SHREE MADHUR REALTORS P.LTD, MUMBAI V. ITO 8(3)1, MUMBAI

ITA 6343/MUM/2013

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 2102 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-10-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2008-2009
• Appeal Filed On: 29-10-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PREMANAND J
• Assessee Lawyers: M SUBRAMANIAN
• Section: 143(3); 37(1); 37

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE SHRI N.K . BILLAIYA, ACCOUNTANT MEMBER AND SHRI SANJAY GARG , JUDICIAL MEMBER / I .T.A. NO . 6343/MUM/2013 ( / ASSESSMENT YEAR : 2008 - 09 SHREE MADHUR REALTORS PVT. LTD., A - 38, NANDJYOT INDUSTRIAL ESTATE, ANDHERI KURLA ROAD, ANDHERI (E), MUMBAI - 400 072 / VS. THE ITO 8(3) - 1, AAYAKAR BHAVAN, MUMBAI 400 020 ./ ./ PAN/GIR NO. : AAICS 7097J ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY: SHRI M. SUBRAMANIAN / RESPONDENT BY: SHRI PREMANAND J / DATE OF HEARING : 22.09.2015 / DATE OF PRONOUNCEMENT : 07.10.2015 / O R D E R PER N.K. BILLAIYA, AM: THIS APPEAL BY THE ASSESSEE IS PREFERRED AGAINST THE ORDER OF THE LD. CIT(A) - 18 , MUMBAI D ATED 1 4 .0 8 .201 3 PERTAINING TO ASSESSMENT YEAR 2008 - 09. 2. THE SOLE GRIEVANCE OF THE ASSESSEE IS THAT THE LD. CIT(A) ERRED IN CONFIRMING THE PENALTY ORDER PASSED BY THE AO U/S. 271(1)(C) OF THE ACT. ITA. NO. 6343/M/2013 2 3. THE ROOTS FOR THE LEVY OF PENALTY LIE IN THE ASSESSMENT ORDER DATE D 30.12.2010 MADE U/S. 143(3) OF THE ACT. WHILE SCRUTINIZING THE RETURN OF INCOME, THE ASSESSING OFFICER FOUND THAT THE ASSESSEE HAS DEBITED INTEREST ON TERM LOAN AND OTHER LOANS AT RS. 22,39,355/ - IN THE PROFIT AND LOSS ACCOUNT. THE AO FURTHER OBSERVED THA T OUT OF THE AFORESAID INTEREST, RS. 15,12,901/ - HAS BEEN CLAIMED AS INTEREST ON LOAN FOR THE PURCHASE OF THE PROPERTY AND THE SAME HAS BEEN CLAIMED AS DEDUCTION U/S. 24 UNDER THE HEAD INCOME FROM HOUSE PROPERTY. ON FURTHER EXAMINATION OF THE LOAN U TILIZATION, THE AO FOUND THAT THE ASSESSEE HAS UTILIZED LOAN OF RS. 4,78,00,000/ - ON PURCHASE OF SHARES OF M/S. AGIO PHARMACEUTICAL LTD AND M/S. MELODY HEALTHCARE PVT. LTD. FOR GETTING CONTROLLING INTEREST IN THESE COMPANIES. 3.1. THE ASSESSEE WAS ASKED TO EXPLAIN WHY THE INTEREST SHOULD NOT BE DISALLOWED U/S. 37(1) OF THE ACT. AFTER CONSIDERING THE SUBMISSIONS MADE BY THE ASSESSEE, THE AO DRAWING SUPPORT FROM THE DECISION OF THE HONBLE HIGH COURT OF BOMBAY IN THE CASE OF CIT VS AMRITABEN R. SHAH 238 ITR 777 , THE AO DISALLOWED INTEREST OF RS. 7,26,454/ - . FOR SIMILAR REASONS AND DRAWING SUPPORT FROM THE SAME DECISIONS, THE BANK PROCESSING CHARGES OF RS. 4,91,173/ - WERE ALSO DISALLOWED. THE AO INITIATED PENALTY PROCEEDINGS U/S. 271(1)(C) OF THE ACT ON SUCH DISALLOWANCES. 3.2. DURING THE COURSE OF THE PENALTY PROCEEDINGS, THE ASSESSEE STRONGLY CONTENDED THAT IT HAS TRULY AND ACCURATELY DISCLOSED ALL THE FACTS AND HAS DECLARED THE CORRECT INCOME. IT WAS ALSO POINTED OUT THAT THE DISALLOWANCE MADE BY TH E AO WAS ON ACCOUNT OF A PARTICULAR VIEW TAKEN BY HIM WHEREAS THERE ARE SEVERAL OTHER VIEWS ON THE ITA. NO. 6343/M/2013 3 SAME SET OF FACTS. . THE CLAIM OF THE ASSESSEE WAS DENIED BY THE AO WHO COMPLETED THE PENAL PROCEEDINGS BY LEVYING PENALTY AT RS. 3,76,247/ - 4. THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) BUT WITHOUT ANY SUCCESS. 5. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE VEHEMENTLY SUBMITTED THAT BY CLAIMING INTEREST ON BORROWED CAPITAL, THE ASSESSEE HAS FOLLOWED ONE PARTICULAR COURSE OF ACTION AND BY DISALLOW ING THE CLAIM, THE AO HAS FOLLOWED ANOTHER COURSE OF ACTION. IT IS THE SAY OF THE LD. COUNSEL THAT THE CLAIM OF INTEREST BY THE ASSESSEE IS SUPPORTED BY THE DECISION OF THE HONBLE HIGH COURT OF BOMBAY IN THE CASE OF CIT VS PHIL CORPN. LTD. IN ITA NO. 57 OF 2002 DATED 28.6.2011. THE LD. COUNSEL STATED THAT WHEN TWO VIEWS ARE POSSIBLE IN RESPECT OF THE MATTER, PENALTY LEVIED U/S. 271(1)(C) OF THE ACT IS NOT JUSTIFIED. 6. PER CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE STRONGLY SUPPORTED THE FINDINGS OF T HE REVENUE AUTHORITIES. 7. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE ORDERS OF THE AUTHORITIES BELOW. THE DISPUTE RELATES TO THE CLAIM OF INTEREST IN RESPECT OF BORROWINGS WHICH HAVE BEEN UTILIZED FOR THE PURCHASE OF SHARES. THE AO HAS DISALLOWE D THE CLAIM RELYING UPON THE DECISION OF THE HONBLE HIGH COURT OF BOMBAY IN THE CASE OF AMRITABEN R. SHAH (SUPRA) . WE FIND THAT THE SAID DECISION WAS DELIVERED BY THE HONBLE HIGH COURT IN RESPECT OF THE CLAIM MADE U/S. 57(III) OF THE ACT AND NOT U/S. 37(I) OF THE ACT. THE DEDUCTION OF EXPENDITURE ARE ALLOWED U/S. 37 WHICH ARE NOT COVERED U/SS. 30 TO 36 OF THE ACT WHICH ARE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS WHEREAS U/S. ITA. NO. 6343/M/2013 4 57(III), THE DEDUCTION OF EXPENDITURE IS ALLOWED WHEN THE SAME HAS BEEN INCURRED FOR EARNING SUCH INCOME AND SUCH INCOME REFERS TO THE INCOME FROM OTHER SOURCES. 8. WE FURTHER FIND THAT THE HONBLE HIGH COURT OF BOMBAY IN THE CASE OF PHIL CORPN. LTD (SUPRA) ALLOWED THE CLAIM OF DEDUCTION OF INTEREST PAID ON OVERDRAFT U/S. 36(I)(III) OF THE ACT, WHEN THE OVERDRAFT WAS USED FOR THE PURCHASE OF SHARES OF SISTER/SUBSIDIARY COMPANIES TO HAVE CONTROL OVER THEM. THUS, IT CAN BE SEEN THAT ON SAME SET OF FACTS, THERE ARE DIFFERENT VIEWS OF THE HIGHER JUDICIARY. 9. IN OUR UNDERSTANDING OF THE LAW, IF THE ASSESSEE HAS MADE A BONAFIDE CLAIM ON THE BASIS OF LAW LAID DOWN BY VARIOUS HONBLE HIGH COURTS, THEN PENALTY SHOULD NOT BE LEVIED UPON SUCH ASSESSEE MERELY ON THE GROUND THAT HIS CLAIM WAS DISALLOWED. OUR VIEW I S ALSO FORTIFIED BY THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS RELIANCE PETRO PRODUCTS PVT. LTD. 322 ITR 158. CONSIDERING THE FACTS IN TOTALITY IN THE LIGHT OF THE JUDICIAL DECISIONS DISCUSSED HEREINABOVE, WE DO NOT FIND IT A FIT CA SE FOR THE LEVY OF PENALTY U/S. 271(1)(C) OF THE ACT. WE, THEREFORE, SET ASIDE THE ORDER OF THE LD. CIT(A) AND DIRECT THE AO TO DELETE THE PENALTY LEVIED U/S. 271(1)(C) OF THE ACT. 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 7 TH OCTOBER, 2015 SD/ - SD/ - ( SANJAY GARG ) (N.K. BILLAIYA) /JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED : 7 TH OCTOBER, 2015 . . ./ RJ , SR. PS ITA. NO. 6343/M/2013 5 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . / BY ORDER, //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI