SANE & DOSHI ENTERPRISES, MUMBAI V. ACIT 12(1), MUMBAI

ITA 6532/MUM/2010

• Counselvise Citation: 653219914 RSA 2010
• Duration Of Justice: 1 year(s) 8 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-05-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2007-2008
• Appeal Filed On: 06-09-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PARTHASARTHI NAIK
• Assessee Lawyers: NATASHA MANGAT

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH E, MUMBAI BEFORE SHRI P.M.JAGTAP, ACCOUNTANT MEMBER & SHRI VIVEK VARMA, JUDICIAL MEMBER. I.T.A. NO. 6532/MUM/2010. ASSES SMENT YEAR : 2007-08 M/S SANE & DOSHI ENTEPRISES, ASSTT. COMMISSIONER OF 12, ALI CHAMBERS, TAMARIND LANE, VS. INCOME-TAX, 12(1), FORT, MUMBAI 400001. MUMBAI. PAN AAAFS6687D APPELLANT. RESPONDENT. APPELLANT BY : MS. NATASHA MANGAT. RESPONDENT BY : SHRI PARTHASARTHI NAIK. DATE OF HEARING : 04-04-2012 DATE OF PRONOUNCEMENT : 16-05-2012 O R D E R PER P.M. JAGTAP, A.M. : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF LEARNED CIT(APPEALS)-23, MUMBAI DATED 30-07-2010 AND THE SO LITARY ISSUES ARISING OUT OF THE SAME RELATES TO THE DISALLOWANCE OF RS.64,54,43 0/- MADE BY THE AO AND CONFIRMED BY THE LEARNED CIT(APPEALS) ON ACCOUNT OF DEDUCTION CLAIMED BY THE ASSESSEE FOR INTEREST PAID TO PARTNERS U/S 24(B). 2. THE ASSESSEE IN THE PRESENT CASE IS A PARTNERSHI P FIRM WHICH IS ENGAGED IN THE BUSINESS AS BUILDER AND DEVELOPER. THE RETURN OF IN COME FOR THE YEAR UNDER CONSIDERATION WAS FILED BY IT ON 24-10-2007 DECLARI NG TOTAL INCOME OF 2 ITA NO.6532/MUM/2010 RS.2,71,89,740/-. THE ASSESSEE FIRM HAD CONSTRUCTED TWO MULTI STORIED COMMERCIAL COMPLEXES VIZ. MAYFAIR I AND MAYFAIR II IN PUNE AND HAD SOLD PART OF IT. THE SAID BUILDINGS WERE TREATED AS STOCK IN TRADE ALL THROUG HOUT AND UNSOLD PART THEREOF WAS LET OUT. THE RENT RECEIVED FROM THE SAID BUILDING W AS OFFERED TO TAX BY THE ASSESSEE UNDER THE HEAD INCOME FROM HOUSE PROPERTY AND WHI LE COMPUTING THE INCOME UNDER THE SAID HEAD, DEDUCTION U/S 24(B) WAS CLAIME D ON ACCOUNT OF INTEREST PAID ON THE PARTNERS CAPITAL. IT WAS CLAIMED BY THE ASSESS EE THAT THE SAID INTEREST WAS PAID TO THE PARTNERS ON THE AMOUNT LYING IN THEIR CAPITA L WHICH WAS DEPLOYED FOR THE PURPOSE OF CONSTRUCTION OF BUILDING GIVEN ON RENT. THIS CLAIM OF THE ASSESSEE WAS NOT FOUND ACCEPTABLE BY THE AO. ACCORDING TO HIM, T HE CAPITAL CONTRIBUTED BY THE PARTNERS COULD NEVER BE TREATED AS BORROWED CAPITAL AND INTEREST PAID THEREON, THEREFORE, COULD NOT BE ALLOWED AS DEDUCTION U/S 24 (B). HE ALSO HELD THAT THE SAID CAPITAL ACTUALLY REPRESENTED ACCUMULATED PROFITS EA RNED BY THE ASSESSEE FIRM OVER THE YEARS WHICH COULD NOT BE TREATED AS BORROWED FU NDS. ACCORDINGLY, THE DEDUCTION CLAIMED BY THE ASSESSEE ON ACCOUNT OF INT EREST PAID ON THE PARTNERS CAPITAL ACCOUNTS U/S 24(B) WAS DISALLOWED BY THE AO . 3. THE DISALLOWANCE MADE BY THE AO ON ACCOUNT OF IN TEREST PAID ON ITS PARTNERS CAPITAL WAS CHALLENGED BY THE ASSESSEE IN AN APPEAL FILED BEFORE THE LEARNED CIT(APPEALS). DURING THE COURSE OF HEARING, IT WAS BROUGHT TO THE NOTICE OF THE LEARNED CIT(APPEALS) BY THE ASSESSEE THAT A SIM ILAR DEDUCTION CLAIMED U/S 24(B) ON ACCOUNT OF INTEREST PAID ON PARTNERS CAPI TAL HAS ALREADY BEEN ALLOWED BY HIS PREDECESSOR IN ASSESSMENT YEAR 2006-07 AND THE RELIEF SO ALLOWED WAS CONFIRMED BY THE TRIBUNAL. THIS VITAL ASPECT OF THE MATTER, HOWEVER, WAS BRUSHED ASIDE BY THE LEARNED CIT(APPEALS) OBSERVING THAT TH E CLAIM OF THE ASSESSEE FOR DEDUCTION U/S 24(A) WAS ALLOWED BY HIS PREDECESSOR WITHOUT EXAMINING THE BASIS OF THE SAID CLAIM AND HE CONFIRMED THE DISALLOWANCE MA DE BY THE AO ON A SIMILAR 3 ITA NO.6532/MUM/2010 ISSUE IN THE YEAR UNDER CONSIDERATION MAINLY FOR TH E SAME REASONS AS GIVEN BY THE AO. AGGRIEVED BY THE ORDER OF THE LEARNED CIT(APPEA LS), THE ASSESSEE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 4. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. ALTHOUGH THE LEARNED DR HAS STR ONGLY SUPPORTED THE IMPUGNED ORDER OF THE LEARNED CIT(APPEALS) CONFIRMING THE DI SALLOWANCE MADE BY THE AO ON ACCOUNT OF ASSESSEES CLAIM FOR DEDUCTION U/S 24(B) FOR INTEREST PAID ON PARTNERS CAPITAL ACCOUNT BY RELYING ON THE VARIOUS REASONS G IVEN IN THE IMPUGNED ORDER, THE LEARNED COUNSEL FOR THE ASSESSEE HAS FILED A WRITTE N SUBMISSION TO MEET SATISFACTORILY EACH AND EVERY POINT RAISED BY THE L EARNED CIT(APPEALS) WHILE CONFIRMING THE DISALLOWANCE MADE BY THE AO ON ACCOU NT OF ASSESSEES CLAIM FOR DEDUCTION U/S 24(B). MOREOVER, AS RIGHTLY SUBMITTED BY THE LEARNED COUNSEL FOR THE ASSESSEE, A SIMILAR ISSUE INVOLVED IN THE IMMEDIATE LY PRECEDING YEAR I.E. ASSESSMENT YEAR 2006-07 WAS DECIDED BY THE LEARNED CIT(APPEALS ) IN FAVOUR OF THE ASSESSEE IN THE SIMILAR FACTS AND CIRCUMSTANCES AND THE SAID DE CISION OF LEARNED CIT(APPEALS)D GIVING RELIEF TO THE ASSESSEE HAS BEEN UPHELD BY TH E TRIBUNAL VIDE ITS ORDER DATED 20 TH APRIL, 2010 PASSED IN ITA NO. 3216/MUM/2009. AS HE LD BY THE TRIBUNAL IN THE SAID ORDER, THE ENTIRE INTEREST PAID ON THE PARTNER S CAPITAL WAS RELATED TO THE PREMISES WHICH WERE LET OUT BY THE ASSESSEE AND THE SAME, THEREFORE, WAS ALLOWABLE AS DEDUCTION U/S 24(B) WHILE COMPUTING INCOME OF TH E ASSESSEE UNDER THE HEAD INCOME FROM HOUSE PROPERTY. RESPECTFULLY FOLLOWIN G THE SAID DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2006-07, WE DIRECT THE AO TO ALLOW THE CLAIM OF THE ASSESSEE FOR DEDUCTION ON AC COUNT OF INTEREST PAID ON PARTNERS CAPITAL U/S 24(B). 4 ITA NO.6532/MUM/2010 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED ON THIS 16 TH DAY OF MAY, 2012. SD/- SD/- (VIVEK VARMA) (P.M. JAGTAP) JUDICIAL MEMBER ACCO UNTANT MEMBER MUMBAI, DATED: 16 TH MAY, 2012 COPY TO : 1. APPELLANT 2. RESPONDENT 3. C.I.T. 4. CIT(A) 5. DR, E-BENCH. (TRUE COPY) BY ORDE R ASSTT. REGI STRAR, ITAT, MUMBAI BEN CHES, MUMBA I, WAKODE