The ITO, Ward-4(2)., Ahmedabad V. Kalpvruksha Estate & Finance P.Ltd., Ahmedabad

ITA 683/AHD/2012

• Counselvise Citation: 68320514 RSA 2012
• Duration Of Justice: 2 year(s) 2 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-05-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 26-05-2014
• Assessment Year: 2005-2006
• Appeal Filed On: 21-03-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O P BATHEJA
• Assessee Lawyers: S N DIVETIA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD BEFORE SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER AND SHRI T.R. MEENA, ACCOUNTANT MEMBER ITA NO.683/AHD/2012 A.Y. 2007-08 THE ITO, WARD 4(2), AHMEDABAD, ROOM NO.105, NAVJIVAN TRUST BUILDING, OFF. ASHRAM ROAD, AHMEDABAD. VS KALPVRUKSHA ESTATE & FINANCE P. LTD., 30 ASIA HOUSE, NR. SWASTIK CHAR RASTA, NAVRANGPURA, AHMEDABAD. PAN: AAACK 8013G (APPELLANT) (RESPONDENT) REVENUE BY : SHRI O.P. BATHEJA, D.R., ASSESSEE(S) BY : SHRI S.N. DIVETIA, AR / DATE OF HEARING : 26/05/2014 / DATE OF PRONOUNCEMENT: 30/05/2014 / O R D E R PER SHRI MUKUL KUMAR SHRAWAT, JUDICIAL MEMBER THIS IS AN APPEAL FILED BY THE REVENUE ARISING FRO M THE ORDER OF LEARNED CIT(A)-VIII, AHMEDABAD, DATED 31.01.2012 AN D THE SUBSTANTIVE GROUND RAISED BY THE REVENUE IS REPRODUCED BELOW: THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DE LETING THE ADDITION OF RS.8,45,046/- ON ACCOUNT OF INTEREST ON BORROWED CA PITAL U/S24(B) WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE FAILED TO P ROVE THAT ANY MONEY WAS BORROWED TO CONSTRUCT, ACQUIRE, REPAIR OR RECONSTRU CTION OF RENTED PROPERTY. THE ASSESSEE ALSO FAILED TO PROVIDE ANY EVIDENCES R EGARDING TDS ON INTEREST PAYMENT. 2. FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDING ASSESSMENT ORDER PASSED U/S.143(3) R.W.S. 147 OF IT ACT, DATED 17 TH NOVEMBER, 2009 WERE THAT THE ASSESSEE IS A COMPANY AND FOR THE YEAR UND ER CONSIDERATION IT WAS NOTED BY THE AO THAT THE ASSESSEE HAD NOT CARRIED O UT ANY BUSINESS ACTIVITY AND SHOWN ONLY RENTAL INCOME UNDER THE HEA D INCOME FROM ITA NO.683/AHD/2012 ITO, WARD 4(2), AHMEDABAD VS. KALPVRUKSHA ESTATE & FINANCE P. LTD. A.Y.2005-06 - 2 - HOUSE PROPERTY AMOUNTING TO RS.17,81,843/-. THE AS SESSEE HAD CLAIMED STANDARD DEDUCTION AS PRESCRIBED UNDER THE ACT TO R S.5,34,533/-. FURTHER, THE ASSESSEE HAS ALSO CLAIMED A DEDUCTION OF PAYMEN T OF INTEREST ON BORROWED CAPITAL OF RS.8,45,046/- AS PER THE PROVIS IONS OF SECTION 24(B) OF IT ACT. THE AOS OBJECTION WAS THAT AS PER THE L EDGER ACCOUNT OF ONE SRI R.R. SHAH TO WHOM THE IMPUGNED INTEREST WAS PAI D WAS NOT ON THE BORROWED CAPITAL BUT THE INTEREST WAS PAID UNDER TH E CURRENT ACCOUNT OF SRI R.R. SHAH. IN COMPLIANCE OF THE SHOW CAUSE NOTI CE, THE ASSESSEE HAS SUBMITTED THE FOLLOWING EXPLANATION: 2. IN THIS REGARD, WE WOULD LIKE TO BRING TO YOUR N OTICE THE FACT THAT THE YEAR UNDER CONSIDERATION IS NOT THE FIRST YEAR OF ACQUIS ITION OF THE GODOWN. THE GODOWN WAS ACQUIRED IN THE ASSESSMENT YEAR 96-97 I. E. CLOSE TO 10 YEARS AGO. FURTHER, THE COMPANY WAS FORMED IN FINANCIAL YEAR W ITH A PAID UP SHARE CAPITAL AND FREE RESERVES OF RS. 700 ONLY AND IN TH E FINANCIAL YEAR 1996-97 I.E. THE YEAR IN WHICH THE GODOWN WAS CONSTRUCTED, THERE WAS NO INCREASE IN THE PAID UP SHARE CAPITAL. OBVIOUSLY, THE CONSTRUCT ION OF GODOWN WAS DONE OUT OF BORROWED CAPITAL. EVEN AS ON 31 ST MARCH, 2005 THE AGGREGATE VALUE OF PAID UP SHARE CAPITAL AND FREE RESERVES IS RS. 9,21 ,062/- AS AGAINST WHICH THE DEPRECIATED VALUE OF GODOWN IS RS. 71,57,450/- WHIC H FURTHER SUBSTANTIATES THE FACT THAT THE GODOWN WAS CONSTRUCTED OUT OF BOR ROWED CAPITAL. WE ARE SUBMITTING HEREWITH THE ACKNOWLEDGMENT AND STATEMEN T OF COMPUTATION OF TOTAL INCOME ALONG WITH TAX LIABILITY THEREON OF .Y . 1997-98 FOR YOUR GOOD SELFS PERUSAL WHICH CLEARLY ESTABLISHES THE AFORESAID FAC T THAT INTEREST ON LOAN OF RS.10,71,711/- WAS CLAIMED AS WELL AS ALLOWED AS DE DUCTION AGAINST RENT RECEIVED FROM RENTING OF GODOWN CONSTRUCTED FROM BO RROWINGS. (ANNEXURE-1) WE WOULD LIKE TO EMPHASISE THAT, AS A MATTER OF FAC T, THE NATURE OF UNSECURED LOAN FROM SHRI RAKESH R. SHAH WHICH IS OUTSTANDING SINCE 1995-96 HAS NOT BEEN DISPUTED BY THE PREDECESSORS IN YOUR GOODSELFS OFFICE. 3. HOWEVER, THE AO WAS NOT CONVINCED AND HELD THAT THE ASSESSEE HAD REPAID UNSECURED LOAN OF RS.5,71,684/- TO R.R. SHAH , THEREFORE, IT WAS EVIDENT THAT THE SAID ACCOUNT WAS A CURRENT ACCOUNT AND THE ASSESSEE HAS NOT ESTABLISHED THAT THE GODOWNS WERE CONSTRUCTED O UT OF THE SAID BORROWED FUNDS. RESULTANTLY, THE CLAIM OF INTEREST OF RS.8,45,046/- WAS DISALLOWED. BEING AGGRIEVED THE MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY. ITA NO.683/AHD/2012 ITO, WARD 4(2), AHMEDABAD VS. KALPVRUKSHA ESTATE & FINANCE P. LTD. A.Y.2005-06 - 3 - 4. THE OBSERVATION OF THE AO WAS THAT THE ASSESSEE WAS HAVING RENTAL INCOME WHICH WAS ASSESSED IN THE PAST SINCE A.Y. 19 95-96. IN A.Y. 1995-96, THE CONSTRUCTION OF THE GODOWN WAS MADE OU T OF THE BORROWED FUNDS. THE SAID DEDUCTION, AS PER LEARNED CIT(A) WE RE CLAIMED AGAINST THE HOUSE PROPERTY INCOME IN THE PAST WHICH WERE AL SO ASSESSED ACCORDINGLY. FEW CASE LAWS CITED WERE ITO VS. MAAKRUPA CHEMICALS, 110 TTJ 489 (MUMBAI), PREM CHHADHA, 92 TTJ 69 (DELH I) . AFTER ANALYZING CASE LAWS AND FACTS, LEARNED CIT(A) HAS G IVEN THE FINDING AS UNDER: 5. THE ASSESSMENT ORDER AND THE SUBMISSION OF THE APPELLANT ARE SEEN CAREFULLY. THE APPELLANT HAS SUBMITTED THAT GODOWN WAS ACQUIRED MORE THAN 10 YEARS AGO OUT OF BORROWED FUNDS AND INTEREST WAS BEING CLAIMED SINCE THEN AND DULY ACCEPTED BY THE DEPTT. THE APPELLANT ALSO CONTENDED THAT IT WAS NOT NECESSARY TO FILE CERTIFICATE WITH RETURN OF INCOME IN VIEW OF THE CLEAR LANGUAGE OF SEC.23(2) WHICH REQUIRES SUCH CERTIFICA TE TO BE FILED ONLY IN THE CASE OF A RESIDENTIAL HOUSE AND NOT GODOWN. THE APP ELLANT HAS ALSO DEDUCTED THE TDS AND PAID IN TIME TO THE GOVT. A/C. THE A.O. HAS ALSO FAILED TO MAKE OUT AS TO HOW REPAYMENT OF PART OF THE LOAN CAN COME IN THE WAY OF ALLOWANCE OF INTEREST. 5.1. FROM THE DETAILS FILED BY THE APPELLANT BEFORE AO AND BEFORE UNDERSIGNED, IT BECOMES VERY CLEAR THAT THIS WAS AN OLD LOAN AND IN PREVIOUS YEARS THE INTEREST CLAIMED WAS BEING ALLOWED. IT IS NOT AT ALL CLEAR AS WHAT HAS LED TO THE AO TO TREAT THIS ACCOUNT AS CURRENT ACCO UNT. HOWEVER, THIS ISSUE HAS NO BEARING BECAUSE THE INCOME IS BEING ASSESSED UND ER THE HEAD INCOME FROM HOUSE PROPERTY AND NOT UNDER THE HEAD INCOME FROM B USINESS OR PROFESSION. IN VIEW OF THIS, THE DISALLOWANCE OF INTEREST EXPEN SES ON BORROWED CAPITAL OF RS. 8,45,046/- IS DELETED 5. PARTIES HEARD. CASE RECORD PERUSED. FROM THE SID E OF THE REVENUE, LEARNED DR HAS PLACED RELIANCE ON THE ORDER OF THE AO, ON THE OTHER HAND FROM THE SIDE OF THE RESPONDENT-ASSESSEE, LEARNED A R HAS SUPPORTED THE ORDER OF LEARNED CIT(A). IN THE PAPER BOOK FILED BE FORE US THE ASSESSEE HAS FURNISHED RETURN OF INCOME FOR A.Y.1996-97 TO E STABLISH THAT THE GODOWNS WERE SHOWN SINCE THEN AND THE RENTAL INCOME WAS ALSO ITA NO.683/AHD/2012 ITO, WARD 4(2), AHMEDABAD VS. KALPVRUKSHA ESTATE & FINANCE P. LTD. A.Y.2005-06 - 4 - DISCLOSED. THE ASSESSEE HAS ALSO FURNISHED THE BALA NCE-SHEET TO PROVE THAT THE COMPANY HAD VERY LIMITED OWN FUNDS AND THE GODO WNS WERE CONSTRUCTED OUT OF THE BORROWED FUNDS. FEW MORE BAL ANCE-SHEETS OF INTERREGNUM PERIOD HAVE ALSO BEEN PLACED ON RECORD TO PROOF THAT THE LOAN WAS SHOWN IN THE NAME OF SRI R.R. SHAH OF RS.70,47, 488/- WHICH WAS SHOWN AS UNSECURED LOAN IN THE PAST FEW YEARS. IN T HE ABSENCE OF ANY CONTRARY MATERIAL, WE ARE NOT INCLINED TO INTERFERE WITH THE FACTUAL AS WELL AS LEGAL FINDING OF LEARNED CIT(A); HENCE, THE SAME IS HEREBY AFFIRMED AND THE GROUND OF THE REVENUE IS DISMISSED. 6. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. SD/- SD/- (T.R. MEENA) ( MUKUL KR. SHRAWAT) ACCOUNTANT MEMBER JUD ICIAL MEMBER AHMEDABAD; DATED 30/05/2014 PRABHAT KR. KESARWANI, SR. P.S. / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A)-III, AHMEDABAD 5. , , / DR, ITAT, AHMEDABAD 6. / GUARD FILE. / BY ORDER, / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD