ACIT, New Delhi V. M/s. Deepsons Southend, New Delhi

ITA 6130/DEL/2014

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 3915 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 2 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-01-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 10-11-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASHIMA NEB
• Assessee Lawyers: S C MALHOTRA
• Keywords: Depreciation; Revised return
• Section: 37(1); 139(5); 37

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B, NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI O.P. KANT, ACCOUNTANT MEMBER I.T.A. NO.6130/DEL/2014 A.Y. : 2010-11 ACIT, CIRCLE 32(1), ROOM NO. 1502, BLOCK-E-2, 15 TH FLOOR, SHYAMA PRASAD MUKHERJEE CIVIC CENTRE, MINTO ROAD, NEW DELHI VS. M/S DEEPSONS SOUTHEND, M-10, SOUTH EXTENSION, NEW DELHI - 110 049 (PAN: AACFD1758J) (ASSESSEE) (RESPONDENT) REVENUE BY : MS. ASHIMA NEB, SR. DR ASSESSEE BY : SH. S.C. MALHOTRA, CA ORDER PER H.S. SIDHU : JM THE REVENUE HAS FILED THIS APPEAL AGAINST THE IMPUGN ED ORDER DATED 28.8.2014 OF THE LD. CIT(A)-XXVI, NEW DELHI REL EVANT TO ASSESSMENT YEAR 2010-11. 2. THE GROUNDS RAISED IN THIS APPEAL READ AS UNDER: - 1. WHETHER CIT(A) WAS RIGHT IN DELETING THE ADDITION OF RS. 31,69,502/- WHEN IT IS EVIDENT THAT BORROWED FUNDS HAD NOT BEEN UTILIZED FOR THE PURPOSE OF BUSINESS. 2 2. WHETHER CIT(A) WAS RIGHT IN DELETING THE ADDITION OF RS. 31,69,502/- WHEN IT IS EVIDENT THAT SAME HAD BEEN GIVEN TO PARTNERS FROM YEAR TO YEAR WITHOUT CHARGING INTEREST FROM THEM. 3. WHETHER CIT(A) WAS RIGHT IN DELETING THE ADDITION OF RS. 31,69,502/- WHEN ON THE ONE HAND ASSESSEE IS CLAIMING INTEREST ON ACCOUNT OF BORROWALS USED FOR CONSTRUCTION OF BUILDING AND ON THE OTHER HAND PARTNERS WERE MAKING CONTINUOUS WITHDRAWAL FROM THEIR CAPITAL. 4. WHETHER THE CIT(A) IS RIGHT TO ALLOW THE SET OFF OF BROUGHT FORWARD DEPRECIATION LOSS OF RS. 20,46,292/-. 5. WHETHER THE CIT(A) IS RIGHT IN ACCEPTING REVISED RETURN OF INCOME. 6. THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEND ANY / ALL OF THE GROUNDS OF APPEAL BEFORE OR DURING THE COURSE OF THE HEARING OF THE APPEAL. 3 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PARTNERSHIP FIRM WHICH IS ENGAGED IN CARRYING ON TH E BUSINESS OF TRADING IN GARMENTS AND ACCESSORIES. IT ALSO DERIVES FROM HOUSE PRORTY. THE ASSESSEE FILED ITS RETURN OF INCOME DEC LARING INCOME OF RS.1,91,40,837/-. THE RETURNED INCOME CONSISTS OF INCOME OF RS. 2,58,02,861/- FROM THE HOUSE PROPERTY AND BUSINESS L OSS OF RS. 46,15,732/-. AFTER CLAIMING SET OFF OF BUSINESS LOS S OF RS. 46,15,732/- AGAINST THE INCOME OF RS. 2,58,02,861/ - FROM THE HOUSE PROPERTY, THE NET CURRENT YEAR INCOME WAS SHOWN AT RS.2,11,87,129/- IN THE COMPUTATION OF INCOME ANNEXE D WITH THE RETURN OF INCOME. THEREAFTER, THE ASSESSEE ALSO CLAI MED SET OFF OF BROUGHT FORWARD DEPRECIATION OF RS.20,46,292/- AGAIN ST THE CURRENT YEAR INCOME OF RS.2,11,87,129/- AND ACCORDINGLY, TH E APPELLANT SHOWED INCOME OF RS.1,91,40,837/- IN THE ORIGINAL R OI. THE ASSESSEE, AFTER RE-APPORTIONING VARIOUS EXPENSES AMO NGST THE INCOME DERIVED FROM THE HOUSE PROPERTY AND BUSINESS, FILED A REVISED COMPUTATION OF INCOME DURING THE ASSESSMENT P ROCEEDINGS VIDE A LETTER DATED 22.02.2013 SHOWING INCOME OF RS.1 ,88,83,889/-. THE REVISED COMPUTATION OF INCOME WAS NOT ACKNOWLEDGE D BY THE AO AS THE SAME WAS NOT IN ACCORDANCE WITH THE PROVISIO NS OF SECTION 139(5) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFE RRED AS THE ACT). THE REVISED COMPUTATION OF INCOME CONSISTS OF IN COME OF 4 RS.2,64,02,406/- FROM THE HOUSE PROPERTY AND BUSINESS LOSS OF RS.54,72,225/-. AFTER CLAIMING SET OFF OF BUSINESS LOSS OF RS.54,72,225/- AGAINST THE INCOME OF RS.2,64,02,406/ - FROM THE HOUSE PROPERTY IN THE REVISED COMPUTATION OF INCOME; THE CURRENT YEAR INCOME WAS SHOWN AT RS.2,09,30,181/-. THEREAFTE R, CLAIMING SET OFF OF BROUGHT FORWARD DEPRECIATION OF RS.20,46,2 92/- AGAINST THE CURRENT YEAR INCOME OF RS.2,09,30,181/-, THE NET INCOME IN THE REVISED COMPUTATION WAS SHOWN AT RS.1,88,83,889/-. T HE CASE WAS PICKED UP UNDER SCRUTINY. ACCORDINGLY, THE AO COMPLE TED THE ASSESSMENT AT AN INCOME OF RS.2,62,64,130/- AND MADE THE VARIOUS ADDITIONS VIDE ORDER DATED 14.3.2014 PASSED U/S. 14 3(3) OF THE ACT. AGAINST THE AFORESAID ASSESSMENT ORDER, ASSESSEE APPE ALED BEFORE THE LD. CIT(A)-XXVI, NEW DELHI, WHO VIDE HIS IMPUGNE D ORDER DATED 28.08.2014 HAS PARTLY ALLOWED THE APPEAL OF THE ASSE SSEE. AGGRIEVED WITH THE ORDER OF THE LD. CIT(A), THE REVENU E IS IN APPEAL BEFORE THE TRIBUNAL. 4. LD. DR RELIED UPON THE ORDER OF THE AO AND REITE RATED THE CONTENTIONS RAISED IN THE GROUNDS OF APPEAL. 5. ON THE CONTRARY, LD. COUNSEL OF THE ASSESSEE RE LIED UPON THE ORDER OF THE LD. CIT(A) AND STATED THAT LD. CIT(A) HAS PASSED A WELL REASONED ORDER WHICH DOES NOT NEED ANY INTERFER ENCE ON OUR 5 PART AND REQUESTED THAT THE SAME MAY BE UPHELD BY DIS MISSING THE APPEAL OF THE REVENUE. 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RELEV ANT RECORDS, ESPECIALLY THE IMPUGNED ORDER. WE FIND THAT THE DISALLOWANCE OF INTEREST AMOUNTING TO RS. 31,16,898/- WAS MADE BY THE AO BY HOLDING THAT THE BORROWED FUND HAVE NOT BEE N UTILIZED FOR THE PURPOSE OF BUSINESS, HENCE THE INTEREST CLAIMED THEREON IS NOT ALLOWABLE U/S. 36(1)(III) & 37(1) OF THE ACT. WE FI ND THAT THE BUILDING UNDER REFERENCE HAS BEEN CONSTRUCTED OUT OF BORROWE D FUND AS EVIDENT FROM THE TABULAR CHART AT PAGE-20 OF THE IMPUG NED ORDER. IT IS NOTICED THAT OVER THE YEARS, THE ASSESSEE HAS REPA ID THE BANK LOAN. IT IS EVIDENT THAT THE LOAN WAS RAISED FROM THE B ANK DURING THE AY 2000-01; WHICH ALONG WITH THE INTEREST WAS REPAID EVERY YEAR. THERE WAS NO BANK LOAN AS ON 31.03.2010. THUS, THERE IS NO COGENCY IN THE AO'S FINDING THAT THE BANK LOAN WAS NOT U TILIZED FOR BUILDING CONSTRUCTION. WE FURTHER NOTE THAT AO HAS HE LD THAT THE BANK LOAN WAS UTILIZED FOR RENOVATION OF THE BUILDING UNDER REFERENCE. EVEN OTHERWISE ALSO THERE IS NO BAR ON A LLOWANCE OF INTEREST ON LOAN EVEN FOR RENOVATION U/S 36 OF THE ACT. WE FURTHER OBSERVE THAT DURING THE RELEVANT ASSESSMENT YEAR, THE ASSESSEE HAS PAID INTEREST ONLY ON THE BANK LOAN. IT WAS FURTH ER OBSERVED FROM THE AO'S FINDING THAT THE PARTNERS HAVE UTILIZED LOAN FOR THEIR 6 PERSONAL PURPOSES AFTER WITHDRAWING IT THROUGH THEI R CAPITAL ACCOUNT, IN VIEW OF THE ASSESSEES SUBMISSION TABULATED AT PAG E-25-26 OF THE IMPUGNED ORDER, WAS RIGHTLY HELD UNCALLED FOR PARTI CULARLY IN VIEW OF THE FACT THAT THE DEBIT BALANCE IN PARTNERS' ACCOUNT IS DUE TO THE ASSESEES LOSS ALLOCATED TO THE PARTNERS AND NOT ANY OTHERWISE. IT IS GERMANE TO STATE HERE THAT THE INTEREST ON THE ABOVE M ENTIONED BANK LOAN WAS ALLOWED IN THE AY 2002-03 TO 2006-07 U NDER SCRUTINY AND THERE IS NO NEW FACTS HAVE BEEN BROUGHT ON THE REC ORD TO DISTINGUISH THE CASE OF THE RELEVANT ASSESSMENT YEAR F ROM THE ASSESSMENT YEAR 2002-03 TO 2006-07. THE BORROWED FUN D FROM BANK IS FOUND CONTINUING FROM THE AY 2001-02. THE BOR ROWING IS DULY REFLECTED IN THE ASSESSEES BOOKS OF ACCOUNT. W E FURTHER NOTE THAT THE AO HAS NOT ESTABLISHED THAT HOW THE BANK LOAN W AS NOT UTILIZED BY THE ASSESSEE FOR NOT EARNING ANY INCOME I N THE RELEVANT ASSESSMENT YEAR. THEREFORE, THE QUESTION OF DISALLOWA NCE OF INTEREST ON LOAN U/S 37 DOES NOT ARISE AT ALL. VARIOUS OBSERV ATIONS AND INFERENCE DRAWN BY THE AO WERE RIGHTLY HELD UNCALLED FOR AS THESE ARE RESULTED DUE TO MISS APPRECIATION OF THE FACTS OF THE CASE. THUS, IN VIEW OF ABOVE FACTS AND CIRCUMSTANCES AND RESPEC TFULLY FOLLOWING THE FINDING OF THE EARLIER LD. CIT(A) ON THIS ISSUE AN D THE RATIOS LAID DOWN IN JUDGMENTS OF THE HON'BLE SUPREME COURT IN THE CASES OF EXCEL INDUSTRIES LTD. (DATE OF ORDER 09.10.2013), RAD HASWAMI 7 SATSANG 193 ITR 321, PARSHURAM POTTERY 106 ITR 1, WH EREIN IT HAS BEEN HELD THAT THE DISALLOWANCE OF INTEREST ON BANK LO AN IS UNCALLED FOR, HENCE, THE LD. CIT(A) HAS RIGHTLY DELETED THE ADD ITION IN DISPUTE, WHICH DOES NOT NEED ANY INTERFERENCE ON OUR PART, TH EREFORE, WE UPHOLD THE WELL REASONED ORDER PASSED BY THE LD. CIT (A) ON THE ISSUE IN DISPUTE AND ACCORDINGLY REJECT THE GROUNDS RAISED BY THE REVENUE. 7 IN THE RESULT, THE APPEAL FILED BY THE REVENUE ST ANDS DISMISSED. ORDER PRO NOUNCED IN THE OPEN COURT ON 19/01/2018. SD/- SD/- [O.P. KANT] [H.S. SIDHU] ACCOUNTANT MEMBER JUDICIAL MEMBER DATE 19/01/2018 SRBHATNAGAR COPY FORWARDED TO: - 1. ASSESSEE - 2. RESPONDENT - 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHE S