SIROYA HOLDINGS, MUMBAI V. ADDL CIT 12(3), MUMBAI

ITA 5901/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 101073 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-09-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 17-08-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 04-10-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUMIT KUMAR
• Assessee Lawyers: B V JHAVERI
• Keywords: Question of law

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI N.K.BILLAIYA, ACCOUNTANT MEMBER ITA NO. 5901 /MUM/20 13 (ASSESSMENT YEAR: 200 9 - 10 ) M/S.SIROYA HOLDINGS, 72, BAJAJ BHAWAN, NARIMAN POINT, MUMBAI - 400 021. PAN: AAQFS9329G APPELLANT VS. ADDL. COMMISSIONER OF INCOME - TAX 12(3), MUMBAI. RESPONDENT APPELLANT BY : SHRI B.V.JHAVERI (AR) RESPONDENT BY: SHRI SUMIT KUMAR (DR) DATE OF HEARING: 18 /08/2015 DATE OF PRONOUNCEMENT : : 16 / 0 9 /2015 O R D E R PER VIJAY PAL RAO, JM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 16 / 8 /2013 OF THE CIT(A) - 23, MUMBAI, FOR THE ASSESSMENT YEAR 200 9 - 10 . 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: 1. ON THE FACTS AND IN THE CIRCUMSTANCES, THE LD. CIT(A) ERRED IN CONFIRMING ACTION OF THE A.O. IN DISALLOWING INTEREST OF RS. 18,70,675/ - U/S 24(B) WHILE COMPUTING 'INCOME FROM HOUSE PROPERTY' WITHOUT PROPERLY APPRECIATING THE FACTS OF THE CASE AND LAW APPLICABLE THERETO. 2. ON THE FACTS AND IN THE CIRCUMSTANCES, THE LD. CIT(A) FAILED TO APPRECIATE THE FACT THAT THE INTEREST OF ITA NO .5901/MUM/2013 M/S.SIROYA HOLDINGS PAGE 2 OF 8 RS. 18,70,675/ - HAS BEEN PA ID ON LOAN/CAPITAL RECEIVED FROM THE PARTNERS WHICH WAS UTILIZED IN ACQUISITION/ CONSTRUCTION OF PROPERTY OR REPAYMENT. OF LOAN UTILIZED FOR ACQUISITION/ CONSTRUCTION OF PROPERTY, HENCE, SHOULD HAVE BEEN ALLOWED. 3. ON THE FACTS AND IN THE CIRCUMSTANCES, THE LD. CIT(A) FAILED TO APPRECIATE THAT THERE IS NO BAR IN THE LAW THAT INTEREST PAID ON PARTNERS' CAPITAL WHICH WAS UTILIZED WHOLLY AND EXCLUSIVELY FOR ACQUISITION! CONSTRUCTION OF PROPERTY CANNOT BE ALLOWED AS DEDUCTION U/S 24(B) OF THE INCOME TAX ACT, 1961. 4. THE LD. CIT(A) FAILED TO APPRECIATE THAT THE INTEREST PAID BY THE APPELLANT WAS OFFERED FOR TAXATION BY THE PARTNERS, THEREFORE, SUCH DISALLOWANCE AMOUNTS TO DOUBLE TAXATION ON THE SAME AMOUNT, THEREFORE, EITHER DEDUCTION OF INTEREST MAY BE ALLOWED I N THE HANDS OF THE APPELLANT OR CORRESPONDING RELIEF OF INTEREST MAY BE ALLOWED IN THE HANDS OF THE PARTNERS. 5. THE APPELLANT PRAYS THAT THE DISALLOWANCE OF INTEREST CLAIMED U/S 24(B) MAY BE DELETED AND/OR ALTERNATIVELY, INTEREST INCOME MAY NOT BE TAXED IN T HE HANDS OF THE PARTNERS. 3. THE ONLY ISSUE THAT ARISES IN THE APPEAL OF THE ASSESSEE IS IN RESPECT OF DISALLOWANCE OF INTEREST OF RS.18,70,675/ - U/S 24(B) OF THE IT ACT WHILE COMPUTING INCOME FROM HOUSE PROPERTY. 4. THE ASSESSEE - FIRM OWNS A PROPERTY CALLED SIROYA CENTRE IN ANDHERI(E), MUMBAI. THIS PROPERTY WAS LET OUT TO M/S.ADITYA BIRLA RETAILS LTD., FOR ANNUAL RENT OF RS. 8,40,84,000/ - . WHILE COMPUTING INCOME FROM HOUSE PROPERTY , THE ASSESSEE HAS CLAIMED INTEREST U/S 24(B) OF RS.19,64 ,857/ - . THE AO NOTED THAT THE ASSESSEE PAID INTEREST OF RS.4,70,909/ - ON LOANS FROM OUTSIDERS AND BALANCE INTEREST OF RS.93,53,377/ - WAS PAID TO PARTNERS ON THEIR CAPITAL CONTRIBUTION. ACCORDINGLY AO HAS RESTRICTED THE CLAIM OF INTEREST US 24(B) TO RS.94 ,182/ - OUT OF THE TOTAL AMOUNT OF ITA NO .5901/MUM/2013 M/S.SIROYA HOLDINGS PAGE 3 OF 8 RS.19,64,857/ - CLAIMED BY THE ASSESSEE. THE CLAIM OF THE ASSESSEE WAS DENIED BY THE AO ON THE GROUND THAT THE AMOUNT OF INTEREST PAID ON CAPITAL CONTRIBUTION BY THE PARTNERS COULD NOT BE TAKEN INTO CONSIDERATION FOR THE P URPOSE OF COMPUTATION OF INTEREST TO BE DEDUCTED U/S 24(B) OF THE ACT. THE ASSESSEE CHALLENGED THE ACTION OF THE AO BEFORE THE CIT(A) BUT COULD NOT SUCCEED. 5. BEFORE US, LD. AR OF THE ASSESSEE HAS SUBMITTED THAT AS PER THE PARTNERSHIP DEED DATED 1/ 4 /200 2 , PARTNERS CAPITAL WAS INCREASED TO RS.4,50,000/ - WHICH WAS TAKEN AS PARTNERS FIXED CAPITAL. HE HAS REFERRED TO CLAUSES 7 & 8 OF THE PARTNERSHIP DEED AND SUBMITTED THAT THE PARTNERSHIP DEED PERMITS PAYMENT OF INTEREST AT THE RATE OF 12% PER ANNUM OR SUCH OTHER ATE AS MAY BE MUTUALLY AGREED UPON OR AT SUCH RATE NOT EXCEEDING THE RATE AS MAY BE PRESCRIBED BY THE IT ACT OR OTHER STATUTORY PROVISION SHALL BE PAYABLE ON THE AMOUNT STANDING TO THE CR EDIT OF CAPITAL ACCOUNT, LOAN ACCOUNT OR CURRENT ACCOUNT O F THE PARTNERS FROM TIME TO TIME. HE HAS POINTED OUT THAT APART FROM FIXED CAPITAL OF THE PARTNERS, THE CURRENT ACCOUNT CAPITAL OF THE PARTNERS STOOD AT RS.3,82,33,742/ - ON WHICH INTEREST IS PAID AT THE RATE OF 12% AS PER CLAUSE 8 OF THE PARTNERSHIP DEED. THUS WHEN THERE IS NO BAR ON PAYMENT OF INTEREST ON CAPITAL BORROWED FROM THE PARTNER TO BE CLAIMED AS DEDUCTION WHILE COMPUTING INCOME FROM HOUSE PROPERTY, THEN THE CLAIM OF THE ASSESSEE U/S 24(B) CANNOT BE REJECTED. IN SUPPORT OF HIS CONTENTION, HE HA S RELIED UPON THE ITA NO .5901/MUM/2013 M/S.SIROYA HOLDINGS PAGE 4 OF 8 DECISION OF THIS TRIBUNAL DATED 16/5/2012 IN THE CASE OF M/S.SANE & DOSHI ENTERPRISES VS. ACIT IN ITA NO.6532/MUM/2010 WHICH HAS BEEN UPHELD BY THE HON'BLE JURISDICTIONAL HIGH COURT VIDE JUDGMENT DATED 9/4/2015 REPORTED IN 232 TAXMAN 452. THUS THE LEARNED AR OF THE ASSESSEE SUBMITTED THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE. 6. ON THE OTHER HAND, LEARNED DEPARTMENTAL REPRESENTATIVE HAS RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT INTEREST PAID BY THE A SSESSEE TO ITS PARTNERS CANNOT BE TREATED AS EXPENDITURE FOR THE PURPOSE OF SECTION 24(B) OF THE ACT . 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD. AT THE OUTSET, WE NOTE THAT AS PER THE BALANCE - SHEET AS ON 31/3/2009, FIXED CAPITAL CONTRIBUTION OF PARTNERS STANDS AT RS.4,50,000/ - AND PARTNER S CAPITAL ACCOUNT BALANCE IS AT RS.3,82,33,742/ - . THEREFORE, THE CURRENT CAPITAL BALANCE OF THE PARTNER IS OVER AND ABOVE THE FIXED CAPITA L CONTRIBUTION OF THE CAPITAL. THERE IS NO DISPUTE THAT AS PER PARTNERSHIP DEED DATED 1/4/2002, PAYMENT OF INTEREST AT THE RATE OF 12% PER ANNUM ON THE AMOUNT STANDING TO THE CREDIT OF THE CAPITAL ACCOUNT, LOAN ACCOUNT OR CURRENT ACCOUNTS OF THE PARTNERS IS PROVIDED UNDER CLAUSE 8 WHICH READS AS UNDER: 8. SIMPLE INTEREST AT THE RATE OF 12% PER ANNUM OR AT SUCH OTHER RATE AS MAY BE MUTUALLY AGREED UPON OR AT SUCH RATE NOT EXCEEDING RATE AS MAY BE PRESCRIBED BY THE INCOME TAX ACT OR SUCH OTHER STATUTORY M ODIFICATIONS OR RE - ENACTMENT THEREOF AS MAY BE IN FORCE FROM TIME TO ITA NO .5901/MUM/2013 M/S.SIROYA HOLDINGS PAGE 5 OF 8 TIME, SHALL BE PAYABLE ON THE AMOUNTS STANDING TO THE CREDIT OF CAPITAL ACCOUNT, LOAN ACCOUNTS OR CURRENT ACCOUNTS OF THE PARTNERS FROM TIME TO TIME THUS, IT IS A CASE WHERE PARTNERS HA VE CONTRIBUTED THE SAID AMOUNT OF RS.3,82,33,742/ - OVER AND ABOVE THEIR FIXED CAPITAL CONTRIBUTION AND THEREFORE THE PAYMENT OF INTEREST BY THE FIRM TO THE PARTNERS IS AN ALLOWABLE EXPENDITURE IF THE SAID AMOUNT IS USED FOR ACQUISITION OR IMPROVEMENT OF TH E HOUSE PROPERTY IN QUESTION AS PER PROVISIONS OF SEC.24(B) OF THE IT ACT. AN IDENTICAL ISSUE HAS BEEN CONSIDERED BY THE CO - ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF M/S.SANE & DOSHE ENTERPRISES (SUPRA) IN PARA GRAPH 4 AS UNDER: 4. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. ALTHOUGH THE LEARNED DR HAS STRONGLY SUPPORTED THE IMPUGNED ORDER OF THE LEARNED CIT(APPEALS) CONFIRMING THE DISALLOWANCE MADE BY THE AO ON ACCOUNT OF ASSESSEE'S CLAIM FOR DEDUCTION U/S 24(B) FOR INTEREST PAID ON PARTNERS' CAPITAL ACCOUNT BY RELYING ON THE VARIOUS REASONS GIVEN IN THE IMPUGNED ORDER, THE LEARNED COUNSEL FOR THE ASSESSEE HAS FILED A WRITTEN SUBMISSION TO MEET SATISFACTORILY EAC H AND EVERY POINT RAISED BY THE LEARNED CIT(APPEALS) WHILE CONFIRMING THE DISALLOWANCE MADE BY THE AO ON ACCOUNT OF ASSESSEE'S CLAIM FOR DEDUCTION U/S 24(B). MOREOVER, AS RIGHTLY SUBMITTED BY THE LEARNED COUNSEL FOR THE ASSESSEE, A SIMILAR ISSUE INVOLVED I N THE IMMEDIATELY PRECEDING YEAR I.E. ASSESSMENT YEAR 2006 - 07 WAS DECIDED BY THE LEARNED CIT(APPEALS) IN FAVOUR OF THE ASSESSEE IN THE SIMILAR FACTS AND CIRCUMSTANCES AND THE SAID DECISION OF LEARNED CIT(APPEALS)D GIVING RELIEF TO THE ASSESSEE HAS BEEN UPH ELD BY THE TRIBUNAL VIDE ITS ORDER DATED 20 111 APRIL, 2010 PASSED IN ITA NO. 3216/MUM12009. AS HELD BY THE TRIBUNAL IN THE SAID ORDER, THE ENTIRE INTEREST PAID ON THE PARTNERS' CAPITAL WAS RELATED TO THE PREMISES WHICH WERE LET OUT BY THE ASSESSEE AND THE SAME, THEREFORE, WAS ALLOWABLE AS DEDUCTION U/S 24(B) WHILE COMPUTING INCOME OF THE ASSESSEE UNDER THE HEAD 'INCOME FROM HOUSE PROPERTY'. RESPECTFULLY FOLLOWING THE SAID DECISION OF THE TRIBUNAL IN ASSESSEE'S OWN CASE FOR ASSESSMENT YEAR 2006 - 07, WE DIRECT THE AO TO ALLOW THE CLAIM OF THE ASSESSEE FOR DEDUCTION ON ACCOUNT OF INTEREST PAID ON PARTNERS' CAPITAL U/S 24(B). ITA NO .5901/MUM/2013 M/S.SIROYA HOLDINGS PAGE 6 OF 8 8. T HIS ORDER OF THE TRIBUNAL HAS BEEN UPHELD BY THE HON'BLE JURISDICTIONAL HIGH COURT REPORTED IN 232 TAXMAN 452 IN PARAGRAPHS 40 TO 42 AS UNDER: 40. WHILE CARRYING THE MATTER TO THE TRIBUNAL, THE ASSESSEE SPECIFICALLY URGED THAT THE COMMISSIONER ERRED IN REJECTING HIS CLAIM WITHOUT APPRECIATING THE FACT THAT INTEREST IS PAID TO PARTNERS ON THE AMOUNT CONTRIBUTED BY THEM AND THE SAID AM OUNTS IN THIS CASE HAD BEEN UTILISED FOR THE PURPOSE OF CONSTRUCTION OF THE PROPERTY FROM WHICH THE APPELLANT HAD EARNED THE RENTAL INCOME (GROUND NO.2). IT IS IN RELATION TO THIS GROUND THAT THE TRIBUNAL HELD IN PARAGRAPH 4 AS UNDER: '4. WE HAVE HEARD THE ARGUMENTS OF BOTH SIDES AND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. ALTHOUGH THE LEARNED DR HAS STRONGLY SUPPORTED THE IMPUGNED ORDER OF THE LEARNED CIT(APPEALS) CONFIRMING THE DISALLOWANCE MADE BY THE AO ON ACCOUNT OF THE ASSESSEE'S CLAIM FOR DEDUC TION U/S 24(B) FOR INTEREST PAID ON PARTNERS' CAPITAL ACCOUNT BY RELYING ON THE VARIOUS REASONS GIVEN IN THE IMPUGNED ORDER, THE LEARNED COUNSEL FOR THE ASSESSEE HAS FILED A WRITTEN SUBMISSION TO MEET SATISFACTORILY EACH AND EVERY POINT RAISED BY THE LEARNED CIT(APPEALS) WHILE CONFIRMING THE DISALLOWANCE MADE BY THE AO ON ACCOUNT OF ASSESSEE'S CLAIM FOR DEDUCTION U/S 24(B). MOREOVER, AS RIGHTLY SUBMITTED BY THE LEARNED COUNSEL FOR THE ASSESSEE, A SIMILA R ISSUE INVOLVED IN THE IMMEDIATELY PRECEDING YEAR I.E, ASSESSMENT YEAR 2006 - 07 WAS DECIDED BY THE LEARNED CIT(APPEALS) IN FAVOUR OF THE ASSESSEE IN THE SIMILAR FACTS AND CIRCUMSTANCES AND THE SAID DECISION OF LEARNED CIT(APPEALS) GIVING RELIEF TO THE ASSE SSEE HAS BEEN UPHELD BY THE TRIBUNAL VIDE ITS ORDER DATED 20TH APRIL, 2010 PASSED IN ITA NO.3216/MURN/2009. AS HELD BY THE TRIBUNAL IN THE SAID ORDER, THE ENTIRE INTEREST PAID ON THE PARTNERS' CAPITAL WAS RELATED TO THE PREMISES WHICH WERE LET OUT BY THE A SSESSEE AND THE SAME, THEREFORE, WAS ALLOWABLE AS DEDUCTION U/S 24(B) WHILE COMPUTING INCOME OF THE ASSESSEE UNDER THE HEAD INCOME FROM HOUSE PROPERTY'. RESPECTFULLY FOLLOWING THE SAID DECISION OF THE TRIBUNAL IN ASSESSEE'S OWN CASE FOR ASSESSMENT YEAR 200 6 - 07, WE DIRECT THE AO TO ALLOW THE CLAIM OF THE ASSESSEE FOR DEDUCTION ON ACCOUNT OF INTEREST PAID ON PARTNERS' CAPITAL U/S 24(B).' 41. THE TRIBUNAL HELD THAT IF A SIMILAR ISSUE WAS INVOLVED IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR 2006 - 07 AND THERE A FINDING WAS RENDERED IN FAVOUR OF THE ASSESSEE BY THE COMMISSIONER (APPEALS), THEN, IT WAS NOT POSSIBLE TO TAKE A DIFFERENT VIEW PARTICULARLY BECAUSE THAT FINDING OF THE COMMISSIONER WAS UPHELD BY THE TRIBUNAL BY ITS ORDER DATED 20TH APRIL, 2010. IF THE FACTS AND CIRCUMSTANCES IN ITA NO .5901/MUM/2013 M/S.SIROYA HOLDINGS PAGE 7 OF 8 WHICH THE CLAIM AROSE WERE IDENTICAL, THEN, THE TRIBUNAL CONCLUDED THAT A DIFFERENT VIEW ON FACTS WAS IMPOSSIBLE. 42. WE DO NOT THINK THAT ANY LARGE R QUESTION OR WIDER CONTROVERSY NEEDS TO BE DETERMINED. IF THE MATTER WAS APPROACHED IN THIS ANGLE BY THE COMMISSIONER AND IN THE SAME FACTUAL BACKDROP, THEN, THERE IS NO JUSTIFICATION FOR TAKING A CONTRARY VIEW. IF TWO CONFLICTING VIEWS OF THE COMMISSIONE R WERE PLACED BEFORE THE TRIBUNAL AND THE TRIBUNAL FOUND THAT IT HAD CONCURRED WITH ONE OF THOSE VIEWS AND THAT THE VIEW WITH WHICH IT CONCURRED PREVAILS, THEN, WE DO NOT THINK HOW THE REVENUE CAN RAISE THIS ISSUE. THE ISSUE HAS BEEN CONSIDERED BEARING IN MIND THE TYPICAL FACTUAL BACKGROUND. IF THE ENTIRE INTEREST PAID ON THE PARTNERS' CAPITAL WAS RELATED TO THE PREMISES WHICH WERE LET OUT BY THE ASSESSEE BUT THE CONSTRUCTION THEREOF CAME FROM THE CONTRIBUTIONS OF THE PARTNERS, THEN, THE INTEREST WAS DUE AN D PAYABLE TO THEM. THAT INTEREST WAS PAYABLE NOT ONLY IN TERMS OF THE GENERAL PRINCIPLE OF PARTNERSHIP AND HIGHLIGHTED IN THE INDIAN PARTNERSHIP ACT, 1932, BUT ALSO ON THE BROAD CONSIDERATION UNDER SECTION 24(B) OF THE INCOME TAX ACT, 1961. IF THE INCOME I S INCOME FROM HOUSE PROPERTY AND THAT IS A DEDUCTION WHICH COULD BE GRANTED FROM THE SAME WE DO NOT THINK THAT THE REVENUE SHOULD BE PERMITTED TO RAISE THIS GROUND. EVEN OTHERWISE, THE FINDING BEING CONSISTENT WITH THE FACTUAL POSITION WHICH IS NOT DISPUTE D, THEN ALL THE MORE EVEN THIS GROUND CANNOT BE CONSIDERED AS A SUBSTANTIAL QUESTION OF LAW. WE DO NOT THINK ANY REFERENCE IS REQUIRED TO THE DETAILED WRITTEN SUBMISSIONS OR THE CASE LAWS IN THIS REGARD. IN VIEW OF THE FACTS AND CIRCUMSTANCES AS WELL AS THE DECISION OF THE THIS TRIBUNAL IN THE CASE OF M/S.SANE & DOSHE ENTERPRISES (SUPRA) WHICH HAS BEEN UPHELD BY THE HON'BLE JURISDICTIONAL HIGH COURT, WE DECIDE THIS ISSUE IN FAVOUR OF THE ASSESSEE AND CONSEQUENTLY THE ORDERS OF THE AUTHORITIES BELOW QUA TH IS ISSUE ARE SET ASIDE AND THE CLAIM OF THE ASSESSEE U/S 24(B) IS ALLOWED. 9 . IN THE RESULT, THE ASSESSEE S APPEAL IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 1 6 TH SEPTEMBER , 2015. S D / - S D / - (N.K.BILLAIYA) (VIJAY PAL RAO) ACCOUNANT MEMBER JUDICIAL MEMBER EKSRINIVASULU, SR.PS ITA NO .5901/MUM/2013 M/S.SIROYA HOLDINGS PAGE 8 OF 8 COPY TO: 1. A PPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, MUMBAI. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME - TAX APPELLATE TRIBUNAL MUMBAI