PEEPUL TREE PROPERTIES P.LTD, MUMBAI V. DCIT 3(2), MUMBAI

ITA 6258/MUM/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 3648 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 6 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-05-2016
• Appeal Filed By: Assessee
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 28-10-2013
• Court: TRIBUNAL
• Keywords: Revised return
• Section: 143(3)

Judgement Text

, , C, IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES C, MUMBAI , , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, AND SHRI ASHWANI TANEJA, ACCOUNTANT MEMBER ITA NO.6258/MUM/2013 ASSESSMENT YEAR: 2010-11 PEEPUL TREE PROPERTIES P. LTD., C/O. KALYANIWALLA & MISTRY, ARMY & NAVY BLDG. 3 RD FLOOR, 148, M.G. RD. MUMBAI-400001 / VS. ASST. CIT 5(1) AAYAKAR BHAVAN, M.K. RD. MUMBAI- (ASSESSEE ) (REVENUE) P.A. NO. AAECM6392E !' / ASSESSEE BY SHRI NITESH JOSHI, & SHRI M.M. GOLVALA (AR) / REVENUE BY SHRI C.W. ANGOLKAR (DR) # $ % & / DATE OF HEARING : 13/04/2016 % & / DATE OF ORDER: 20/05/2016 / O R D E R PER ASHWANI TANEJA (ACCOUNTANT MEMBER): THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS), MUMBAI-4 PEEPUL TREE PROPERTIES P. LTD. 2 {(IN SHORT CIT(A)}, DATED 14.08.2013 PASSED AGAIN ST ASSESSMENT ORDER U/S 143(3) DATED 23.01.2013 FOR TH E ASSESSMENT YEAR 2010-11 ON THE FOLLOWING GROUNDS: 1.BOTH THE LOWER AUTHORITIES ERRED IN NOT ALLOWING DEDUCTION UNDER SECTION 24(B) IN RESPECT OF THE LOA N PROCESSING CHARGES PAID TO BANK - RS.1 CRORE. 2. BOTH THE LOWER AUTHORITIES ERRED IN NOT CONSIDER ING THE SPECIFIC DEFINITION OF 'INTEREST' UNDER SECTION 2(2 8A) OF THE INCOME TAX ACT. 3. THE APPELLANT SUBMITS THAT THE PROCESSING CHARGE S PAID SHOULD BE ALLOWED AS DEDUCTION UNDER SECTION 24(B) WHILE COMPUTING 'INCOME FROM HOUSE PROPERTY'. 4. BOTH THE LOWER AUTHORITIES ERRED IN NOT ALLOWING DEDUCTION UNDER SECTION 24(B) IN RESPECT OF PREPAYM ENT CHARGES PAID TO BANK - RS. 1,32,44,633/-. 5. BOTH THE LOWER AUTHORITIES ERRED IN NOT CONSIDER ING THE SPECIFIC DEFINITION OF 'INTEREST' UNDER SECTION 2(2 8A). 6.THE APPELLANT SUBMITS THAT THE PRE-PAYMENT CHARGES PAID SHOULD BE ALLOWED AS DEDUCTION UNDER SECTION 24(B) WHILE COMPUTING 'INCOME FROM HOUSE PROPERTY'. 7. BOTH THE LOWER AUTHORITIES ERRED IN NOT ALLOWING AS A DEDUCTION COMMON AREA MAINTENANCE CHARGES, AMOUNTING TO RS.3,70,62,516/-, RECOVERED BY THE APP ELLANT FROM TENANTS, WHILE ARRIVING AT THE ANNUAL VALUE UN DER SECTION 23 OF INCOME TAX ACT. 8. BOTH THE LOWER AUTHORITIES ERRED IN RELYING ON T HE DECISION OF THE SUPREME COURT IN CASE OF GOETZE IND IA LIMITED (284 ITR 323). 9. BOTH THE LOWER AUTHORITIES ERRED IN HOLDING THAT FOR RAISING A NEW CLAIM, A REVISED RETURN IS TO BE MAND ATORILY FILED. 10. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) ERRED IN HOLDING THAT THE AMOUNT RECOVERED BY THE APPELLANT IN RESPECT OF COMMON AREA MAINTENANCE CHA RGES CANNOT BE ASSESSED SEPARATELY UNDER THE HEAD 'INCOM E FROM OTHER SOURCES'. PEEPUL TREE PROPERTIES P. LTD. 3 2. THE ASSESSEE ALSO FILED FOLLOWING ADDITIONAL GROUND S WHICH WERE ADMITTED WITH THE CONSENT OF BOTH THE PARTIES. 1. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN NOT DIRECTING THE ASSESSING OFFICER TO GRA NT FULL TDS CREDIT ON THE BASIS OF ORIGINAL TDS CERTIFICATE S WHICH HAD BEEN FURNISHED TO THE ASSESSING OFFICER A T THE TIME OF SCRUTINY ASSESSMENT PROCEEDINGS. 2. WITHOUT PREJUDICE, THE APPELLANT SUBMITS THAT TH E ASSESSING OFFICER BE DIRECTED TO GRANT TDS CREDIT O N THE BASIS OF TDS CREDIT APPEARING PRESENTLY IN FORM NO. 26AS. 2. DURING THE COURSE OF HEARING, ARGUMENTS WERE MADE B Y SHRI NITESH JOSHI, & SHRI M.M. GOLVALA, AUTHORISED REPRESENTATIVE (AR) ON BEHALF OF THE ASSESSEE AND B Y SHRI C.W. ANGOLKAR, DEPARTMENTAL REPRESENTATIVE (DR) ON BEHAL F OF THE REVENUE. 4. GROUND NO.1 TO 6: THESE GROUNDS DEAL WITH THE CONNECTED ISSUES OF DISALLOWING LOAN PROCESSING CHARGES AND P RE-PAYMENT CHARGES PAID TO THE BANK. 4.1. THE BRIEF FACTS AS CULLED OUT FROM THE ORDER OF TH E LOWER AUTHORITIES ARE THAT DURING THE YEAR, THE ASSESSEE COMPANY OWNED AN INFORMATION TECHNOLOGY PARK AT MALAD, MUMB AI AND HAD LEASED OUT ITS PORTIONS TO VARIOUS TENANTS. THE INCOME EARNED FROM THE SAID ACTIVITY WAS OFFERED UNDER THE HEAD INCOME FROM HOUSE PROPERTY AND WAS ACCEPTED AS SU CH BY THE AO IN THE ASSESSMENT ORDER. IN THE EARLIER YEAR S ALSO THE PEEPUL TREE PROPERTIES P. LTD. 4 ASSESSEE HAS BEEN SHOWING THE SAID INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY AND THE SAME HAS BEEN AC CEPTED AS SUCH REGULARLY. THE ASSESSEE HAS ALSO BEEN CLAIM ING DEDUCTION ON ACCOUNT OF PAYMENT OF INTEREST TO SIX BANKERS FROM WHOM THE ASSESSEE HAD TAKEN LOAN FOR CONSTRUCT ING THE SAID PROPERTY. THE DEDUCTION OF INTEREST HAS ALSO B EEN CONSISTENTLY ALLOWED BY THE AO IN ALL THE YEARS. IN THE YEAR UNDER CONCERN, THE ASSESSEE TOOK FRESH LOAN FROM AX IS BANK WHICH WAS UTILIZED FOR THE EXCLUSIVE PURPOSE OF REP AYMENT OF LOANS TO THE AFORESAID SIX PARTIES. IN THE PROCESS OF CHANGE OVER OF THE LENDER, THE ASSESSEE PAID PREPAYMENT CHARGES OF RS.1,32,44,653/- TO THESE SIX BANKERS TO WHOM LOANS WERE PREPAID AND ALSO PAID PROCESSING CHARGES OF RS. 1 C RORE TO AXIS BANK FOR AVAILING THE FRESH LOAN. THIS IS WHERE THE DISPUTE AROSE. THE AO DISALLOWED BOTH OF THESE AMOUNTS I.E. PREPAYMENT CHARGES AS WELL AS PROCESSING FEE ON THE GROUND THAT NO SUCH DEDUCTION IS ALLOWABLE U/S 24 AS THE A SSESSEE IS GRANTED THE BENEFIT OF STANDARD DEDUCTION OF 30% AN D THEREFORE, NO FURTHER DEDUCTION CAN BE ALLOWED TO T HE ASSESSEE. 4.2. BEING AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFO RE THE LD. CIT(A) WHEREIN HE MADE DETAILED SUBMISSIONS IN SUPPORT OF HIS CLAIM. THE LD. CIT(A) WAS NOT SATISFIED AND HE UPHELD THE ORDER OF THE AO WITH FOLLOWING OBSERVATIONS: 5.2.7. PROCESSING FEES ARE ADMINISTRATIVE CHARGES LEVIED BY CERTAIN BANKS TO PROCESS THE LOAN APPLICATIONS FROM VARIOUS CATEGORIES OF LOAN APPLICANTS. ADMINISTRATIVE CHARGES AND PROCESSING FEES DO NOT GUARANTEE THE SANCTION OF LOAN AND PEEPUL TREE PROPERTIES P. LTD. 5 THEREFORE, THE SAID PROCESSING FEES ARE NOT ALWAYS DIRECTLY RELATED TO THE PAYMENT OF INTEREST. THERE MAY BE CASES WHERE PROCESSING CHARGES HAVE BEEN PAID BY THE LOAN APPLICANT BUT NO LOANS WERE ACTUALLY SANCTIONED BY THE BANKS AND THEREFORE, NO INTEREST WAS PAID BY THE LOAN APPLICANT. ON THE OTHER HAND PRE-PAYMENT IS PERCEIVED AS A RISK, BECAUSE SUCH PR E- PAYMENT OF LOAN IS OFTEN LINKED WITH RESTRUCTURING OF LOAN THROUGH CHEAPER RE-FINANCING AND THEREFORE, TH E LOANER BANK IS DEPRIVED OF THE PROJECTED CASH INFLO W IN RESPECT OF A LOAN ALREADY SANCTIONED BY THE BANK. T HE PRE-PAYMENT PENALTY IS NOT WITH REFERENCE TO INTEREST BUT WITH REFERENCE TO PARTING FEES/PENALTY LEVIED BY THE OLD BANK FROM THE LOAN APPLICANT, WHE N THE LOAN APPLICANT MOVES FROM OLD BANK TO THE NEW B ANK FOR BETTER OR CONVENIENT PROSPECTS. 5.2.8. HAVING REGARD TO FACTS AND CIRCUMSTANCES OF THE CASE AND IN THE LIGHT OF THE AFORESAID DECISIONS, THE PR OCESSING CHARGES AND THE PRE-PAYMENT PENALTY, PENALTY ARE HE LD NOT ALLOWABLE DEDUCTION U/S 24 (B) OF THE ACT. THE CASE LAWS RELIED UPON BY THE APPELLANT ARE DISTINGUISHABLE FR OM THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE, HENCE THEY ARE NOT SQUARELY APPLICABLE IN THIS CASE. IN VIEW O F THE ABOVE, THE DISALLOWANCE OF PROCESSING CHARGES OF RS .1 CRORE AND OF PRE-PAYMENT PENALTY OF RS.1,32,44,633/- MADE BY THE LAO ARE CONFIRMED. 4.3. BEING AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFO RE THE TRIBUNAL. 4.4. DURING THE COURSE OF HEARING BEFORE US, IT HAS BEE N ARGUED BY THE LD. COUNSEL OF THE ASSESSEE THAT GENU INENESS OF THE PAYMENT IS NOT DOUBTED NOR IT HAS BEEN DOUBTED THAT FRESH LOAN HAS BEEN UTILISED FOR PREPAYMENT OF THE EARLIE R LOANS WHICH WERE USED FOR THE PURPOSE OF ACQUIRING OR CON STRUCTING THE IMPUGNED PROPERTY FROM WHICH RENTAL INCOME HAS BEEN RECEIVED BY THE ASSESSEE. THUS, IN HIS VIEW, THE ON LY ISSUE TO PEEPUL TREE PROPERTIES P. LTD. 6 BE DECIDED HERE IS THAT WHETHER THE ASSESSEE IS ELI GIBLE TO CLAIM THE DEDUCTION U/S 24 OF THE ACT ON THE IMPUGNED PAY MENTS OR NOT. IN THIS REGARD, HE DREW OUR ATTENTION UPON SEC TION 24(B) TO ARGUE THAT INTEREST PAYABLE ON BORROWED CAPITAL IS ALLOWABLE TO THE ASSESSEE. FOR THE PURPOSE OF EXPLAINING SCOPE A ND MEANING OF THE TERM INTEREST, HE REFERRED TO PROVISIONS O F DEFINITION CLAUSE AS CONTAINED IN SECTION 2(28A) DEFINING THE MEANING OF THE TERM INTEREST, CONTENDING THAT THE SCOPE OF W ORD INTEREST HAS BEEN WIDELY ADOPTED UNDER THE DEFINITION CLAUSE WHICH SHALL CLEARLY INCLUDE BOTH OF THESE PAYMENTS I.E. PROCESSING FEE AS WELL AS PRE-PAYMENT CHARGES. IN SUPPORT O F HIS CLAIM HE ALSO RELIED UPON FOLLOWING JUDGMENT: 1. PENTAGRAM PROPERTIES PVT. LTD. VS. DCIT (ITA NO.3713/M/2010) DATED 12 TH AUGUST 2011 2. SUPREME PETROCHEM LTD. V. DCIT (ITA NO.5773/M/2006) DATED 5 TH OCTOBER 2009 3. SHRI TRILOCHAN SINGH SAHNEY VS. ACIT (ITA NO.5304/M/2006) DATED 30 TH NOVEMBER 2009 4. WINDERMERE PROPERTIES (P) LTD. V. DCIT (34 TAXMANN. COM) 5. DCIT V. JAMMU & KASHMIR BANK LTD. (36CCH 463) 6. CIT VS. GUJARAT GUARDIAN LTD. (177 TAXMAN 434, DELH I) 4.5. IN ADDITION TO THE ABOVE ARGUMENTS HE ALSO DISTING UISHED THE DECISION IN THE CASE OF HADDOCK PROPERTIES PVT. LTD. VS. DCIT (ITA NO. 3714/M/2010) DATED 07.09.2011 WHICH H AS BEEN RELIED UPON BY THE AO IN HIS ORDER TO DECIDE T HIS ISSUE AGAINST THE ASSESSEE. PER CONTRA, LD. DR HAS RELIED UPON THE ORDERS OF THE LOWER AUTHORITIES AND SUBMITTED THAT THESE PEEPUL TREE PROPERTIES P. LTD. 7 PAYMENTS WERE OF CAPITAL IN NATURE AND THEREFORE, T HESE ARE NOT ALLOWABLE. 4.6. WE HAVE GONE THROUGH THE SUBMISSIONS MADE BY BOTH THE SIDES AND ORDERS OF THE LOWER AUTHORITIES AS WELL A S JUDGMENTS RELIED UPON BEFORE US. IT IS NOTED THAT IT IS NOT I N DISPUTE THAT INTEREST PAID ON IMPUGNED LOANS WAS ALLOWABLE U/S 2 4(B) OF THE ACT. THUS, THE ONLY ISSUE TO BE DECIDED BY US IS WH ETHER PRE- PAYMENT CHARGES AND PROCESSING FEE SHALL FORM PA RT OF THE WORD INTEREST AS USED IN SECTION 24(B) OF THE ACT . FOR THIS PURPOSE, WE NEED NOT LABOUR MUCH AS THE TERM INTER EST HAS BEEN DEFINED IN SECTION 2(28A) AS UNDER: INTEREST MEANS INTEREST PAYABLE IN ANY MANNER IN R ESPECT OF ANY MONEYS BORROWED OR DEBT INCURRED (INCLUDING A DEPOSIT, CLAIM OR OTHER SIMILAR RIGHT OR OBLIGATION ) AND INCLUDES ANY SERVICE FEE OR OTHER CHARGE IN RESPECT OF MONEYS BORROWED OR DEBT INCURRED OR IN RESPECT OF A NY CREDIT FACILITY WHICH HAS NOT BEEN UTILISED; 4.7. PERUSAL OF THE ABOVE SAID DEFINITION SHOWS THAT TH E TERM INTEREST HAS BEEN DEFINED IN A MANNER GIVING IT A WIDER SCOPE. IT CLEARLY SHOWS THAT THE TERM INTEREST SHALL INC LUDE ANY SERVICES FEE OR OTHER CHARGES IN RESPECT OF MONEYS BORROWED AND IT GOES TO THE EXTENT OF SAYING THAT ANY CHARGE S IN RESPECT OF ANY CREDIT FACILITIES WHICH HAS NOT BEEN UTILIZE D. IF WE CAREFULLY ANALYSE THIS DEFINITION, WE FIND THE ANSW ER RIGHT HERE IN THIS DEFINITION. THE PROCESSING FEE CHARGED BY AXIS BANK IS NOTHING BUT SERVICE FEE CHARGED BY THE BANK AND THE REFORE IT IS CLEARLY ALLOWABLE AS PER PLAIN PROVISIONS OF THE AC T. AS FAR AS PEEPUL TREE PROPERTIES P. LTD. 8 THE PREPAYMENT CHARGES ARE CONCERNED, THESE HAVE BE EN PAID FOR THE LOANS WHICH HAVE BEEN REFUNDED AND THUS NO MORE UTILISED BY THE ASSESSEE. IT HAS BEEN CLEARLY PROVI DED THAT ANY CHARGES INCURRED EVEN FOR ANY CREDIT FACILITY WHICH HAS NOT BEEN UTILISED SHALL ALSO FORM PART OF THE TERM INT EREST. EVEN, OTHERWISE, BOTH OF THESE PAYMENTS HAVE BEEN MADE FO R THE PURPOSE OF AVAILING OF THE LOAN AT LOWER INTEREST C OST. IT IS FOR THE ASSESSEE TO PLAN ITS FINANCIAL AFFAIRS IN THE B EST POSSIBLE MANNER. IT IS NONE OF THE BUSINESS OF THE REVENUE T O GUIDE THE ASSESSEE OR PUT ANY OBSTACLE IN THE MANAGEMENT OF I TS FINANCIAL AFFAIRS. THE ASSESSEE APPEARS TO HAVE DON E THE RESTRUCTURING OF ITS LOANS AND CHANGED ITS LENDERS FOR THE PURPOSE OF REDUCING ITS INTEREST BURDEN BY AVAILING LOAN FROM THE LENDERS AT LOWER RATE OF INTEREST. THE PREPAYME NT CHARGES AND PROCESSING FEE BORNE BY THE ASSESSEE AT THIS ST AGE WERE BE COMPENSATED SUBSEQUENTLY BY PAYMENT OF LOWER AMOUNT OF INTEREST. IN ANY CASE, SO LONG AS THE EXPENSES INCU RRED BY THE ASSESSEE ARE GENUINE AND NOT PART OF ANY COLORABLE DEVICE TO MAKE TAX EVASION, THEN SUCH EXPENSES SHOULD BE ALLO WED UNDER THE RELEVANT PROVISIONS OF THE ACT. 4.8. IT IS NOTED THAT OUR VIEW IS SUPPORTED BY PLETHORA OF JUDGMENTS. IN THE CASE OF PENTAGRAM PROPERTIES PVT. LTD. (SUPRA), THE MUMBAI BENCH OF THE TRIBUNAL WHILE ALL OWING THE CLAIM OF THE ASSESSEE ON ACCOUNT OF PAYMENT OF PROC ESSING FEE OBSERVED AS UNDER: THE ASSESSEE IS IN APPEAL QUESTIONING THE DECISION OF THE CIT(A) REGARDING THE ALLOWANCE OF PROCESSING FEES. SECTION 24(B) ALLOWS DEDUCTION IN RESPECT OF ANY INTEREST P AYABLE PEEPUL TREE PROPERTIES P. LTD. 9 ON CAPITAL BORROWED FOR THE PURPOSE OF ACQUIRING, CONSTRUCTING, REPAIRING OR RENEWING THE PROPERTY. S ECTION 2(28A), WHICH WAS INSERTED BY THE FINANCE ACT, 1976 , WITH EFFECT FROM 1ST JUNE 1976 DEFINES INTEREST AS INT EREST PAYABLE IN ANY MANNER IN RESPECT OF ANY MONEYS BORR OWED OR DEBT INCURRED (INCLUDING A DEPOSIT, CLAIM OR OTH ER SIMILAR RIGHT OR OBLIGATION) AND INCLUDES ANY SERVICE FEE O R OTHER CHARGE IN RESPECT OF THE MONEYS BORROWED OR DEBT IN CURRED OR IN RESPECT OF ANY CREDIT FACILITY WHICH HAS NOT BEEN UTILIZED. IT IS SEEN FROM THE DEFINITION THAT EVEN A SERVICE FEE PAID IN RESPECT OF THE MONEYS BORROWED IS INCLU DED IN THE DEFINITION OF INTEREST. THE PROCESSING FEE IS CHARGED BY THE LENDER SINCE THE PROCESSING OF THE LOAN APPL ICATION AND CONNECTED DOCUMENTS INVOLVES A SERVICE RENDERED BY HIM TO THE BORROWER. BY VIRTUE OF THE DEFINITION OF THE WORD INTEREST, THE PROCESSING FEE, WHICH PERHAPS MAY N OT OTHERWISE FALL TO BE CONSIDERED AS INTEREST, IS TO BE TREATED AS INTEREST AND ALLOWED AS A DEDUCTION UNDER SECTIO N 24(B) OF THE ACT. IF WE MAY SAY, THAT WITH RESPECT, THE C IT(A) WOULD APPEAR TO HAVE LOST SIGHT OF THE FACT THAT IT IS BY DEFINITION OF THE WORD INTEREST THAT THE PROCESSI NG FEE IS TO BE TREATED AS INTEREST AND THE FACT THAT THE PRO CESSING IS DONE BEFORE THE GRANT OF THE LOAN CANNOT BE PUT AGA INST THE ASSESSEE IN THE LIGHT OF THE DEFINITION. THE ASSESS EES CONTENTIONS ARE ALSO SUPPORTED BY THE ORDER OF THE SINGLE MEMBER, PUNE BENCH IN THE CASE OF CHINTAMANI HATCHE RIES (P) LTD. VS. DCIT (2000) 75 ITD 116 (PUNE) (SMC), W HERE IT HAS BEEN HELD THAT PROCESSING FEE FOR OBTAINING A L OAN IS A SERVICE FEE AND HAS TO BE ALLOWED AS INTEREST IN VI EW OF THE DEFINITION IN SECTION 2(28A). THE CIRCULAR NO. 202, DATED 5TH JULY 1976, ISSUED BY THE CBDT (COPY FILED) WHIL E EXPLAINING THE PROVISIONS OF SECTION 2(28A) ALSO CL ARIFY THE POSITION. WE THEREFORE ACCEPT THE ASSESSEES CLAIM BASED ON SECTION 2(28A) AND DIRECT THE ASSESSING OFFICER TO ALLOW THE PROCESSING FEE OF RS.55,00,000/- AS DEDUCTION U NDER SECTION 24(B) WHILE COMPUTING THE PROPERTY INCOME. 4.9. SIMILAR VIEW HAS BEEN TAKEN WITH REGARD TO CLAIM O F PREPAYMENT CHARGES BY THE MUMBAI BENCH IN THE CASE OF PEEPUL TREE PROPERTIES P. LTD. 10 WINDERMERE PROPERTIES (P) LTD. (SUPRA) WITH FOLLOWI NG OBSERVATIONS: WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED TH E RELEVANT MATERIAL ON RECORD. THERE IS NO DISPUTE ON THE FACT THAT THE ASSESSEE AVAILED LOAN FOR ACQUISITION OF C ERTAIN PREMISES, THE INCOME FROM WHICH WAS SHOWN AND ACCEP TED UNDER THE HEAD INCOME FROM HOUSE PROPERTY. THE ASSESSEE CLAIMED DEDUCTION OF RS.11.05 CRORE U/S 24 (B) OF THE ACT. THE ASSESSING OFFICER DID NOT ALLOW DEDUCT ION OF RS.1.56 CRORE PAID AS PREPAYMENT CHARGES FOR THE CL OSURE OF THE LOAN ACCOUNT WHICH WAS TAKEN FOR ACQUISITION OF PROPERTY FETCHING THE EXTANT HOUSE PROPERTY INCOME. UNDER THESE CIRCUMSTANCES THE QUESTION ARISES AS TO WHETH ER SUCH AMOUNT OF `PREPAYMENT CHARGES PAID TO HDFC FO R CLOSURE OF LOAN ACCOUNT IS DEDUCTIBLE U/S 24(B) OF THE ACT. THIS PROVISION PROVIDES THAT: WHERE THE PROPERTY H AS BEEN ACQUIRED, CONSTRUCTED, REPAIRED, RENEWED OR RECONST RUCTED WITH BORROWED CAPITAL, THE AMOUNT OF ANY INTEREST P AYABLE ON SUCH CAPITAL SHALL BE ALLOWED AS DEDUCTION IN T HE COMPUTATION OF INCOME UNDER THE HEAD INCOME FROM H OUSE PROPERTY. THE TERM INTEREST HAS BEEN DEFINED IN SECTION 2(28A) TO MEAN: INTEREST PAYABLE IN ANY MANNER IN RESPECT OF ANY MONEYS BORROWED OR DEBT INCURRED . AND INCLUDES ANY SERVICE FEE OR OTHER CHARGE IN RESPECT OF THE MONEYS BORROWED OR DEBT INCURRED OR IN RESPECT OF A NY CREDIT FACILITY WHICH HAS NOT BEEN UTILIZED. THE D EFINITION OF INTEREST U/S 2(28A) MAKES IT MANIFEST THAT IT HA S BASICALLY TWO COMPONENTS, VIZ., FIRSTLY, THE AMOUNT WITH NOMENCLATURE OF INTEREST FOR MONEYS BORROWED AND SECONDLY, THE AMOUNT PAID BY WHATEVER NAME CALLED I N RESPECT OF THE MONEY BORROWED OR DEBT INCURRED. THE SECOND CATEGORY MAY ALSO ENCOMPASS ANY CHARGE PAID FOR NOT UTILIZING THE CREDIT FACILITY. WHEN WE INCORPOR ATE THE DEFINITION OF `INTEREST IN SECTION 24(B), THE POSI TION WHICH EMERGES IS THAT NOT ONLY THE AMOUNT PAID DESIGNATED AS INTEREST BUT ALSO ANY OTHER AMOUNT PAID BY WHATEVER NAME CALLED IN RELATION TO SUCH DEBT INCURRED ALSO QUALI FIES FOR DEDUCTION. 4. ADVERTING TO THE FACTS OF THE INSTANT CASE, IT IS NOTICED THAT THE ASSESSEE OBTAINED LOAN FROM HDFC LIMITED FOR ACQUISITION OF PROPERTY. LATER ON IT AR RANGED THE PEEPUL TREE PROPERTIES P. LTD. 11 MONEY FROM OTHER SOURCES AND REPAID THE LOAN WHICH WAS TAKEN FOR ACQUISITION OF PROPERTY. THE BANK ACCEPTE D THE EARLY REPAYMENT OF LOAN ON RECEIPT OF PREPAYMENT CH ARGES. BY SUCH REPAYMENT, THE ASSESSEE MANAGED TO WIPE OUT ITS INTEREST LIABILITY IN RESPECT OF THE LOAN, WHICH WO ULD HAVE OTHERWISE QUALIFIED FOR DEDUCTION U/S 24(B) DURING THE CONTINUATION OF LOAN. IT IS OBVIOUS THAT THESE PREP AYMENT CHARGES HAVE LIVE AND DIRECT LINK WITH THE OBTAININ G OF LOAN WHICH WAS AVAILED FOR ACQUISITION OF PROPERTY. IT I S BEYOND OUR COMPREHENSION AS TO HOW THE AMOUNT PAID AS INTE REST FOR THE LOAN TAKEN IS ALLOWABLE AS DEDUCTION BUT TH E AMOUNT PAID AS PREPAYMENT CHARGES OF THE VERY SAME LOAN IS NOT DEDUCTIBLE. IN OUR CONSIDERED OPINION THE PA YMENT OF SUCH `PREPAYMENT CHARGES CANNOT BE CONSIDERED AS D E HORS THE LOAN OBTAINED FOR ACQUISITION OR CONSTRUCT ION OR REPAIR ETC. OF THE PROPERTY ON WHICH INTEREST IS DE DUCTIBLE U/S 24(B) OF THE ACT. BOTH THE DIRECT INTEREST AND PREPAYMENT CHARGES ARE SPECIES OF THE TERM `INTERES T. WE, THEREFORE, SET ASIDE THE IMPUGNED ORDER ON THIS ISS UE AND ORDER FOR THE GRANT OF DEDUCTION. 4.10. SIMILAR VIEW HAS BEEN TAKEN BY THE HONBLE DELHI H IGH COURT IN THE CASE OF GUJARAT GUARDIAN LTD.(SUPRA). SIMILAR VIEW HAS BEEN TAKEN IN FEW OTHER CASES ALSO AS RELI ED UPON BY THE LD. COUNSEL. 4.11. IN THE CASE OF HADDOCK PROPERTIES PVT. LTD., AS WAS RELIED UPON THE LOWER AUTHORITIES, LOAN PROCESSING CHARGES WERE DISALLOWED BY THE AO AND THE ACTION OF THE AO WAS U PHELD BY THE BENCH. BUT, IF WE READ THE JUDGMENT FULLY, WE F IND THAT FACTS OF THE SAID CASE ARE CLEARLY DIFFERENT. IN TH E SAID CASE, THE DISALLOWANCE WAS MADE MAINLY FOR THE REASON THAT PR OCESSING CHARGES WERE PAID ON ACCOUNT OF ISSUANCE OF DEBENTU RES AND HONBLE BENCH WHILE DECIDING THIS ISSUE CLEARLY MAD E OUT A DISTINCTION BY MENTIONING THAT PROCESSING CHARGES W ERE NOT PEEPUL TREE PROPERTIES P. LTD. 12 PAID FOR OBTAINING LOAN AMOUNT. THE RELEVANT OBSERV ATIONS OF THE JUDGMENT ARE REPRODUCED BELOW: THEREFORE, THESE PROCESSING CHARGES IN OUR VIEW AR E NOT PAID FOR OBTAINING FUNDS OR LOAN AMOUNT. FURTHER TH E DEBENTURE ISSUED BY THE ASSESSEE CANNOT BE EQUATED WITH THE DIRECT LOAN FOR ACQUIRING THE PROPERTY IN QUEST ION BUT THE FUNDS RAISED THROUGH THE DEBENTURES WERE PARTLY APPLIED FOR REPAYMENT OF LOAN TAKEN FOR ACQUISITION OF THE PROPERTY. 10. AS REGARDS THE DECISIONS RELIED UPON BY THE LEA RNED AR ON THE POINT THAT ANY CHARGES IN RESPECT OF MONEY BARROWED BY THE ASSESSEE WOULD FALL IN THE DEFINITI ON OF INTEREST. IT IS PERTINENT TO NOTE THAT IN ALL THOSE CASES THE CHARGES WERE EITHER PAID FOR TAKING LOAN FOR ACQUIR ING THE PROPERTIES OR FOR RESTRUCTURING OF LOAN WITH THE OB JECT TO TAKE SOME ADVANTAGE OF INTEREST LIABILITY OR SOME F INANCIAL LEVERAGE. THEREFORE, THE FACTS OF THE CASE IN HAND ARE DISTINGUISHABLE BECAUSE THE PROCESSING CHARGES WERE NOT PAID FOR OBTAINING LOAN OR RESTRUCTURING OF LOAN BU T FOR ISSUE OF DEBENTURE AND ONLY THE PART OF THE FUNDS R ECEIVED WERE UTILIZED FOR REPAYMENT OF THE LOAN. ACCORDINGL Y, WE ARE OF THE VIEW THAT THE PROCESSING CHARGES FOR ISS UE OF DEBENTURE CANNOT BE TREATED AS INTEREST PAID ON DEB ENTURE AND CONSEQUENTLY CANNOT BE ALLOWED AS A DEDUCTION U /S 24(B). 4.11. THUS, PERUSAL OF THE ABOVE CLEARLY SHOWS THAT THE BENCH HAS RATHER SUPPORTED THE CASE OF THE ASSESSEE BY OB SERVING THAT IN CASE PROCESSING CHARGES WOULD HAVE BEEN PAI D FOR OBTAINING LOAN, THEN, THE SAME WOULD HAVE BEEN INDE ED ALLOWABLE. THUS, IN OUR CONSIDERED VIEW, THE LEGAL POSITION IS CLEAR THAT THESE PAYMENTS ARE ALLOWABLE U/S 24(B) A ND THEREFORE, AO IS DIRECTED TO GRANT THE BENEFIT OF T HE SAME THE DISALLOWANCE MADE BY THE AO IS DIRECTED TO BE DELET ED. THUS, GROUND NOS. 1 TO 6 ARE TREATED AS ALLOWED. PEEPUL TREE PROPERTIES P. LTD. 13 5. GROUND NO.7 TO 8: IN THESE GROUNDS THE ASSESSEE HAS MADE CLAIM OF MAINTENANCE CHARGES, AMOUNTING TO RS. 3,70,62,516/- RECOVERED BY THE ASSESSEE FROM ITS TE NANTS. 5.1. THE BRIEF FACTS AS NARRATED BEFORE US BY THE PARTI ES ARE THAT IN ALL THE EARLIER YEARS, THE IMPUGNED YEAR AS WELL AS SUBSEQUENT YEARS, THOUGH THE ASSESSEE HAS BEEN SHOW ING ITS TOTAL INCOME UNDER THE HEAD INCOME FROM HOUSE PROP ERTY, BUT BY WAY OF NOTE GIVEN IN THE COMPUTATION SHEET, THE ASSESSEE HAS STATED THAT THE ASSESSEE COMPANY RESERVES ITS R IGHT TO CLAIM COMMON AREA MAINTENANCE CHARGES AMOUNTING TO RS.3,70,62,516/- AS DEDUCTION TO ARRIVE AT THE ANNU AL VALUE U/S 23 RELYING UPON THE MUMBAI TRIBUNAL JUDGMENT IN THE CASE OF SHARMILA TAGORE VS. JCIT 93 TTJ 483 (DEL). IT IS AN ADMITTED FACT THAT NEITHER IN THE EARLIER YEARS NOR IN THE SUBSEQUENT YEARS THIS CLAIM HAS EVER BEEN EXERCISED BY THE ASSESSEE OR HAS EVER BEEN ALLOWED BY THE AO. DURING THE ASSESSMENT PROCEEDINGS OF THE IMPUGNED YEAR, THE AO REFUSED TO GRANT THIS CLAIM ON THE GROUND THAT THERE IS NO SUCH PROVISION U/S 23 OR 24 TO GRANT THE BENEFIT OF SUCH DEDUCTION UNDER THE HEAD INCOME FROM HOUSE PROPERTY. IN VIEW OF THESE CIRCUMSTANCES, THE ASSESSEE OFFERED AND REQUESTED T HE AO TO TREAT THE IMPUGNED RENTAL INCOME AS INCOME FROM OT HER SOURCES AND ACCORDINGLY ALLOW THE CORRESPONDING EX PENSES INCURRED FOR EARNING INCOME FROM OTHER SOURCES I.E. AFORESAID MAINTENANCE EXPENSES BE ALLOWED AS A DEDUCTION. BOT H OF THE LOWER AUTHORITIES DID NOT ACCEPT THE SUBMISSIONS OF THE ASSESSEE. PEEPUL TREE PROPERTIES P. LTD. 14 5.2. BEING AGGRIEVED THE ASSESSEE FILED APPEAL BEFORE T HE TRIBUNAL. 5.3. DURING THE COURSE OF HEARING, ASSESSEE HAS VEHEMEN TLY SUBMITTED THAT INCOME SHOULD BE ASSESSED AS PER THE PROVISIONS OF LAW AND NO TAX CAN BE COLLECTED WITHO UT THE AUTHORITY OF LAW. PER CONTRA THE LD. DR OPPOSED THE SUBMISSIONS OF THE ASSESSEE. 5.4. WE HAVE GONE THROUGH THE SUBMISSIONS OF THE ASSESS EE CAREFULLY; THERE IS NO DISPUTE ON THE PROPOSITION T HAT TAX LIABILITY OF ASSESSEE HAS TO BE DETERMINED STRICTLY IN ACCORDANCE WITH LAW. BUT A CLAIM CAN BE ALLOWED TO ASSESSEE WH ICH IS VALID AS PER LAW AND MADE BY THE ASSESSEE IN ACCORDANCE W ITH LAW AND IN A COMPLETE AND RIGHTFUL MANNER. IN CASE THE ASSESSEE WANTS ITS INCOME TO BE ASSESSED UNDER DIFFERENT HEA D AS PER THE PROVISIONS OF LAW, THEN, THE MINIMUM DUTY EXPEC TED FROM THE ASSESSEE IS TO AT LEAST FILE A REVISED COMPUTAT ION SHEET OF INCOME OFFERING THE INCOME IN PROPER HEADS AND MAKI NG APPROPRIATE CLAIMS AGAINST EACH AND EVERY HEAD SEPA RATELY. THIS EXERCISE IS NOT EXPECTED TO BE DONE BY THE AO ON BEHALF OF THE ASSESSEE. BUT NONETHELESS, WITH A VIEW TO MEET THE ENDS OF JUSTICE AND IN VIEW OF THESE PECULIAR FACTS AND CIR CUMSTANCES OF THE CASE, WE FIND IT APPROPRIATE TO GIVE AN OPPO RTUNITY TO THE ASSESSEE TO FILE REVISE COMPUTATION SHEET OF INCOME BEFORE THE AO MAKING OUT ITS CLAIM IN AN APPROPRIATE AND COMPL ETE MANNER. THUS, THESE GROUNDS ARE SENT BACK TO THE FI LE OF THE PEEPUL TREE PROPERTIES P. LTD. 15 AO WHO SHALL GIVE ADEQUATE OPPORTUNITY OF HEARING T O THE ASSESSEE TO MAKE ITS CLAIM AS PER LAW. THE ASSESSEE SHALL FILE REQUISITE DETAILS AND DOCUMENTS SO AS TO ENABLE THE AO TO VERIFY THE INCOME AND CORRESPONDING CLAIM AS PER LA W AND FACTS. THE ASSESSEE IS FREE TO RAISE ALL LEGAL AND FACTUAL ISSUES BEFORE THE AO. THUS, THESE GROUNDS ARE TREATED AS A LLOWED FOR STATISTICAL PURPOSES. 6. IN THE ADDITIONAL GROUNDS RAISED BEFORE US THE ASS ESSEE HAS REQUESTED FOR APPROPRIATE DIRECTIONS FOR GRANTING F ULL TDS. THUS, WE SEND THESE GROUNDS BACK TO THE FILE OF THE AO WITH THE DIRECTION TO ALLOW OPPORTUNITY TO THE ASSESSEE TO FILE REQUISITE DETAILS AND DOCUMENTS. THE AO SHALL GRANT CREDIT OF TDS CERTIFICATE AFTER VERIFYING REQUISITE FACTS. TH ESE GROUNDS MAY BE TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 7. IN THE RESULT, THIS APPEAL FILED BY THE ASSESSEE I S TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 20 TH MAY, 2016. SD/- (JOGINDER SINGH) SD/- (ASHWANI TANEJA) '# / JUDICIAL MEMBER $# / ACCOUNTANT MEMBER # $ MUMBAI; ( DATED: 20/05 /2016 CTX? P.S/. . . PEEPUL TREE PROPERTIES P. LTD. 16 %'&'()(*& / COPY OF THE ORDER FORWARDED TO : 1. *+, / THE APPELLANT 2. -.+, / THE RESPONDENT. 3. / / # 0 ( * ) / THE CIT, MUMBAI. 4. / / # 0 / CIT(A)- , MUMBAI 5. 34 - , / *& 5 , # $ / DR, ITAT, MUMBAI 6. 6! 7$ / GUARD FILE. / BY ORDER, .3* - //TRUE COPY// / (DY./ASSTT. REGISTRAR) , # $ / ITAT, MUMBAI