DCIT 14(2), MUMBAI V. SHREE NURSINGSAHAY MUDUNGOPAL (BOMBAY), MUMBAI

ITA 6831/MUM/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 75292 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-01-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 21-01-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 08-11-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASHOK SURI
• Assessee Lawyers: SANJAY R PARIKH
• Keywords: Rule of consistency; Proportionate interest

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, E BENCH, E BENCH, E BENCH, MUMBAI MUMBAI MUMBAI MUMBAI , . . . ! ! ! ! , ' ' ' ' #$ #$ #$ #$ BEFORE BEFORE BEFORE BEFORE SHRI SHRI SHRI SHRI VIJAY PAL RAO, JM VIJAY PAL RAO, JM VIJAY PAL RAO, JM VIJAY PAL RAO, JM & & & & SHRI SHRI SHRI SHRI N. K. BILLAIYA N. K. BILLAIYA N. K. BILLAIYA N. K. BILLAIYA, AM , AM , AM , AM ./ I.T.A. NO. I.T.A. NO. I.T.A. NO. I.T.A. NO.6831/MUM/2012 6831/MUM/2012 6831/MUM/2012 6831/MUM/2012 ( % % % % & & & & / ASSESSMENT YEAR :2007-08) DY. COMMISSIONER OF INCOME TAX-14(2), 3 RD FLOOR, EARNEST HOUSE, NARIMAN POINT, MUMBAI-400021 / VS. M/S SHREE NURSINGSAHAY MUDUNGOPAL (BOMBAY), 281, SARGARGRUH BUILDING, 45/47, LOHAR CHAWL, MUMBAI-400002 $' ' ./ ( ./ PAN/GIR NO. :AAMFS3162K ( ') / APPELLANT APPELLANT APPELLANT APPELLANT) .. ( *+') / RESPONDENT RESPONDENT RESPONDENT RESPONDENT) % %% % ,- ,- ,- ,- / 0 / 0 / 0 / 0 /ASSESSEE BY : SHRI SANJAY R. PARIKH $ $ $ $ / 0 / 0 / 0 / 0 / REVENUE BY : SHRI ASHOK SURI / // / -' -' -' -' / DATE OF HEARING : 21 ST JANUARY 2014 12& 12& 12& 12& / // /-' -' -' -' /DATE OF PRONOUNCEMENT: 24 TH JANUARY 2014 #3 / O R D E R PER : , . . / VIJAY PAL RAO, JM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 27.8.2012 OF COMMISSIONER OF INCOME TAX(APPEALS) FO R THE ASSESSMENT YEAR 2007-08. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS IN THIS APPEAL: 1. THE LD. CIT(A) HAS ERRED IN LAW AS WELL ON THE FACT IN DELETING THE INTEREST OF ` 18,96,923/- EVEN THOUGH NO EVIDEN CE FOR THE PAYMENT OF THE SAME WAS PRODUCED BY THE ASSESSEE. 2. FOR THESE AND ANY OTHER REASONS THAT MAY BE URGE D AT THE TIME OF HEARING, IT IS REQUESTED THAT THE ORDER OF THE C IT(A) BE QUASHED AND THAT OF THE A.O BE RESTORED. 3. THE ONLY ISSUE RAISED BY THE REVENUES IN THIS AP PEAL IS REGARDING THE CLAIM OF INTEREST OF ` 18,96,923/- U/S 24 OF THE IN COME TAX ACT AGAINST THE INCOME FROM HOUSE PROPERTY. THE ASSESSEE CLAIMED IN TEREST OF ` ITA NO.6831/M/2012 SHREE NURSINGSAHAY MUDUNGOPAL (BOMBAY) 2 18,96,923/- BEING PAID ON LOAN TAKEN FOR ACQUISITIO N OF OFFICE PREMISES LET OUT TO THE TENANTS. THE A.O DISALLOWED THE CLAIM OF THE ASSESSEE ON THE GROUND THAT THE ASSESSEE HAS NOT PRODUCED THE RELEV ANT DETAILS. ON APPEAL, THE CIT(A) ISSUED A REMAND ORDER AND AFTER CONSIDER ING THE REMAND REPORT OF THE ASSESSING OFFICER AS WELL AS THE RELEVANT RE CORD FOUND THAT THE INTEREST WAS PAID TO THE STATE BANK OF INDIA ON THE TERM LOAN TAKEN BY THE ASSESSEE FOR ACQUISITION OF THE PROPERTIES IN QUEST ION. 4. BEFORE US THE LD. D.R HAS SUBMITTED THAT THE ASS ESSEE HAS NOT DIRECTLY PAID THE INTEREST TO THE BANK BUT IT WAS P AID TO M/S SHRI N. M. ELECTRICALS LTD. FURTHER THE ASSESSEE HAS NOT OFFER ED THE RENTAL INCOME IN RESPECT OF TWO PREMISES OUT OF THE PREMISES BEARING SHOP NO. 401 TO 410. HE HAS REFERRED THE ASSESSMENT ORDER AND SUBMITTED THAT THE ASSESSEE HAS OFFERED THE RENT ONLY IN RESPECT OF THE PREMISES NO . 401 TO 406 AND NO RENT WAS OFFERED IN RESPECT OF THE PREMISES NO. 407 AND 408. THEREFORE, THE PROPORTIONATE INTEREST SHOULD BE DISALLOWED. HE HAS RELIED UPON THE ORDER OF THE ASSESSING OFFICER. 5. ON THE OTHER HAND, THE LD. A.R HAS SUBMITTED THA T THE ASSESSEE HAS PRODUCED THE CERTIFICATE FROM THE STATE BANK OF IND IA WHEREIN IT HAS BEEN CERTIFIED THAT THE LOAN WAS TAKEN BY THE ASSESSEE F OR ACQUISITION OF PREMISES IN QUESTION AND THEREFORE, THE INTEREST PA ID IN RESPECT OF THE LOAN IS AN ALLOWABLE DEDUCTION U/S 24. HE HAS FURTHER SU BMITTED THAT THE A.O HAS ALLOWED THE CLAIM OF INTEREST FOR THE ASSESSMENT YE AR 2006-07 AND THEREFORE, BY FOLLOWING THE RULE OF CONSISTENCY THE CLAIM CANNOT BE ITA NO.6831/M/2012 SHREE NURSINGSAHAY MUDUNGOPAL (BOMBAY) 3 DISALLOWED FOR THE YEAR UNDER CONSIDERATION. HE HAS SUPPORTED THE ORDER OF THE CIT(A). 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD. THIS ISSUE WAS NOT EXAMINED BY THE A.O IN THE ASSESSMENT PROCEEDINGS HOWEVER IN THE REMAND PROCEE DINGS THE A.O HAS OBJECTED THE CLAIM OF THE ASSESSEE ON THE GROUND TH AT THE INTEREST WAS NOT PAID TO THE BANK BUT IT IS SHOWN AS PAID TO SHRI N. M. ELECTRICALS LTD. BY GENERAL ENTRIES. THUS, THE A.O HAS CONCLUDED THAT T HE INTEREST WAS PAID TO THE BANK BY SHRI N. M. ELECTRICALS LTD. AND NOT BY THE ASSESSEE AND HENCE, NOT ALLOWABLE U/S 24. THE A.O HAS NOT DISPUTED THE FACT THAT THE BUSINESS OF THE ASSESSEES PROPRIETORYSHIP WAS TAKEN OVER BY M/ S SHRI N. M. ELECTRICALS LTD. HOWEVER, THE PREMISES IN QUESTION WERE OWNED A ND RETAINED BY THE ASSESSEE. SINCE THE LOAN WAS TAKEN AND SHOWN IN THE BOOKS OF THE PROPRIETORYSHIP WHICH WAS TAKEN OVER BY M/S N. M. E LECTRICALS LTD. THEREFORE, THE PAYMENT OF INTEREST IS ROOTED THROUG H SHRI N. M. ELECTRICALS LTD. THE CIT(A) HAS RECORDED THE FINDING ON THIS IS SUE IN PARA 3.3.1 AS UNDER: 3.3.1 AS PER THE DETAILS OF THE PROPERTY OWNED BY ASSESSEE AS ON 31.3.2007 IT IS EVIDENT THAT ASSESSEE HAD OWNED OFF ICE PREMISES AT SHOP NO. 401 TO 410. SIMILARLY, ASSESSEE HAS ALSO O WNED PARKING PLACE AT TECH PLAZA FOR WHICH IT HAS PAID ` 13 LAKH S. APART FROM THE ABOVE, THE ASSESSEE ALSO OWNED SHIP AT PAGARIA COMP LEX AND GODWON AT BHUBHANESWAR. THERE IS NO AMBIGUITY WITH REGARD TO THE CLAIM OF THE ASSESSEE OWNING THE IMPUGNED PROPE RTY FOR WHICH THE ALV HAS BEEN BROUGHT TO TAX. THE OTHER UNDISPUT ED FACT IS THAT THE ASSESSEE HAD TAKEN LOAN FROM SBI FOR ACQUIRING THE IMPUGNED PROPERTY. THE CERTIFICATE ISSUED BY SBI IS REPRODUC ED BELOW: THIS IS TO CERTIFY THAT TERM LOAN OF ` 3.00 CRORES WAS SANCTIONED TO M/S SHRI NURSINGSAHAY MUDUNGOPAL (BOM BAY), VIDE OUR SANCTION LETTER NO. CB: AMT-IV:2005:06662 DATED ITA NO.6831/M/2012 SHREE NURSINGSAHAY MUDUNGOPAL (BOMBAY) 4 03.02.2005, FOR ACQUISITION OF OFFICE PREMISES IN S AKINAKA ANDHERI (EAST), MUMBAI. THE INTEREST APPLIED ON ABO VE TL ACCOUNT IN FY 2006-07 (FROM 01.04.2006 TO 31.03.200 7) WAS ` 18,96,923.53 (RUPEES EIGHTEEN LACS NINETY SIX THO USAND NINE HUNDRED TWENTY THREE AND FIFTY THREE PAISA ONL Y). THIS IS TO FURTHER CERTIFY THAT THE BUSINESS ACTIVI TIES OF ABOVE FIRM NAMELY M/S SHREE NURSINGSAHAY MUDUNGOPAL (BOMB AY), WAS TAKEN OVER BY SHRI N. M. ELECTRICALS LTD. EFFEC TIVE FROM 01.04.2005. AS SUCH, INTEREST ON THE CAPTIONED TL W AS DEBITED TO CASH CREDIT ACCOUNT NO. 11079527343 STAN DING IN THE NAME OF SHREE N. M. ELECTRICALS LTD. THIS CERTIFICATE CLEARLY SHOWS THAT AMOUNT WAS BORR OWED BY THE ASSESSEE FROM SBI FOR ACQUIRING THIS IMPUGNED PROPE RTY. THE AMOUNT OF INTEREST INVOLVED IS ALSO CLEARLY MENTION ED. THIS LETTER ALSO CLARIFIES UNDER WHAT CIRCUMSTANCES THE INTERES T ON TERM LOAN GIVEN TO THE ASSESSEE HAS BEEN SHOWN AS DEBIT IN CA SH CREDIT ACCOUNT NO. 11079527343 STANDING IN THE NAME OF SHR EE N. M. ELECTRICALS LTD. IN VIEW OF THESE FACTS IT IS APPAR ENT THAT THE ASSESSEE HAS PAID THE INTEREST TO THE BANK ON THE A MOUNT BORROWED FOR ACQUIRING THE IMPUGNED PROPERTY. IT IS REALLY IMMATERIAL WHETHER THE PAYMENT HAS BEEN MADE DIRECT LY TO SBI OR THROUGH M/S SHREE N. M. ELECTRICALS LTD. WHICH HAS TAKEN OVER THE BUSINESS OF THE ASSESSEE. THE BOOKS OF ASSESSEE FIR M AS WELL AS SHREE N. M. ELECTRICALS LTD. TOWARDS INTEREST PAYAB LE ON THE TERM LOAN FROM SBI TAKEN BY THE ASSESSEE FOR ACQUIRING I MPUGNED PROPERTY. NO AMOUNT HAS BEEN SHOWN PAYABLE BY THE ASSESSEE AS PER BOOKS OF ACCOUNT OF THE ASSESSEE FIRM TO M/S SHREE N. M. ELECTRICALS LTD. OR RECEIVABLE BY SHREE N. M. ELECT RICALS LTD. AS PER ITS BOOKS OF ACCOUNT FROM THE ASSESSEE. AS IT IS EV IDENT FROM THE REMAND REPORT REPRODUCED ABOVE, THE BUSINESS OF THE ASSESSEE WAS TAKEN OVER BY M/S SHREE N. M. ELECTRICALS LTD. W.E.F 01.04.2005. ON THE SAME FACTS THE A.O FOR ASSESSMEN T YEAR 2006- 07 HAS ALLOWED CLAIM OF INTEREST TO THE TUNE OF ` 2 5,21,009/-. I FIND THAT SINCE NECESSARY REQUIREMENT OF TAKING LOAN FOR ACQUIRING IMPUGNED PROPERTY RENT FROM WHICH IS SUBJECTED TO T AX AND FOR WHICH PAYMENT OF INTEREST HAS BEEN MADE WITH, THE C LAIM OF THE ASSESSEE SHOULD BE ALLOWED U/S 24(B). THERE IS NO N EED FOR CERTIFICATE FROM THE BORROWER IF THE PROPERTY INVOL VED IS NOT A SELF OCCUPIED PROPERTY. THE ASSESSEE SUCCEEDED AS FAR AS THIS GROUND IS CONCERNED. 7. IT IS CLEAR FROM THE FINDING OF THE CIT(A) THAT THE LOAN WAS TAKEN BY THE ASSESSEE IN THE YEAR 2005 FOR ACQUISITION OF TH E PROPERTIES IN QUESTION. SUBSEQUENTLY, THE BUSINESS OF THE ASSESSEE WAS TAKE N OVER BY M/S SHREE N. ITA NO.6831/M/2012 SHREE NURSINGSAHAY MUDUNGOPAL (BOMBAY) 5 M. ELECTRICALS LTD. EXCEPT THE PREMISES IN QUESTION . THEREFORE, THE INTEREST ON THE LOAN TAKEN FOR ACQUISITION OF THE PROPERTY I N QUESTION IS AN ALLOWABLE CLAIM U/S 24 OF THE INCOME TAX ACT. MERELY BECAUSE THE PAYMENT INTEREST IS ROOTED THROUGH SHREE N. M. ELECTRICALS LTD. BECAUSE OF THE FACT THAT THE BUSINESS OF THE ASSESSEE WAS TAKEN OVER BY SHREE N. M. ELECTRICALS LTD. CANNOT BE A GROUND FOR DISALLOWANCE OF THE CLAIM WH EN THE FACTUM OF PAYMENT OF INTEREST ON THE SAID LOAN IS NOT IN DISP UTE. AS REGARDS, THE CONTENTION OF THE LD. D.R REGARDING NOT OFFERING RE NT OF SOME OF THE PREMISES TO TAX, WE NOTE THAT NO SUCH OBJECTION WAS RAISED BY THE A.O EITHER IN THE ASSESSMENT ORDER OR IN THE REMAND REP ORT. THEREFORE, WE DO NOT ACCEPT THE CONTENTION OF THE LD. D.R. IN VIEW O F THE FACTS AND CIRCUMSTANCES OF THE CASE WE DO NOT FIND ANY ERROR OR ILLEGALITY IN THE ORDER OF CIT(A) QUA THIS ISSUE. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 24 TH DAY OF JANUARY 2014 SD/- SD/- ( . . ! ) ' #$ (N. K. BILLAIYA) ACCOUNTANT MEMBER ( ) % #$ (VIJAY PAL RAO) JUDICIAL MEMBER PLACE: MUMBAI : DATED: JANUARY 2014 SUBODH COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI