUSING LOAN AVAILED FROM ICICI HOME FINANCE. 5. AGGRIEVED BY THE ORDER OF ASSESSING OFFICER, THE ASSESSEES FILED SEPARATE APPEALS BEFORE THE CIT(A). HOWEVER, THE CI T(A) DISMISSED THE APPEALS OF BOTH THE ASSESSEES AND HENCE THEY ARE IN APPEALS BEFORE THE TRIBUNAL. 6. BEFORE US, SHRI ASHWANI KUMAR, LD. COUNSEL FOR T HE ASSESSEE SUBMITTED THAT SHRI HARJEET SINGH ARORA HAS GIVEN A DVANCES TO M/S TDI INFRASTRUCTURE (P) LTD FOR PURCHASE OF IMMOVABLE PR OPERTY. SUCH ADVANCE WAS MADE DURING THE LAST 2/3 YEARS AS PER THE TERMS OF PURCHASE OF IMMOVABLE PROPERTY OF THE SAID CONCERN. THE ASSESSEE HAS ALS O PURCHASED A FLAT IN DELHI DURING FINANCIAL YEAR 2004-05 FOR WHICH ASSESSEE HA D AVAILED HOUSING LOAN FROM ICICI HOME FINANCE JOINTLY WITH HIS WIFE SMT. HARNEESH KAUR ARORA AND WAS PAYING INTEREST ON SUCH LOAN. SINCE THE AS SESSEE HAD LET OUT THE FLAT AND EARNED RENTAL INCOME AGAINST WHICH THE ASSESSEE HAD CLAIMED INTEREST AS PER THE PROVISIONS OF SECTION 24(B) OF THE INCOME T AX ACT, 1961. NO PART OF LOAN WAS USED FOR THE PURPOSE OF ADVANCING THE AMOU NT TO M/S TDI INFRASTRUCTURE (P) LTD FOR PURCHASE OF IMMOVABLE PR OPERTY. OTHERWISE ALSO, THE SAID CONCERN I.E. M/S TDI INFRASTRUCTURE (P) LT D IS IN NO WAY ANY RELATION TO THE ASSESSEE. THE ADVANCE MADE TO THE SAID CON CERN IS FOR THE PURPOSE OF EARNING SOME PROFIT BY INVESTING IN IMMOVABLE PROPE RTY. OTHERWISE ALSO, THE ASSESSEE HAD CLAIMED THE AMOUNT OF INTEREST PAID TO ICICI HOME FINANCE AS AN EXPENDITURE AS PER PROVISIONS OF SECTION 24 OUT OF RENTAL INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY; WHEREAS THE JUDG MENT OF THE HON'BLE 4 HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT V ABHISHEK INDUSTRIES LTD (SUPRA) IS APPLICABLE IN CASES OF IN TEREST EXPENDITURE CLAIMED OUT OF BUSINESS INCOME AND INTEREST FREE ADVANCES M ADE TO SISTER CONCERN. IN THE PRESENT CASE NEITHER THE ASSESSEE HAD GIVEN ANY INTEREST FREE ADVANCES TO ITS SISTER CONCERN / RELATED PARTIES NOR THE EXPEND ITURE OF INTEREST HAD BEEN CLAIMED OUT OF BUSINESS INCOME. AS SUCH, THE RATIO OF CIT V ABHISHEK INDUSTRIES LTD (SUPRA) AS APPLIED BY THE ASSESSING OFFICER AND CIT(A) IS NOT APPLICABLE IN THE FACTS AND CIRCUMSTANCES OF THE CA SE. AS SUCH, DISALLOWANCE OF INTEREST AT RS. 1,56,000/- BY THE ASSESSING OFFI CER AND CONFIRMED BY THE CIT(A) BY APPLYING THE ABOVE MENTIONED RATIO THAT T HE INTEREST PAID TO THE EXTENT OF INTEREST FREE LOANS GIVEN TO THE FAMILY M EMBERS DESERVES TO BE DELETED. 7. SHRI ASHWANI KUMAR, LD. COUNSEL FOR THE ASSESSEE ADVANCED SIMILAR ARGUMENTS IN THE CASE OF SMT. HARNEESH KAUR ARORA. SHRI AKHILESH GUPTA, LD. DR ON THE OTHER HAND RELIED ON THE ORDERS OF TH E AUTHORITIES BELOW. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE ALS O PERUSED THE MATERIALS AVAILABLE ON RECORD. IN THIS CASE THE A SSESSEES HAD LET OUT THE FLAT AND EARNED RENTAL INCOME AGAINST WHICH THE ASSESSEE S HAD CLAIMED DEDUCTION OF INTEREST PAID ON BORROWED CAPITAL AS PER THE PR OVISIONS OF SECTION 24(B) OF THE INCOME TAX ACT, 1961. THERE IS NO MATERIAL ON RECORD TO SHOW THAT ANY PART OF THE HOUSING LOAN AVAILED FROM ICICI HOME FI NANCE COMPANY LTD WAS USED FOR THE PURPOSE OF ADVANCING THE AMOUNT TO M/S TDI INFRASTRUCTURE (P) LTD AND TO IMPACT PROJECT PVT LTD FOR PURCHASE OF I MMOVABLE PROPERTY. OTHERWISE ALSO, THE ABOVE TWO CONCERNS ARE NO WAY I N RELATION TO THE 5 ASSESSEES. IN THIS CASE, ASSESSEES HAD CLAIMED AMO UNT OF INTEREST PAID TO ICICI HOME FINANCE CO LTD AS AN EXPENDITURE AS PER PROVISIONS OF SECTION 24(B) OF THE ACT OUT OF RENTAL INCOME UNDER THE HEA D INCOME FORM HOUSE PROPERTY; WHEREAS THE JUDGMENT RELIED UPON BY THE LOWER AUTHORITIES IN THE CASE OF CIT V ABHISHEK INDUSTRIES LTD (SUPRA) IS AP PLICABLE IN THE CASES OF INTEREST EXPENDITURE CLAIMED OUT OF BUSINESS INCOME AND INTEREST FREE ADVANCES MADE TO SISTER CONCERN. IN OUR CONSIDERED VIEW, THE AUTHORITIES BELOW HAVE NOT PROPERLY APPRECIATED THE RATIO OF TH E DECISION IN CIT V ABHISHEK INDUSTRIES LTD (SUPRA) IN RIGHT PERSPECTIV E AND WRONGLY APPLIED THE RATIO ON THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE. THIS DECISION IS NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. WE, T HEREFORE, DIRECT THE ASSESSING OFFICER TO ALLOW THE CLAIM OF BOTH THE AS SESSEES U/S 24(B) OF THE ACT. THUS, WE ALLOW THE COMMON GROUND OF APPEALS. 9. IN THE RESULT, APPEALS ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 29 TH DAY OF FEBRUARY, 2012 SD/- SD/- (MEHAR SINGH) (H.L.KARWA) ACCOUNTANT MEMBER VICE PRESIDENT DATED : 29 TH FEBRUARY, 2012 RKK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR TRUE COPY BY ORDER ASSISTANT REGISTRAR 6