ITO, New Delhi V. M/s. Experience Infrastructure Pvt. Ltd., Delhi

ITA 6147/DEL/2012

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 7059 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-01-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 17-10-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 10-12-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained investment; Business income; Business expenditure
• Section: 143(3); 69; 28

Judgement Text

INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B : NEW DELHI BEFORE SHRI I.C.SUDHIR , JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO. 6147/DEL/2012 (ASSESSMENT YEAR: 2009 - 10 ) ITO, WARD - 11(2), ROOM NO. 321, C.R.BUILDING, NEW DELHI VS. EXPERIENCE INFRASTRUCTURE PVT. LTD, A - 19, MOONLIGHT APARTMENTS, IP EXTENSION (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. ANIL KUMAR SHARMA, SR. DR REVENUE BY: DR. RAKESH GUPTA, ADV SH. SOMIL AGARWAL, ADV DATE OF HEARING 17/10/ 2016 DATE OF PRONOUNCEMENT 05 / 01 /201 7 O R D E R PER PRASHANT MAHARISHI, A. M. 1. THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE LD CIT(A) - XIII, NEW DELHI DATED 18.09.2012 FOR THE ASSESSMENT YEAR 2009 - 10. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 1. THE LEARNED CIT(A) HAS ERRED ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, TREATING THE INCOME FROM OTHER SOURCES OF RS. 776520/ - AND RS. 970/ - AS BUSINESS INCOME AS DECLARED BY THE ASSESSEE. DESPITE BEING NO BUSINESS ACTIVITY DURING THE YEAR EXPENDITURE OF RS. 2589375/ - HAS BEEN ALLOWED. 2. THE LD CIT(A) HAS ERRED ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW IN ALLOWING ADDITION TO FIXED ASSETS OF RS. 1165042/ - DESPITE BEING NO ADDITION TO THE FIXED ASSETS MADE DURING THE YEAR. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PRIVATE LIMITED COMPANY ENGAGED IN THE BUSINESS OF INFRASTRUCTURE DEVELOPMENT AND PROMOTION OF REAL ESTATE ACTIVITIES. ASSESSEE FILED ITS RETURN OF INCOME DECLARING LOSS OF RS. 1853873/ - ON 31/03/2010. DU RING THE COURSE OF ASSESSMENT PROCEEDINGS IT WAS NOTED BY THE LD. ASSESSING OFFICER THAT THE ASSESSEE DECLARED THE GROSS RECEIPT OF RS. 7 77490/ IN THE PROFIT AND LOSS ACCOUNT WHICH INCLUDED RENTAL INCOME OF RS. 7 76520/ AND COMMISSION INCOME OF RS. 9 70 / . OUT OF THE ABOVE GROSS RECEIPT THE ASSESSEE HAS CLAIMED THE EXPENDITURE AMOUNTING TO PAGE 2 OF 8 RS. 2 631363/ AND HAS DECLARED A LOSS OF RS. 1 853873/ - . THE ABOVE TRANSACTIONS WERE SHOWN BY THE ASSESSEE AS INCOME FROM THE BUSINESS. HOWEVER, DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE LD. ASSESSING OFFICER ISSUED A SHOW CAUSE NOTICE STATING THAT RENTAL INCOME SHOULD BE ASSESSED AS INCOME FROM HOUSE PROPERTY AND ALL THE EXPENSES CLAIMED UNDER THAT BUSINESS ARE TO BE DISALLOWED. IN RESPONSE TO THAT THE ASSESSEE HAS SUBMITTED THAT THE COMPANY HA S THE MAIN OBJECT OF PURCHASE OF BUILDINGS AND COMMERCIAL SPACES AND LET OUT THESE SPACES ON HIRE AND THEREFORE INCOME FROM RENT IS CHARGEABLE TO TAX AS INCOME FROM BUSINESS. THE LD. ASSESSING OFFICER DID NOT BELIEVE THE E XPLANATION OF THE ASSESSEE AND COMPUTED THE RENTAL INCOME OF RS. 776520/ AS INCOME FROM HOUSE PROPERTY. HE FURTHER INCLUDED THE COMMISSION INCOME OF RS. 970 FROM SMC GLOBAL LTD, AS INCOME FROM OTHER SOURCES. FURTHER, THE AMOUNT OF RS. 2589375/ WAS INCURR ED BY ASSESSEE AS INTEREST EXPENDITURE WHICH WAS ALSO DISALLOWED BY THIS LD. ASSESSING OFFICER HOLDING THAT IT IS NEITHER RELATED TO THE BUSINESS OF THE ASSESSEE COMPANY AND NO R RELATED TO THE PROPERTY OWNED BY THE COMPANY ON WHICH RENTAL INCOME IS EARNED. MOREOVER, THE ASSESSEE HAS SHOWN ADDITION TO THE FIXED ASSETS DURING THE YEAR OF RS. 1 165 042/ - WHICH LD. ASSESSING OFFICER WAS NOT SATISFIED TO THE SOURCE OF THE FUNDS FOR MAKING INVESTMENT IN FIXED ASSETS AND THEREFORE HE MADE AN ADDITION OF RS. 1 165042/ UNDER SECTION 69 OF THE INCOME TAX ACT ON ACCOUNT OF UNEXPLAINED ADDITION TO THE FIXED ASSETS. CONSEQUENTLY, THE TOTAL INCOME OF THE ASSESSEE WAS ASSESSED AT RS. 1709576/ AGAINST THE RETURNED INCOME OF RS. NIL V IDE ASSESSMENT ORDER DATED 25/11/2 011 UNDE R SECTION 143 (3) OF THE INCOME TAX ACT. AGGRIEVED BY THE ORDER OF THE LD. ASSESSING OFFICER THE ASSESSEE PREFERRED AN APPEAL BEFORE THE 1ST APPELLATE AUTHORITY. ON THE ISSUE OF CHARGEABILITY OF RENTAL INCOM E AS INCOME FROM HOUSE PROPERTY, HE HELD THAT SINC E THE ACTIVITIES OF THE APPELLANT COMPANY TO DEVELOP INFRASTRUCTURE AND REAL ESTATE PROJECT AND ALSO ACQUIRE COMMERCIAL PROPERTIES TO PUT THEM ONLY ON HIRE THEREFORE , THE ACTIVITIES OF THE COMPANY OF GIVING COMMERCIAL PROPERTY ON HIRE VERY MUCH FAL LS UNDER THE HEAD BUSINESS ACTIVITIES AND ANY INCOME FROM SUCH ACTIVITIES HAS TO BE ASSESSED AS BUSINESS INCOME OF THE APPELLANT. THEREFORE , HE HELD THAT THE RENTAL INCOME IS CHARGEABLE TO TAX UNDER THE HEAD BUSINESS INCOME. WITH RESPECT TO THE COMMISSION INCOME OF PAGE 3 OF 8 RS. 970 , IT WAS HELD THAT SAME IS ALSO CHARGEABLE TO TAX AS INCOME FROM BUSINESS. WITH RESPECT TO THE DISALLOWANCE OF INTEREST EXP ENDITURE OF RS. 2589375/ HE HELD THAT THE PROPERTY PURCHASED BY THE ASSESSEE OF RS. 15687500/ AND SUBSTANTIAL SUM WAS FINANCED BY SH. MANOJ GOEL , DIRECTOR OF THE COMPANY FROM HIS OWN SOURCE AND THEREAFTER THE APPELLANT ALONG WITH THAT PARTY APPROACHED TH E LENDER AND THE PROPERTY WAS FINANCED BY THE INDIA BULLS PRIVATE LTD. ON 29/09/2007. AS THE LOAN WAS GRANTED BY THE INDIA BULLS TO M/S. MANOJ GOEL AND CO. WHEREIN MR MANOJ GOEL IS PROPRIETOR AND THE AMOUNT OF LOAN WAS ON THE PROPERTY IN THE NAME OF THE AP PELLANT COMPANY. AS A LOAN WAS RECEIVED BY M/S. MANOJ GOEL & CO THE INITIAL FINANCING OF THE PROPERTY WAS DONE BY HIM. THEREAFTER, THE MONEY WAS DIRECTLY PAID TO M/S. MANOJ GOEL & CO. AS THE PROPERTY ON WHICH THE FINANCE WAS INITIALLY DONE BY THIRD - PARTY AND ON RECEIPT OF LOAN FROM THE ANOTHER LENDER SAME WAS PAID TO THE 1ST PARTY AND THE INCOME RECEIVED FROM SUCH PROPERTY, WHICH WAS OFFERED BY THE ASSESSEE FOR TAXATION AS BUSINESS INCOME. THEREFORE IT WAS HELD THAT THE INTEREST EXPENDITURE INCURRED BY THE ASSESSEE COMPANY IS ELIGIBLE FOR DEDUCTION AS BUSINESS EXPENDITURE IN THE HANDS OF THE APPELLANT COMPANY AND THEREFORE, DISALLOWANCE MADE BY THE LD . ASSESSING OFFICER ON ACCOUNT OF INTEREST EXPENDITURE OF RS. 2559375/ WAS DELETED. WITH RESPECT TO THE ADD ITION OF THE SUM OF RS. 1 165042 / - U/S. 59 OF THE INCOME TAX ACT ON ACCOUNT OF ADDITION TO THE FIXED ASSETS IT WAS HELD THAT THE DIFFERENCE PERTAINS TO THE INTERIOR WHICH WERE GOT DONE BY THE APPELLANT COMPANY WHICH WAS INITIALLY PAID FROM THE ACCOUNT OF M / S MANOJ GOEL & CO AND PAYMENT WAS ALSO MADE FROM THAT COMPANY AND FOR THAT PURPOSE THE LEDGER ACCOUNT THROUGH WHICH A SUM OF RS. 1 158123/ WAS INCURRED BY THAT COMPANY AND SAME WAS TRANSFERRED IN THE BOOKS OF THE APPELLANT IN THE MONTH OF NOVEMBER 2008. TH E BALANCE WAS ALSO PAID BY THE APPELLANT FROM ITS OWN ACCOUNT FOR INSTALLING FIRE EXTINGUISHERS ETC AND THEREFORE IT WAS HELD BY HIM THAT ADDITION OF RS. 1 16504 2/ - MADE BY THE LD. ASSESSIN G OFFICER IS INCORRECT. REVENUE AGGRIEVED BY THE ORDER OF THE LD. FI RST APPELLATE AUTHORITY HAS PREFERRED AN APPEAL BEFORE US. 4. THE FIRST GROUND OF APPEAL OF THE REVENUE IS AGAINST TREATMENT OF THE RENTAL INCOME OF RS. 776520 / - AND COMMISSION INCOME OF RS. 970 / - AS BUSINESS INCOME INSTEAD OF INCOME FROM HOUSE PROPERTY AND INCOME FROM OTHER PAGE 4 OF 8 SOURCES RESPECTIVELY. THE FIRST GROUND WAS FURTHER EXTENDED TO CONTEST THAT DESPITE THERE BEING NO BUSINESS ACTIVITY DURING THE YEAR EXPENDITURE IN THE FORM OF INTEREST OF RS. 2589375/ - HAS BEEN ALLOWED AS BUSINESS EXPENDITURE. 5. THE LD DEPARTMENTAL REPRESENTATIVE RELIED UPON THE ORDER OF THE LD ASSESSING OFFICER AND SUBMITTED THAT IN ABSENCE OF ANY BUSINESS IT IS CORRECTLY TAXED AS INCOME FROM HOUSE PROPERTY. 6. THE LD AUTHORISED REPRESENTATIVE SUBMITTED THAT RENTAL INCOME IS CHARGEABLE TO TAX AS BUSINESS INCOME OF THE ASSESSEE AND TO SUPPORT HIS ARGUMENT HE REFERRED TO THE MEMORANDUM OF ASSOCIATION OF THE COMPANY, LEASE DEED AND FURTHER RELIED ON THE DECISION OF THE HON'BLE SUPRE ME COURT IN CASE OF CHENNAI PROPERTIES LTD. 373 ITR 673, HE FURTHER SUBMITTED THAT IN SUBSEQUENT YEARS THE SAME HAS ALSO BEEN TAXED AS BUSINESS INCOME IN ASSESSMENT PROCEEDINGS U/S 143(3) OF THE ACT. WITH RESPECT TO THE INTEREST EXPENDITURE HE SUBMITTED TH AT PAGE NOS. 14 AND 15 OF THE ORDER OF THE LD CIT(A) DESCRIBES THE WHOLE TRANSACTION AND AS THE LOAN WAS TAKEN FROM INDIA BULLS FOR THE PURCHASE OF THE PROPERTY IN THE NAME OF THE ASSESSEE COMPANY INTEREST EXPENDITURE IS ALLOWABLE. HE FURTHER REFERRED TO T HE INTEREST CERTIFICATE ISSUED BY INDIA BULLS HOUSING FINANCE LTD . 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS AND PERUSED THE ORDER OF THE LOWER AUTHORITIES. ACCORDING TO THE MEMORANDUM OF ASSOCIATION OF THE COMPANY ONE OF THE MAIN OBJECTS WERE TO LET OUT ON HIRE ALL TYPES OF IMMOVABLE PROPERTIES. FURTHER, IN TERMS OF THAT OBJECT ASSESSEE RENTED OUT THE PROPERTY TO ONE M/S. AMRITRAJ MARKETING LTD. FOR MONTHLY RENT OF RS. 129420/ - . CONSEQUENTLY, IT HAS EARNED RENT OF RS. 776520/ - WHICH WAS SHOWN BY THE ASSESSEE AS INCOME FROM BUSINESS. THE LD FIRST APPELLATE AUTHORITY HAS DEALT WITH THE ABOVE ISSUE IN PARA 5.3 OF HIS ORDER AS UNDER: - 5.3 DECISION I HAVE CONSIDERED THE SUBMISSION OF THE APPELLANT AND OBSERVATION OF THE ASSESSING OFFICER. IT IS SE EN THAT APPELLANT COMPANY WAS INCORPORATED WITH THE MAIN OBJECT OF INFRASTRUCTURE DEVELOPMENT AND PROMOTION OF REAL ESTATE ACTIVITY, BESIDES OTHER OBJECTS AS STATED IN THE MEMORANDUM AND ARTICLE OF ASSOCIATION INCLUDING ACTIVITIES OF LESSORS AND LET OUT ON HIRE. IN THIS REGARD THE APPELLANT FILED COPY OF THE OBJECTS OF THE APPELLANT COMPANY WHICH ARE FILED AT PAGE 1 TO 14 OF THE PAPER BOOK. IN FULFILLMENT OF THE OBJECT OF THE COMPANY, THE APPELLANT COMPANY PURCHASED A COMMERCIAL PREMISES AT NOIDA ON 19.06.2 007 FROM M/S SEVEN HEAVEN DEVELOPER INDIA PVT. LTD AND GOT ELECTRICAL AND WATER CONNECTION INCLUDING FURNITURE AND FIXTURES, WHICH WAS COMPLETED DURING THE PREVIOUS YEAR PAGE 5 OF 8 RELEVANT TO ASSESSMENT YEAR UNDER CONSIDERATION. AFTER FURNISHING THE PROPERTY, THE AP PELLANT COMPANY OPENED ITS OFFICE IN HALF OF THE SPACE AND THE REMAINING SPACE WAS LET OUT TO M/S AMRITRAJ MARKETING PVT. LTD. FOR COMMERCIAL ACTIVITY FOR A PERIOD OF THREE YEARS. COPY OF THE LEASE DEED IS FILED AT PAGE 50 TO 57 OF THE PAPER BOOK. THE PURP OSE OF LEASING OUT HALF OF THE SPACE ON HIRE WAS TO EARN PROFIT. THE RECEIPT FROM THE RENTAL INCOME WAS SHOWN BY THE APPELLANT AS BUSINESS INCOME IN THE PROFIT AND LOSS ACCOUNT AS THE OBJECT OF THE APPELLANT COMPANY WAS DEVELOPMENT AND PROMOTION OF REAL ES TATE AND INFRASTRUCTURE DEVELOPMENT ACTIVITIES AND ALSO LEASING AND LET OUT OF PROPERTIES AFTER ACQUIRING THE SAME. THE SECTION 28 POSTULATES THAT THE AIM AND OBJECT OF ACQUIRING IN THE PROPERTY SHOULD BE COMMERCIAL IN NATURE. SECTION 28 PROVIDES VARIOUS C ONDITIONS WHERE PROPERTY ACQUIRED AND USED FOR BUSINESS PURPOSES, THE PROVISIONS OF SECTION 29, 30, 31 AND 32 CLEARLY MAKES IT CLEAR THAT THE PROPERTY ACQUIRED AND USED IS FOR COMMERCIAL PURPOSE AND THE OWNER OF THE PROPERTY MUST HAVE ACQUIRED THE PROPERTY WITH THE INTENTION TO RUN THE PROPERTY UNDER COMMERCIAL ACTIVITY. SINCE THE ACTIVITIES OF THE APPELLANT COMPANY ARE TO DEVELOP INFRASTRUCTURE AND REAL ESTATE PROJECT AND ALSO ACQUIRE COMMERCIAL PROPERTIES TO PUT THEM ON LEASE AND LET ON HIRE, THEREFORE, T HE ACTIVITIES OF THE COMPANY OF GIVING COMMERCIAL PROPERTY ON HIRE VERY MUCH FALLS UNDER THE HEAD 'BUSINESS ACTIVITIES' AND ANY INCOME EARNED FROM SUCH ACTIVITIES HAS TO BE ASSESSED AS BUSINESS INCOME OF THE APPELLANT COMPANY. THE ASSESSING OFFICER WAS NOT JUSTIFIED IN TREATING THE INCOME RECEIVED FROM HIRE AS INCOME FROM HOUSE PROPERTY WITHOUT BRINING ANY FACTS ON THE RECORD. I, THEREFORE, HOLD THAT THE PROPERTY GIVEN ON RENT BY THE APPELLANT WAS FOR COMMERCIAL PURPOSES AND INCOME RECEIVED FROM SUCH HIRE H AS TO BE ASSESSED AS BUSINESS INCOME. FURTHER, THE APPELLANT IS IN THE BUSINESS OF ACQUIRING OF COMMERCIAL PROPERTY AND LET IT ON HIRE, THEREFORE, THE MOMENT THE APPELLANT HAS PURCHASED A PROPERTY AND GIVEN IT ON HIRE THE BUSINESS OF THE APPELLANT HAS COMM ENCED. THE ASSESSING OFFICER WAS NOT JUSTIFIED IN HOLDING THAT APPELLANT COMPANY DID NOT CARRY OUT ANY BUSINESS DURING THE YEAR. THE APPELLANT HAS ACQUIRED A PROPERTY IN JUNE 2007AND GIVEN IT ON RENT VIDE LEASE DEED DATED 18.07.2008 TO M/S AMRITRAJ MARKETI NG PVT. LTD. THEREFORE, THE BUSINESS OF THE APPELLANT COMPANY IS COMMENCED DURING THE YEAR AND ALL THE EXPENSES RELATING TO THE BUSINESS OF THE APPELLANT COMPANY ARE ALLOWABLE EXPENDITURE. HENCE, GROUND NO. 1 & 2 OF THE APPELLANT ARE ALLOWED. 8. FURTHER, HON'BLE SUPREME COURT IN CHENNAI PROPERTIES AND INVESTMENT LTD. VS. CIT 373 ITR 673 (SC. ) HAS HELD THAT LETTING OUT OF THE PROPERTIES IS INFACT THE BUSINESS OF THE PROPERTIES WHERE THE MAIN OBJECT OF THE ASSESSEE COMPANY AS STATED IN MEMORANDUM O F UNDERSTANDING ALSO INCLUDED LETTING OUT OF THOSE PROPERTIES. IN THE PRESENT CASE ALSO THERE IS NO OTHER INCOME EXCEPT FROM INCOME OF LETTING OUT OF THE PROPERTIES AND SMALL COMMISSION INCOME. THE LD AUTHORISED REPRESENTATIVE HAS RELIED UPON THIS DECISI ON OF THE HON'BLE SUPREME COURT AND LD DR COULD NOT CONTROVERT THAT WHY THE RATIO LAID BY THE HON'BLE SUPREME COURT ON SIMILAR SET OF FACTS DOES NOT APPLY TO THE CASE OF THE ASSESSEE. THE LD DR ALSO COULD NOT POINT OUT ANY ERROR IN THE ORDER OF THE LD CIT (A) WITH RESPECT TO TREATMENT OF RENTAL INCOME AS BUSINESS INCOME. PAGE 6 OF 8 9. WITH RESPECT TO THE SECOND ASPECT OF THE GROUND NO.1 REGARDING TAXABILITY OF COMMISSION INCOME AS BUSINESS INCOME WE DO NOT FIND ANY REASON TO DEBAR FROM THE DECISION RENDERED BY LD CIT(A) . ON THE THIRD ASPECT OF THE GROUND NO.1 WITH RESPECT TO ALLOWANCE OF INTEREST EXPENDITURE OF RS. 2589375/ - WHICH HAS BEEN ALLOWED BY THE LD FIRST APPELLATE AUTHORITY VIDE PARA NO. 7.3 OF HIS ORDER AS UNDER: - 7.3 DECISION I HAVE CONSIDERED THE SUBMISSION OF THE APPELLANT AND OBSERVATION OF THE AO. IT IS SEEN THAT APPELLANT COMPANY HAD ACQUIRED A PROPERTY OF RS.L,56,87,500/ - ON 19.06.2007. THIS PROPERTY WAS FINANCED BY SH. MANOJ GOEL DIRECTOR OF THE COMPANY FROM HIS OWN SOURCES, THEREAFTER, SH. MANOJ VIJAY GOEL AND CO. AND APPELLANT COMPANY APPROACHED TO INDIA BULLS AND THE PROPERTY WAS FINANCED BY INDIA BULLS PVT. LTD ON 29.09.2007, THE LOAN WAS GRANTED BY INDIA BULLS TO M/S MONOJ GOEL AND CO. WHEREIN MANOJ GOEL IS PROPRIETOR OF RS. 1.50 CRORE. OUT OF THE S AID LOAN OF RS. 1.50 CRORE, A SUM OF RS. 1.46 CRORE (WRONGLY SHOWN AS 1.43 CRORC IN THE ASSESSMENT ORDER) WAS PAID THROUGH CHEQUE TO M/S MANOJ GOEL AND CO. AND REMAINING AMOUNT OF RS. 3,65,584/ - WAS CHARGED AS PROCESSING FEE AND UPFRONT FEE. THE AMOUNT OF L OAN WAS RAISED ON THE PROPERTY IN THE NAME OF APPELLANT COMPANY AND SAID PROPERTY WAS MORTGAGE TO INDIA BULLS AND PERMISSION WAS TAKEN FROM NEW OKHLA INDUSTRIAL DEVELOPMENT AUTHORITY (NOIDA) FOR MORTGAGING THE SAID PROPERTY. THE CHARGE WAS CREATED ON THE S AID PROPERTY ON 12.09.2007. THE LOAN WAS RECEIVED BY MANOJ GOEL &CO. AS THE INITIAL FINANCING OF THE PROPERTY WAS DONE BY SH. MANOJ GOEL, THEREFORE, THE MONEY WAS DIRECTLY PAID TO MANOJ GOEL & CO. THE ENTRY OF THE LOAN WAS NOT PASSED IN THE BOOKS OF THE AP PELLANT COMPANY IN SEPTEMBER 2007 BUT THE SAME WERE PASSED ON 01.04.2008 BY SHOWING THE LOAN AMOUNT AT RS. 1,49,08,840/ - FROM INDIA BULLS BY PASSING AN ENTRY OF CREDIT INDIA BULLS AND DEBIT TO MANOJ VIJAY GOEL & CO. IT IS CLAIMED BY THE APPELLANT THAT BY MI STAKE THE ENTRY OF THE LOAN IN THE BOOKS OF THE COMPANY WAS NOT PASSED IN F.Y. 2007 - 08 BUT THE SAME WAS PASSED IN F.Y. 2008 - 09. THE PROPERTY IS IN THE NAME OF APPELLANT COMPANY WHICH WAS INITIALLY FINANCED BY MANOJ VIJAY GOEL & CO. AND SUBSEQUENTLY THE LOA N WAS RAISED BY MORTGAGING THE PROPERTY TO INDIA BULLS AND THE AMOUNT TAKEN FROM MANOJ VIJAY GOEL & CO. WAS PAID DIRECTLY BY INDIA BULLS BY ISSUE OF CHEQUE. THE INCOME RECEIVED FROM PROPERTY HAS BEEN OFFERED BY THE APPELLANT AS BUSINESS INCOME. THEREFORE, THE INTEREST ON LOAN RAISED BY THE APPELLANT COMPANY HAS TO BE ACCOUNTED FOR IN THE BOOKS OF THE APPELLANT COMPANY. AS PER CERTIFICATES FILED BY THE APPELLANT COMPANY THE TOTAL AMOUNT OF INTEREST PAYABLE TO INDIA BULLS FOR THE F.Y. 2008 - 09 IS RS. 25,89,375 7 - . THE CERTIFICATE IS FILED AT PAGE 112 OF THE PAPER BOOK. THE LOAN WAS RAISED FOR ACQUIRING THE PROPERTY WHICH WAS GIVEN ON LEASE BY THE APPELLANT COMPANY, THEREFORE, THE INTEREST PAYABLE ON SUCH LOAN IS WHOLLY AND EXCLUSIVELY PERTAINS TO THE BUSINESS OF THE APPELLANT COMPANY AND SAME IS ALLOWABLE AS BUSINESS EXPENDITURE IN THE HANDS OF THE APPELLANT COMPANY. THE ASSESSING OFFICER WAS NOT JUSTIFIED IN DISALLOWING INTEREST EXPENDITURE OF RS. 25,59,375/ - . HENCE, THE DISALLOWANCE MADE BY THE ASSESSING OFFICE R IS DELETED. 10. THE LD DR COULD NOT COULD NOT POINT OUT ANY INFIRMITY IN THE ORDER OF THE LD FIRST APPELLATE AUTHORITY WHICH HAS SPECIFICALLY COVERED THE WHOLE TRANSACTION PAGE 7 OF 8 AND CONCLUSIVELY PROVES THAT PROPERTY IS IN THE NAME OF THE APPELLATE COMPANY WHICH WAS FINANCED BY THIRD PARTY AND SUBSEQUENTLY THE PROPERTY WAS MORTGAGED FOR BORROWING AND MONEY ORIGINALLY TAKEN BY THE ASSESSEE WAS REPAID THAT THIRD PARTY. INTEREST ARISING HAS CORRECTLY BEEN HELD TO BE INTEREST EXPENDITURE INCURRED BY THE ASSESSEE FOR T HE PURPOSE OF THE BUSINESS AND HENCE IT IS ALLOWABLE. IN VIEW OF THIS WE CONFIRM THE ORDER OF THE LD FIRSTLY APPELLATE AUTHORITY IN DELETING THE DISALLOWANCE OF INTEREST EXPENDITURE OF RS. 2559375/ - AND TREATING THE RENTAL INCOME OF RS. 776520/ - AND COMMIS SION INCOME OF RS. 970/ - AS BUSINESS INCOME. IN THE RESULT GROUND NO. 1 OF THE REVENUE IS DISMISSED. 11. GROUND NO. 2 OF THE APPEAL OF THE REVENUE IS AGAINST DELETION OF THE ADDITION OF RS. 1165042/ - ON ACCOUNT OF TO FIXED ASSETS. 12. THE LD DEPARTMENTAL REPRESE NTATIVE SUBMITTED THAT THE BANK STATEMENT AND REPLY OF THE APPELLANT STATES THAT THERE IS NO ADDITION TO THE FIXED ASSETS AND THEREFORE THE ADDITION HAS RIGHTLY BEEN MADE. 13. THE LD AUTHORISED REPRESENTATIVE SUBMITTED THAT IT WAS AN ERROR BY ASSESSEE ON QUE RY OF THE LD ASSESSING OFFICER BUT INFACT THE COMPANY HAS RENTED OUT A PREMISES AND THE EXPENSES FOR THE SAME FOR FURNISHING IT WERE INCURRED BY THE FUNDS PROVIDED BY THE DIRECTOR OF THE COMPANY FROM ITS FIRM. HE SUBMITTED THAT THE ASSESSEE COMPANY HAS CRE DITED THE ACCOUNT OF DIRECTOR BY RS. 1158123/ - AND RS. 6919/ - INCURRED BY THE ASSESSEE RESULTED INTO ADDITION OF RS. 1165042/ - TO THE FIXED ASSETS. HE FURTHER REFERRED TO PAGE NO. 80, 81 AND 82 OF THE PAPER BOOK TO SHOW THAT ACCOUNT OF THE FIRM OF THE DIR ECTOR WHEREIN A SUM OF RS. 1158123/ - WAS CREDITED. HE THEREFORE SUBMITTED THAT THE LD CIT(A) HAS CORRECTLY ALLOWED THE CLAIM OF THE ASSESSEE. 14. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND ALSO PERUSED THE ORDERS OF THE LOWER AUTHORITIES. THE LD FIRST APPEL LATE AUTHORITY HAS ALLOWED THE CLAIM OF THE ASSESSEE VIDE PARA NO. 8.3 OF HIS ORDER AS UNDER: - 8.3 DECISION I HAVE CONSIDERED THE SUBMISSION OF THE APPELLANT AND OBSERVATION OF THE ASSESSING OFFICER. IT IS SEEN THAT THE GROSS BLOCK OF ASSETS OF THE APPELLANT COMPANY IS SHOWN AT RS. L,91,48,642/ - WHICH WAS RS. 1 ,79,83,600/ - AS ON 31.03.2008. THE DIFFERENCE OF RS. 1 1 ,65,042/ - PERTAINS TO INTERIOR WORK GOT DONE BY THE APPELLANT COMPANY. INITIALLY THE INTERIOR WORK WAS DONE FROM THE ACCOUNTS OF MANOJ VIJAY GOEL & CO. AND PAYMENT WAS MADE FROM MANOJ VIJAY GOEL AND CO. FOR THIS PURPOSE A LEDGER ACCOUNT IS MAINTAINED IN TH E BOOKS OF MANOJ VIJAY GOEL PAGE 8 OF 8 & CO. ON THIS INTERIOR WORK A TOTAL AMOUNT OF RS. 1 L,58,123/ - WAS INCURRED BY MANOJ VIJAY GOEL & CO. AND THE SAME WAS TRANSFERRED IN THE BOOKS OF THE APPELLANT IN THE MONTH OF NOVEMBER 2008. THE BALANCE AMOUNT OF RS. 6919/ - WAS P AID BY THE APPELLANT COMPANY FROM ITS ACCOUNTS FOR INSTALLING FIRE EXTINGUISHERS AT ITS PREMISES AND SAME WAS PAID BY CHEQUE. THEREFORE, THE ADDITION TO THE FIXED ASSETS OF RS. 11.65,042/ - IS NOT AN UNEXPLAINED INVESTMENT BUT THE SAME PERTAINS TO THE INTERIOR WORK DONE IN THE COMPANY THROUGH THE ACCOUNTS OF MANOJ VIJAY GOEL AND CO. AND TRANSFERRED IN THE BOOKS OF THE APPELLANT IN NOVEMBER 2008. HENCE, THERE IS NO UNEXPLAINED INVESTMENT IN THE H ANDS OF THE APPELLANT COMPANY AND TOTAL ASSETS OF RS. L,91,48,642/ - IS SHOWN IN THE BALANCE SHEET AS ON 31.03.2009. HENCE, THE ADDITION OF RS. 1 L,65,042/ - MADE BY THE ASSESSING OFFICER AS UNEXPLAINED INVESTMENT IS DELETED. IN THE ASSESSMENT ORDER, THE ASSES SING OFFICER HAS MENTIONED THAT THERE IS A DEBIT BALANCE OF RS. 98,15,908/ - IN THE NAME OF MANOJ VIJAY GOEL &CO. HOWEVER, IT IS SEEN THAT IN THE BALANCE SHEET THAT MANOJ GOEL HAS GIVEN INDIVIDUAL CAPACITY OF RS. L,44,07,500/ - TO THE APPELLANT COMPANY AND RS. 10,18,670/ - BY MANOJ VIJAY GOEL & CO. THIS DEBIT BALANCE DOES NOT APPEAR IN THE BALANCE SHEET OF THE APPELLANT COMPANY, THEREFORE, THERE IS NO DEBIT BALANCE IN THE NAME OF MANOJ VIJAY GOEL & CO. AND MANOJ GOEL. AFTER OFFSETTING THE DEBIT BALANCE A CREDIT B ALANCE IN THE NAME OF MANOJ VIJAY GOEL AND CO. AND MANOJ GOEL IS SHOWN BY THE APPELLANT COMPANY IN ITS BOOKS OF ACCOUNTS. HENCE, NO INTEREST FREE ADVANCES WERE ALLOWED BY THE COMPANY TO MANOJ GOEL AND MANOJ VIJAY GOEL & CO. THEREFORE, THE OBSERVATION OF TH E ASSESSING OFFICER WERE CONTRARY TO THE FACTS AND UNJUSTIFIED. 15. THE LD DR COULD NOT CONTROVERT THE FINDING RECORDED IN THE ABOVE ORDER . THEREFORE, WE CONFIRM THE ORDER OF THE FIRST APPELLATE AUTHORITY IN DELETING THE ADDITION OF RS. 1165042/ - ON ACCOUNT TO THE ADDITION TO THE FIXED ASSETS. IN THE RESULT GROUND NO. 2 OF THE APPEAL OF THE REVENUE IS DISMISSED. 16. IN THE RESULT APPEAL OF THE REVENUE IS DISMISSED. ORDER PR ONOUNCED IN THE OPEN COURT ON 0 5 / 01 / 2017 . - S D / - - S D / - ( I.C.SUDHIR ) (PRASHANT MAHARISHI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 0 5 / 01 / 2017 A K KEOT COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI