VINOD R. GOYAL, MUMBAI V. DCIT - 30(3), MUMBAI

ITA 698/MUM/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 0066 (ITAT-MUMBAI)
• Duration Of Justice: 6 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-08-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Appeal Filed On: 01-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N HEMALATHA
• Keywords: Business expenditure; Salary income; Commercial expediency

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI B.R. BASKARAN (AM) I.T.A. NO. 698 /MUM/ 2 017 (ASSESSMENT YEAR 20 13 - 14 ) SHRI VINOD R. GOYAL 1 ST FLOOR, SADHANA 61, DAFTARY ROAD MALAD EAST MUMBAI - 400 097. PAN NO. ADUPG6986A VS. DCIT 30( 3) MUMBAI. ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY SHRI NITESH JOSHI DEPARTMENT BY MS. N. HEMALATHA DATE OF HEARING 2 2 . 8 . 201 7 DATE OF PRONOUNCEMENT 22 . 8 . 201 7 O R D E R THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 28.11.2016 PASSED BY THE LEARNED CIT(A) - 41, MUMBAI AND IT RELATES TO A.Y. 2013 - 14. 2. AT THE TIME OF HEARING LEARNED COUNSEL APPEARING FOR THE ASSESSEE DID NOT PRESS GROUND NO. 1 RELATING TO DISALLOWANCE OF INTEREST OF ` 63,441/ - . ACCORDINGLY, THE SAID GROUND IS DISMISSED AS NOT PRESSED. 3. REMAINING GROUNDS RELATE TO THE FOLLOWING ISSUES : - A) DISALLOWANCE OF INTEREST OF ` 22.50 LAKHS B) DISALLOWANCE OF INTEREST OF ` 60,672/ - 4. I HEARD THE PARTIES AND PERUSED THE RECORD. THE ASSESSEE IS AN INDIV IDUAL DERIVING SALARY INCOME AND SHARE OF PROFIT FROM A FIRM. THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS MADE A CLAIM OF ` 22.50 LAKHS ON ACCOUNT OF BANK CHARGES AND INTEREST. THE ASSESSEE EXPLAINED THAT HE HAS HELD FIXED DEPOSITS WITH BHARAT COOP ER ATIVE BANK LIMITED AND EARNED INTEREST THEREON. HE SUBMITTED THAT HE HAS OBTAINED LOAN ON THE PLEDGE OF FIXED DEPOSIT RECEIPTS SHRI VINOD R. GOYAL 2 AND LOAN PROCEEDS WERE USED FOR MAKING INVESTMENT IN A PROJECT RELATING TO CONSTRUCTION OF A BUILDING ON AN ANCESTRAL PROPERTY. THE ASSESSEE INCURR ED INTEREST EXPENDITURE OF ` 22.50 LAKHS AND THE SAME WAS CLAIMED AGAINST INTEREST INCOME OF ` 11.86 LAKHS RECEIVED FROM FIXED DEPOSITS . SINCE THE ASSESSEE HAS FAILED TO ESTABLISH THAT THE ASSESSEE HAS INCURRED INTEREST EXPENDITURE TO E ARN INTEREST INCOME FROM THE BANK, THE ASSESSING OFFICER REJECTED THE CLAIM FOR DEDUCTION ON INTEREST EXPENDITURE. THE ASSESSEE HAD ALSO SUBMITTED THAT THE LOAN OBTAINED ON THE PLEDGE OF FDR WAS INVESTED IN THE CONSTRUCTION AND HENCE INTEREST EXPENDITURE S HOULD BE ALLOWED AS BUSINESS EXPENDITURE . THE S AID CONTENTION ALSO DID NOT FIND FAVOUR WITH THE ASSESSING OFFICER . A CCORDINGLY HE DISALLOWED THE INTEREST EXPENDITURE CLAIM OF ` 22.50 LAKHS. 5. BEFORE THE LEARNED CIT(A), ASSESSEE CONTENDED THAT THERE IS COMMERCIAL EXPEDIENCY INVOLVED IN INVESTING LOAN FUND S IN THE PROJECT OF CONSTRUCTION OF THE NEW BUILDING ON THE ANCESTRAL LAND. THE ASSESSEE SUBMITTED THAT THE PROJECT WAS BEING UNDERTAKEN IN JOINT VENTURE ALONG WITH SOME OTHER PERSON WITH THE NAME BRIJW ASI INFRA PROJECTS. THE LEARNED CIT(A) TOOK THE VIEW THAT THE ASSESSEE IS FREE TO CAPITALISE INTEREST OF ` 22.50 LAKHS AS PART OF COST OF PROJECT UNDERTAKEN BY THE ASSESSEE. T HE LEARNED CIT(A), HOWEVER, AGREED WITH THE VIEW TAKEN BY THE ASSESSING OFFICE R THAT THE INTEREST EXPENDITURE CANNOT BE CONSIDERED AS EXPENSES INCURRED IN EARNING INTEREST INCOME FROM THE BANK. ACCORDINGLY, HE REJECTED THE CLAIM OF THE ASSESSEE. 6. LEARNED AR SUBMITTED THAT THE ASSESSEE HAS ENTERED INTO A JOINT VENTURE AGREEMENT TO DEVELOP A BUILDING PROJECT ON THE ANCESTRAL LAND OWNED BY THE ASSESSEE. HE SUBMITTED THAT THE ASSESSEE IS HAVING 50% SHARE IN THE PROJECT. HE SUBMITTED THAT IT WAS A COMMERCIAL PROJECT AND THE TAX AUTHORITIES HAVE NOT BEEN PROPERLY BRIEFED IN THE MATTER . ACCORDINGLY, HE SUBMITTED THAT THE INTEREST EXPENDITURE SHOULD BE ALLOWED ON THE PRINCIPLES OF COMMERCIAL EXPEDIENCY , SINCE THE ASSESSEE HAS INVESTED LOAN FUNDS INTO THE PROJECT. THOUGH THE LD SHRI VINOD R. GOYAL 3 A.R SUBMITTED THAT THE JOINT VENTURE WAS AN AOP, HE WAS NOT S URE ABOUT THE LEGAL STATUS OF THE JOINT VENTURE. 7. ON THE CONTRARY, LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE ASSESSEE HAS NOT FURNISHED ANY DETAILS ABOUT THE PROJECT. SHE FURTHER SUBMITTED THAT IT IS ALSO NOT CLEAR AS TO WHETHER THE SAID PR OJECT WAS BEING UNDERTAKEN AS A SEPARATE ENTITY OR AS ASSESSEES OWN PROJECT. SHE FURTHER SUBMITTED THAT CLAIM OF THE ASSESSEE HAS TO BE EXAMINED ON THE BASIS OF CORRECT FACTS. 8. HAVING HEARD THE RIVAL SUBMISSIONS, I AM OF THE VIEW THAT THIS ISSUE REQU IRES FRESH EXAMINATION. I NOTICE THAT THE CLAIM OF THE ASSESSEE NEEDS TO BE CONSIDERED IN THE CONTEXT OF THE LEGAL STATUS OF THE JOINT VENTURE ENTERED BETWEEN THE ASSESSEE AND SOME OTHER PERSON. I NOTICED THAT THE ASSESSEE HAS ALSO NOT BROUGHT ON RECORD D ETAILS OF JOINT VENTURE. ACCORDING TO THE ASSESSEE , JOINT VENTURE IS A COMMERCIAL VENTURE AND HENCE INTEREST EXPENDITURE SHOULD BE ALLOWED ON T HE PRINCIPLE OF COMMERCIAL EXPE DIENCY. SINCE THE DETAILS OF JOINT VENTURE PROJECT HAS NOT BEEN EXAMINED OR BROUGH T ON RECORD , I AM OF THE VIEW THAT THIS ISSUE NEEDS TO BE RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR EXAMINING IT AFRESH. AT THE SAME TIME, I AGREE WITH THE VIE W TAKEN BY THE TAX AUTHORITIES THAT INTEREST EXPENDITURE CANNOT BE ALLOWED AS DEDUCTION A GAINST INTEREST INCOME SINCE PROCEEDS OF LOAN HAVE BEEN INVESTED IN THE PROJECT CITED ABOVE. MY VIEW FINDS SUPPORT FROM THE DECISION RENDERED BY HON'BLE SUPREME COURT IN THE CASE OF CIT VS. DR. V.P.GOPINATHAN (248 ITR 449) . 9. ACCORD I NGLY, I SET ASIDE TH E ORDER PASSED BY THE LEARNED CIT(A) ON THIS ISSUE AND RESTORE THE SAME TO THE FILE OF THE ASSESSING OFFICER WITH THE DIRECTION TO EXAMINE THE ISSUE AFRESH IN THE LIGHT OF FRESH INFORMATION AND EXPLANATION S THAT MAY BE FURNISHED BY THE ASSESSEE WITH REGARD TO THE PROJECT EXECUTED BY THE ASSESSEE IN JOINT VENTURE. AFTER AFFORDING ADEQUATE OPPORTUNITY TO THE ASSESSEE, THE ASSESSING OFFICER MAY TAKE APPROPRIATE DECISION IN ACCORDANCE WITH LAW. SHRI VINOD R. GOYAL 4 10. NEXT ISSUE RELATES TO DISALLOWANCE OF ` 60,672/ - PAID TO LIC L OAN. LEARNED AR SUBMITTED THAT THE ASSESSEE HAS UTILISED LIC LOAN FOR MAKING CAPITAL CONTRIBUTION TO THE FIRM AND HENCE INTEREST SHOULD BE ALLOWED AS DEDUCTION. HOWEVER, I NOTICED THAT THE ASSESSEE HAS FAILED TO FURNISH RELEVANT DETAILS SHOWING NEXUS BETWE EN THE LOAN AND CAPITAL CONTRIBUTION MADE IN THE FIRM. WHEN THIS FACT WAS POINTED OUT TO LEARNED AR, HE PRAYED THAT THE ASSESSEE MAY BE PROVIDED WITH AN OPPORTUNITY TO FURNISH NECESSARY DETAILS BEFORE THE ASSESSING OFFICER. HENCE, IN THE INTEREST OF NATURA L JUSTICE, I SET ASIDE THE ORDER PASSED BY THE LEARNED CIT(A) ON THIS ISSUE AND RESTORE THE SAME TO THE FILE OF THE ASSESSING OFFICER WITH THE DIRECTION TO EXAMINE THE SAME AFRESH AND TAKEN APPROPRIATE DECISION IN ACCORDANCE WITH THE LAW. 11. IN THE RESU LT, APPEAL FILED BY THE ASSESSEE IS TREATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER HAS BE EN PRONOUNCED IN THE COURT ON 2 2 . 8 . 201 7. SD/ - (B.R.BASKARAN) ACCOUNTANT MEMBER MUMBAI ; DATED : 2 2 / 8 / 20 1 7 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) PS ITAT, MUMBAI