DCIT RG 8(1), MUMBAI V. ELEGANT EATERIES P.LTD, MUMBAI

ITA 5890/MUM/2012

• Counselvise Citation: 589019914 RSA 2012
• Duration Of Justice: 2 year(s) 2 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-12-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 09-12-2014
• Assessment Year: 2002-2003
• Appeal Filed On: 27-09-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NEIL PHILIPDR
• Assessee Lawyers: RAHUL K HAKANI; DR K SHIVARAM
• Keywords: Assessment record
• Section: 143(3)

Judgement Text

, , ,, , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E MUMBAI , .. , ! ' # BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI B.R.BASKARAN, ACCOUNTANT MEMBER . / ITA NOS.5890 TO 5894/MUM/2012 $ $ $ $ / ASSESSMENT YEARS: 2002-03 TO 2006-07 ASST. COMMISSIONER OF INCOME-TAX, RANGE-8(1), ROOM NO.260A, 2 ND FLOOR, AAYAKAR BHAVAN, M.K.ROAD, MUMBAI-400020 VS. M/S ELEGANT EATERIES P. LTD, LEELA BAUG, SIR M.V. ROAD, ANDHERI (E), MUMBAI-400059 ( % / REVENUE) ( &'() / RESPONDENT ) P.A. NUMBER : AAACG8656R % * ** * + + + + /REVENUE BY : SHRI NEIL PHILIP-DR &'() * ** * + + + + /RESPONDENT BY : DR. K.SHIVARAM & SHRI RAHUL K. HAKANI. * ,-! / DATE OF HEARING : 09/12/2014 ./$ * ,-! / DATE OF PRONOUNCEMENT : 09/12/2014 ' 0 ' 0 ' 0 ' 0 / O R D E R PER JOGINDER SINGH (JM) : THE BUNCH OF FIVE APPEALS WHEREIN THE REVENUE IS AGGRIEVED BY THE IMPUGNED ORDER DATED 17/07/2012 OF THE LD. FIRST APPELLATE AUTHORITY, MUMBAI, ON THE GROUND TH AT THE LD. 2 M/S ELEGANT EATERIES P. LTD COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN DELET ING THE DISALLOWANCE OF RS.34.83 LAKHS (A.Y. 2002-03), RS.2 8,64,263/- (A.Y.2003-04, A.Y. 2004-05), RS.20,50,289/- (A.Y. 2 005-06) AND RS.18,33,685/-(A.Y. 2006-07) ON ACCOUNT OF INTEREST U/S 24(B) OF THE INCOME TAX ACT, 1961, IN RESPECT OF LOAN TAK EN FROM HDFC IGNORING THE FACT THAT THE BORROWED CAPITAL WAS UTI LIZED FOR ACQUIRING NEW FIXED ASSET. 2. DURING HEARING OF THESE APPEALS, LD. DR, SHRI NE IL PHILIP, DEFENDED THE DISALLOWANCE MADE BY THE ASSESSING OFF ICER IN THE RESPECTIVE APPEALS AND ADVANCED HIS ARGUMENTS WHICH ARE IDENTICAL TO THE GROUND RAISED BY FURTHER SUBMITTIN G THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) WHILE DELETING THE DISALLOWANCE IGNORED THE FACT THAT THE BORROWED CAP ITAL WAS UTILIZED FOR ACQUIRING THE NEW ASSET. 2.1. ON THE OTHER HAND, SENIOR ADVOCATE DR. K. SHIV ARAM ALONGWITH SHRI RAHUL K. HAKANI, STRONGLY DEFENDED T HE CONCLUSION ARRIVED AT BY THE LD. COMMISSIONER OF IN COME TAX (APPEALS) BY SUBMITTING THAT THE ASSESSEE TOOK LOAN OF RS.2.55 CRORES FROM HDFC BANK BY MORTGAGING ITS PROPERTY AN D THEREAFTER ISSUED CHEQUES TO VARIOUS PARTIES AMOUNT ING TO RS.1,92,00,000/- WHICH WERE UTILIZED FOR REPAYMENT OF LOAN. IT WAS PLEADED THAT THE ENTIRE SETS OF TRANSACTIONS AR E CLEARLY EVIDENT FROM THE BANK STATEMENT AND ALSO COPY OF LE DGER SUBMITTED BEFORE THE AUTHORITIES. 3 M/S ELEGANT EATERIES P. LTD 2.2. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND P ERUSED THE MATERIAL AVAILABLE ON RECORD. THE FACTS, IN BRIEF, ARE THAT ASSESSMENT U/S 143(3) R.W.S. 147 OF THE INCOME-TAX ACT, 1961 (HEREINAFTER THE ACT) WAS COMPLETED ON 30/11/2007, WHEREIN CERTAIN ADDITIONS AND DISALLOWANCES WERE MADE INCLU DING THE DISALLOWANCE OF INTEREST AND FINANCIAL CHARGES AS M ENTIONED IN THE RESPECTIVE ASSESSMENT ORDER. THE AGGRIEVED ASS ESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. COMMISS IONER OF INCOME TAX (APPEALS), WHO VIDE ORDER DATED 07/01/20 09 UPHELD THE ACTION OF THE ASSESSING OFFICER ON CERTAIN COUN TS HOWEVER HE ALLOWED INTEREST PAYMENT AS DEDUCTION U/S 24(B) OF THE ACT BY OBSERVING THAT THE ASSESSEE OBTAINED THE LOAN OF RS .2.55 CRORES FROM HDFC BANK. THE DEPARTMENT FILED AN APPEAL BEF ORE THE TRIBUNAL ON THE PLEA THAT RELIEF WAS GRANTED TO THE ASSESSEE WITHOUT VERIFYING THE FACTS THAT THE NEW LOAN TAKEN WERE UTILIZED FOR REPAYMENT OF WHOLE LOAN ETC. THE TRIBUNAL VI DE ORDER DATED 09/03/2010 RESTORED THE MATTER TO THE FILE OF THE A SSESSING OFFICER TO VERIFY THE CLAIM OF THE ASSESSEE AND PAR TICULARLY THE FACT OF REPAYMENT OF UNSECURED LOAN OF RS.1.92 CROR ES TO LEELA SCOTTISH LACE PVT. LTD. WHICH ALLEGEDLY UTILIZED TH E FUNDS FOR ACQUIRING THE ASSET. AS PER THE ASSESSING OFFICER, NO BODY ATTENDED THE PROCEEDINGS NOR ANY SUBMISSIONS WERE F ILED PURSUANT TO THE ORDER OF THE TRIBUNAL, THUS HE COMP LETED THE ASSESSMENT ON THE BASIS OF MATERIAL AVAILABLE ON RE CORD. 2.3. ON APPEAL, BEFORE THE LD FIRST APPELLATE AUTH ORITY, THE CONTENTION OF THE ASSESSEE ALONGWITH RELEVANT RECOR D WERE 4 M/S ELEGANT EATERIES P. LTD EXAMINED AND FINALLY ALLOWED THE CLAIMED DEDUCTION U/S 24(1)(B) OF THE RESPECTIVE AMOUNTS AS DETAILED IN THE RESPEC TIVE APPEAL. FOR READY REFERENCE, WE ARE REPRODUCING HEREUNDER T HE RELEVANT PORTION FROM A.Y. 2002-03 (THE FACTS AND ISSUE BEIN G IDENTICAL IN ALL THE ASSESSMENT YEARS BEFORE US): 2.3.1. I HAVE CAREFULLY CONSIDERED THE CONTENTION OF THE APPELLANT COMPANY AS WELL AS CAREFULLY GONE THROUGH THE AVAILABLE DOCUMENTS ON RECORD. A PERUSAL OF THE BAL ANCE SHEET OF THE APPELLANT AS ON 31.3.1998 ALSO SHOWS THE PRE VIOUS YEAR'S FIGURE AS ON 31.3.1997, CLEARLY REVEALED THAT THE S HARE CAPITAL OF THE COMPANY WAS ONLY RS. 4,50,2001 -, WHEREAS TH E COST OF THE FIXED ASSETS I.E. LOAN WAS SHOWN OF RS.95,62,04 71- AS ' ON 31.03.1997. IN ORDER TO ASCERTAIN THE SOURCE OF THE SAID INVESTMENT, A FURTHER PROBE TO THE BALANCE SHEET RE VEALED THAT THE ENTIRE SOURCE OF INVESTMENT IN THE LAND IS FROM UNSECURED LOAN AT RS 91,55,8421- FROM M/S. LEELA SCOTTISH LAC E PVT. LTD. IT IS FURTHER SEEN THAT LOAN FROM M/S. LEELA SCOTTI SH LACE PVT. LTD. ROSE TO RS 1,84,39,5341 - TILL THE END OF THE A.Y. 2001-02. IT IS ALSO A MATTER OF FACT THAT THE APPELLANT HAD TAK EN A LOAN OF FROM HDFC BANK AMOUNTING TO RS 2.55 CRORES. A PERUS AL OF THE LOAN AGREEMENT ENTERED INTO BY THE APPELLANT WITH T HE HDFC BANK ON 31.03.2001 AT MUMBAI, REVEALED THAT THE APP ELLANT HAD APPROACHED THE HDFC BANK FOR ADVANCING TO IT A LOAN OF RS 2.55 CRS, BEING THE DISCOUNTED VALUE OF THE LEASE R ENT /COMPENSATION AND THE HDFC BANK, VIDE ITS LETTER DA TED 23.03.2001 HAS AGREED TO LEND LOAN FACILITIES OF RS 2.55 CRORES ON THE TERMS AND CONDITIONS AS APPEARING IN THE AGR EEMENT. THE BORROWER I.E. THE APPELLANT HAS AGREED TO MORTGAGE ALL THE PIECE AND PARCEL OF THE LAND ADMEASURING APPROXIMATELY 26 5 SQ. MTS. 5 M/S ELEGANT EATERIES P. LTD OR THEREABOUTS BEARING CRS NO. 883/1, SITUATED AT J UHU TARA ROAD, VILLAGE JUHU, MUMBAI - 400 049 TOGETHER WITH THE BUILDING STANDING THEREON (WITH APPURTENANT OPEN SP ACE 1 AND ALL COMMON AREAS) AND CONSTRUCTION THEREON PRESENT AND FUTURE (HEREINAFTER REFERRED TO AS THE SAID 'SECURITY') IN FAVOUR OF HDFC AS SECURITY FOR THE LOAN FACILITY AVAILED BY THE BO RROWER FROM HDFC. FURTHER, IT IS APPARENT THAT THE APPELLANT OB TAINED THE LOAN BY MORTGAGING THE PROPERTY, FOR WHICH THE LOAN WAS EARLIER TAKEN FROM M/S. LEELA SCOTTISH LACE PVT. LTD. A FUR THER PERUSAL OF THE ACCOUNTS OF THE APPELLANT IN THE GLOBAL TRUS T BANK LTD.- CURRENT ACCOUNT GENERAL NO. 1800102222, IT IS EVIDE NT THAT THE APPELLANT HAD RECEIVED LOAN OF RS. 2,52,45,000/- FR OM THE HDFC BANK ALONG WITH INTEREST THEREON AND THE APPEL LANT, THEREAFTER, ISSUED VARIOUS CHEQUES TO M/S. LEELA SC OTTISH LACE PVT. LTD. AMOUNTING TO RS 45 LAKHS, RS 35 LAKHS , R S 1,12,00,000/- AND AMOUNTING TO RS 1,92,00,000/ -. I T CAN BE SEEN THAT OUT OF THE TOTAL LOAN OF RS 2.55 CRORES O BTAINED FROM HDFC BANK, RS 1.92 CRORE WAS UTILISED FOR REPAYMENT OF LOANS TO M/S. LEELA SCOTTISH LACE PVT. LTD., RS 4,94,000/ - WAS PAID TO M/ S. K. KUMAR CONSTRUCTION PVT. LTD., WHICH WAS AG AIN FOR CONSTRUCTION PURPOSES OF THE LEASED PROPERTY AND RS . 45 LAKHS WAS GIVEN TO M/ S. OCEANIC HOTELS PVT. LTD. IT IS A MATTER OF RECORD THAT THE APPELLANT HAS NOT CLAIMED THE INTER EST ON RS. 45 LAKHS AND SUBSEQUENT PAYMENT GIVEN TO M/ S. OCEANIC HOTEL AS DEDUCTION. THE ENTIRE SET OF TRANSACTIONS ARE CLEAR LY EVIDENT FROM THE BANK'S STATEMENT AS WELL FROM THE COPY OF THE LEDGER SUBMITTED BY THE APPELLANT BEFORE ME AS WELL AS BEF ORE MY LD. PREDECESSOR. MY LD. PREDECESSOR, AFTER EXAMINING TH E ENTIRE TRANSACTIONS, FOUND THAT RS. 2,10,00,000/ - WAS THE AMOUNT THAT HAS BEEN UTILISED BY THE APPELLANT FOR THE PUR POSES OF REPAYMENT OF LOAN TO M/S. LEELA SCOTTISH LACE PVT. LTD. 6 M/S ELEGANT EATERIES P. LTD INCLUDING THE MOUNT INCURRED FOR THE PURPOSES OF CO NSTRUCTION ETC. THEREFORE, HE HAS RIGHTLY ALLOWED THE INTEREST AS ELIGIBLE U/ S. 24(1)(B) OF THE ACT. 2.3.2 THE BANK ACCOUNT OF M/S. LEELA SCOTTISH LACE PVT. LTD. IN ORIENTAL BANK OF COMMERCE AT BANDRA INDICATES THE R ECEIPT OF THE SAID CHEQUES ISSUED BY THE APPELLANT, E.G. RS.4 5 LAKHS HAS BEEN RECEIVED BY M/S. LEELA SCOTTISH LACE PVT. LTD. ON 03.04.2001, ON 04.04.2001, RS. 35 LAKHS AND ON 10.0 4.2001AN AMOUNT OF RS. 1,12,00,000/- HAS BEEN RECEIVED BY M/ S. LEELA SCOTTISH LACE PVT. LTD. IN THEIR BANK ACCOUNTS, WHI CH CORRESPONDS TO THE ENTRIES REFLECTED IN THE APPELLA NT'S BANK ACCOUNTS IN THE GLOBAL TRUST BANK LTD. FURTHER, FRO M THE RECORDS, I FIND THAT MY LD. PREDECESSOR, WHILE ALLO WING RELIEF TO THE APPELLANT, HAS RIGHTLY CONCLUDED THAT THE APPEL LANT HAD ACTUALLY REPAID THE AMOUNT OF RS. 1,92,00,000/ - TO M/S. LEELA SCOTTISH LACE PVT. LTD. AND THE INTEREST THEREON SH ALL BE ALLOWED AS PER THE BOARD'S CIRCULAR NO. 28 (F. NO. 8/8/69-I T(A-I)], DATED 20.08.1969, WHEREIN THE CBDT HAS HELD THAT THE SECO ND BORROWING, WHICH HAS BEEN USED TO REPAY THE FIRST B ORROWING, THE INTEREST THEREON SHALL BE ALLOWED AS DEDUCTION U/ S.24(1)(B) AMOUNTING TO RS.2868,631/-. 2.3.3 THE LD. AO STATED THAT THE APPELLANT DID NOT FURNISH ANY DETAILS. ON THE CONTRARY, I FIND THAT ENTIRE DETAIL S WERE FURNISHED BY THE APPELLANT BEFORE THE LD. AO AND TH E RECORDS OF THE LD. AO CLEARLY REVEALED THE SAME. FURTHER, THE DETAILS WERE ALSO FURNISHED BEFORE MY LD. PREDECESSOR ALONG WITH BANK DETAILS AS WERE PLACED BEFORE ME AND, THEREFORE, TH ERE IS NO MERIT IN THE ARGUMENTS OF THE LD. AO THAT THE DETAI LS ARE NOT AVAILABLE ON RECORD. I FIND THAT THE DETAILS WERE A LREADY AVAILABLE ON RECORD AND THE LD. AO SHOULD HAVE OBSE RVED THE 7 M/S ELEGANT EATERIES P. LTD SAME BEFORE PASSING AN EX-PARTE ORDER. THE MERE NON - ATTENDANCE OF THE APPELLANT SHOULD NOT BE TAKEN AGA INST IT. IT IS A SETTLED PRINCIPLE OF LAW THAT, WHILE PASSING AN E X-PARTE ORDER, THE MATERIAL ON RECORD MUST BE GIVEN DUE COGNIZANCE OF, WHICH INADVERTENTLY, HE FAILED TO DO SO. FOLLOWING THE DE CISION OF MY LD. PREDECESSOR AND ALSO IN VIEW OF THE ABOVE, THE APPEAL OF THE APPELLANT IS ALLOWED. 2.4. IF THE OBSERVATION MADE IN THE ASSESSMENT ORDE R LEADING TO DISALLOWANCE OF DEDUCTION, CONCLUSION DR AWN IN THE IMPUGNED ORDER, MATERIAL AVAILABLE ON RECORD AND TH E ARGUMENTS ADVANCED BY THE LD. RESPECTIVE COUNSEL, I F KEPT IN JUXTAPOSITION AND ANALYZED, WE NOTE THAT THE LD. CO MMISSIONER OF INCOME TAX (APPEALS) HAS ALREADY EXAMINED THE SO URCE OF INVESTMENT AND THE AVAILABILITY OF FUNDS WITH THE A SSESSEE ONE UNDISPUTED FACT IS OOZING OUT THAT THE ASSESSEE TOO K LOAN OF RS.2.55 CRORES FROM HDFC BANK PURSUANT TO A LOAN AG REEMENT ENTERED BETWEEN THE ASSESSEE AND THE BANK ON 31/03/ 2012 ON THE TERMS AND CONDITIONS APPEARING IN THE AGREEMENT . THE ASSESSEE MORTGAGED THE LAND APPROXIMATELY 265 SQ. M ETERS TO THE BANK ALONGWITH THE CONSTRUCTION THEREUPON TO TH E BANK AS A SECURITY FOR THE LOAN. OUT OF THIS LOAN, THE ASSES SEE ISSUED CHEQUES TO M/S LEELA SCOTTISH LACE PVT. LTD. AMOUNT ING TO RS. 1,92,00,000/- (RS.45 LAKH + 35 LAKH + 1,12,00,000/- ) FOR REPAYMENT OF LOAN AND RS.4,94,000/- WAS PAID TO M/S K. KUMAR CONSTRUCTIONS PVT. LTD. FOR CONSTRUCTION PURP OSES. THE TRANSACTIONS ARE CLEARLY EVIDENT FROM THE BANK STAT EMENTS AS WELL AS FROM THE COPY OF LEDGER AVAILABLE ON RECORD S WHICH WERE 8 M/S ELEGANT EATERIES P. LTD ALSO EXAMINED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS). THE REVENUE HAS NOT PRODUCED ANY EVIDENCE IN SUPPOR T OF ITS CLAIM. THERE IS UNCONTROVERTED FINDING IN THE IMPU GNED ORDER THAT THE ENTRIES MADE IN THE ACCOUNTS BY M/S LEELA SCOTTISH LACE PVT. LTD. CORRESPONDS TO THE ENTRY REFLECTED I N THE BANK ACCOUNT OF THE ASSESSEE MAINTAINED WITH GLOBAL TRUS T BANK, MEANING THEREBY, THE ASSESSEE ACTUALLY REPAID THE A MOUNT OF RS.1,92,00,000/- TO M/S LEELA SCOTTISH LACE PVT. LT D. AS PER CLAUSE (B) TO SECTION 24 WHERE THE PROPERTY HAS BEE N ACQUIRED, CONSTRUCTED, REPAID, RENEWED OR RECONSTRUCTED WITH BORROWED CAPITAL, THE AMOUNT OF ANY INTEREST PAYABLE ON SUCH CAPITAL IS ALLOWABLE DEDUCTION FROM THE INCOME FROM SUCH HOUSE PROPERTY, THUS, WE FIND NO INFIRMITY IN ALLOWING THE CLAIMED DEDUCTION U/S 24(1)(B) OF THE ACT. SO FAR AS, THE CONTENTION OF THE LD. DR THAT NECES SARY DETAILS WERE NOT FURNISHED BEFORE THE ASSESSING OFF ICER, WE NOTE THAT THERE IS UNCONTROVERTED FINDING IN PARA 2.3.3 OF THE IMPUGNED ORDER THAT THE ENTIRE DETAILS WERE FURNISH ED BEFORE THE ASSESSING OFFICER AS THE ASSESSMENT RECORD WAS DULY PERUSED AND EXAMINED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS). IT IS ALSO NOTED THAT THE LD. COMMISSIONER OF INCOM E TAX (APPEALS) FOUND THAT SUCH DETAILS WERE DULY FURNISH ED BEFORE HIS PREDECESSORS ALONGWITH BANK DETAILS. IN VIEW OF TH IS UNCONTROVERTED FINDING, WE FIND NO MERIT IN THE ARG UMENT OF THE REVENUE THAT SUCH DETAILS WERE NOT FILED DURING ASS ESSMENT STAGE, CONSEQUENTLY, WE FIND NO SUBSTANCE/MERIT IN THE APPEALS 9 M/S ELEGANT EATERIES P. LTD FILED BY THE REVENUE. SINCE, THE FACTS AND THE ISS UES ARE IDENTICAL IN ALL THE APPEALS, THEREFORE, OUR CONCLU SION WILL REMAIN THE SAME. THE APPEALS OF THE REVENUE ARE, T HEREFORE, DISMISSED. FINALLY, THE APPEALS OF THE REVENUE ARE DISMISSED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. REPRESENTATIVES FROM BOTH SIDES AT THE CONCLUSI ON OF HEARING ON 09/12/2014. SD/- SD/- B.R. BASKARAN JOGINDER SINGH ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED -09/12/2014 F{X~{T? P.S/. . . ' 0 ' 0 ' 0 ' 0 * ** * &,1 &,1 &,1 &,1 2 1$, 2 1$, 2 1$, 2 1$, / COPY OF THE ORDER FORWARDED TO : 1. () / THE APPELLANT 2. &'() / THE RESPONDENT. 3. 3 ( ) / THE CIT(A)- 4. 3 / CIT 5. 14 &, , , / DR, ITAT, MUMBAI 6. 45 6 / GUARD FILE. ' 0 ' 0 ' 0 ' 0 / BY ORDER, '1, &, //TRUE COPY// 7 77 7 / 8 8 8 8 % % % % (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI