GVM Infrastructure Pvt Ltd., Meerut V. ITO, Meerut

ITA 6160/DEL/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 6945 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-02-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC 1
• Next Hearing Date: 08-02-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 19-11-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T VASANTHAN
• Keywords: Capital asset; Revenue expenditure
• Section: 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A NEW DELHI BEFORE SHRI S.V. MEHROTRA : ACCOUNTANT MEMBER AND MS. SUCHITRA KAMBLE : JUDICIAL MEMBER ITA NO. 6160/DEL/2015 ASSTT. YR: 2010-11 GVM INFRASTRUCTURE PVT. LTD., VS. INCOME-TAX OFFI CER, C/O M/S SANJAY KUMAR & CO., CAS WARD-1(2), MEERUT. 318, SADAR BUNDELA, DALMANDI MEERUT CANTT (UP) PAN: AADCG 4058 J ( APPELLANT ) (RESPONDENT) APPELLANT BY : SHRI C.S. ANAND ADV. RESPONDENT BY : SHRI T. VASANTHAN DR . DATE OF HEARING : 08/02/2016. DATE OF ORDER : 12/02/2016. O R D E R PER S.V. MEHROTRA, A.M: THIS IS ASSESSEES APPEAL AGAINST THE ORDER DATED 1 6.09.2015 PASSED BY THE LD. CIT(A), MEERUT IN APPEAL NO. 139/13-14, R ELATING TO A.Y. 2010-11. 2. BRIEF FACTS OF THE CASE ARE THAT IN THE RELEVANT ASSESSMENT YEAR THE ASSESSEE, A PRIVATE LIMITED COMPANY, WAS ENGAGED I N THE BUSINESS OF SALE AND PURCHASE OF LAND. DURING THE COURSE OF ASSESSME NT PROCEEDINGS THE AO NOTICED THAT ASSESSEE HAD GIVEN INTEREST OF RS. 8,1 3,501/-, ON UNSECURED LOANS, DURING FY 2009-10. HE NOTED THAT THE OPENING BALANCE OF UNSECURED 2 ITA 6160/DEL/2015 LOAN WAS RS. 93,87,885/-, WHICH AMOUNT WAS GIVEN TO THE ASSESSEE BY VARIOUS PERSONS, WHICH ALSO INCLUDED THE DIRECTORS AS WELL AS THE SHARE HOLDERS FOR PURCHASING LAND DURING FY 2008-09. THE AO OBSERVED THAT THE LAND WHICH WAS PURCHASED BY THE ASSESSEE COMPANY DU RING FY 2008-09 WAS NOT PUT TO ANY USE TILL 31.3.2010 AND, THEREFORE, T HE INTEREST ON BORROWED CAPITAL WAS TO BE CAPITALIZED. THE ASSESSEE EXPLAIN ED THAT THE INTEREST ON BORROWED CAPITAL WAS NOT TO PURCHASE ASSETS BUT WAS INVESTED IN STOCK IN TRADE. THE AO OBSERVED THAT THE FUNDS HAD BEEN INVE STED IN PURCHASE OF STOCK IN TRADE AND, THEREFORE, IT WAS NOT ALLOWABLE U/S 36(1)(III). HE, ACCORDINGLY, DISALLOWED RS. 8,13,501/- U/S 36(1)(II I). 3. LD. CIT(A) CONFIRMED THE AOS ACTION, INTER ALIA , OBSERVING THAT THERE WAS NO SALE DONE DURING THE YEAR AND, THEREFORE, IN TEREST EXPENSES CLAIMED BECAME PREOPERATIVE EXPENSES. AGGRIEVED, THE ASSESS EE IS IN APPEAL BEFORE US AND HAS TAKEN FOLLOWING GROUNDS OF APPEAL: 1. THAT ON THE FACTS OF THE CASE AND UNDER THE LAW , THE EXPENDITURE OF RS. 8,13,501/- INCURRED/CLAIMED BY T HE ASSESSEE ON A/C OF INTEREST ON BORROWED FUNDS, OUGHT TO HAD BEEN ALLOWED AS REVENUE EXPENDITURE FOR THE YEAR UNDER CONSIDERA TION. 2. THAT ON THE FACTS OF THE CASE AND UNDER THE LAW, THE DETERMINATION OF TOTAL INCOME OF THE ASSESSEE FOR T HE YEAR UNDER CONSIDERATION AT RS. 8,13,501/- (BEING THE AMOUNT O F DISALLOWANCE MADE) IS UNJUST & ILLEGAL, IN AS MUCH AS THERE WAS LOSS OF RS. 8,32,438/- FOR THE YEAR UNDER CONSIDERA TION. . 3 ITA 6160/DEL/2015 3. THAT ON THE FACTS OF THE CASE AND UNDER THE LAW, TILE CREATION OF LIABILITIES OF RS. 3,41,872/- (INCLUDIN G INTEREST OF RS. 90,500/- CHARGED U/S 234B) IS UNJUST & ILLEGAL. 4. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT ASSE SSEES CLAIM HAS BEEN ALLOWED IN EARLIER AS WELL A SUBSEQUENT YEAR AS UND ER: F.Y. A.Y. AMOUNT OF INTEREST (IN RS.) 2008-09 2009-10 284516 2009-10 2010-11 813501 2010-11 2011-12 816614 2011-12 2012-13 925908 2012-13 2013-14 615305 2013-14 2014-15 651408 5. HE, THEREFORE, SUBMITTED THAT THE ASSESSEES CLA IM IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE. 6. LD. DR RELIED ON THE ORDER OF LOWER REVENUE AUTH ORITIES. 7. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE P ARTIES AND HAVE PERUSED THE RECORD OF THE CASE. THERE IS NO DISPUTE THAT ASSESSEE HAD UTILIZED THE UNSECURED LOANS FOR PURCHASE OF LAND. THE AO HA S NOTED THAT THE ASSESSEE COMPANY WAS ENGAGED IN THE BUSINESS OF SALE AND PUR CHASE OF LAND, THEREFORE, THE ASSESSEES CONTENTION THAT THE LAND WAS ITS STOCK IN TRADE CANNOT BE DOUBTED. ONCE THE FUNDS HAVE BEEN INVESTE D IN PURCHASE OF STOCK IN TRADE, THEN MERELY BECAUSE THERE WAS NO SALE DUR ING THE YEAR, IT COULD NOT BE CONCLUDED THAT THE ENTIRE INTEREST PAID ON BORRO WED CAPITAL WAS TOWARDS CAPITAL ASSET. IT IS WELL SETTLED LAW THAT FOR ALLO WABILITY OF INTEREST U/S 4 ITA 6160/DEL/2015 36(1)(III), THERE NEED NOT BE ANY SALE/ TURNOVER DU RING THE YEAR. IF THE BUSINESS OF ASSESSEE HAS STARTED AND ASSESSEE IS AC QUIRING THE RAW-MATERIAL/ GOODS FOR TRADING PURPOSES, THEN THE UTILIZATION OF BORROWED CAPITAL IS FOR BUSINESS PURPOSE AND IS TO BE ALLOWED U/S 36(1)(III ). WE, ACCORDINGLY, DIRECT THE AO TO ALLOW THE ASSESSEES CLAIM. 8. CHARGING OF INTEREST U/S 234B IS CONSEQUENTIAL. 9. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCEMENT IN OPEN COURT ON 12/02/2016. SD/- SD/- (SUCHITRA KAMBLE ) (S.V. MEHROTRA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 12/02/2016. *MP* COPY OF ORDER TO: 1. ASSESSEE 2. AO 3. CIT 4. CIT(A) 5. DR, ITAT, NEW DELHI.