Jyoti Agarwal, Hyderabad, Hyderabad V. ITO, Ward-14(2), Hyderabad, Hyderabad

ITA 703/HYD/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 2662 (ITAT-HYDERABAD)
• Duration Of Justice: 9 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-01-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 21-12-2017
• Assessment Year: 2013-2014
• Appeal Filed On: 20-04-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SUMAN MALIK
• Assessee Lawyers: ARUN KUMAR MALPANI
• Keywords: Salary income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SMT P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO. 703/HYD/2017 ASSESSMENT YEAR: 2013-14 JYOTI AGARWAL, HYDERABAD. PAN AAKPA 6898G VS. INCOME-TAX OFFICER, WARD 14(2), HYDERABAD (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI ARUN KUMAR MALPANI REVENUE BY : SMT. SUMAN MALIK DATE OF HEARING 21-12-2017 DATE OF PRONOUNCEMENT 24-01-2018 O R D E R PER S. RIFAUR RAHMAN, A.M.: THIS APPEAL IS PREFERRED BY THE ASSESSEE AGAINST T HE ORDER OF CIT(A) 6, HYDERABAD, DATED 16/10/2017 FOR THE AY 2013-14. 2. BRIEFLY THE FACTS OF THE CASE ARE, ASSESSEE, AN INDIVIDUAL, FILED RETURN OF INCOME FOR THE AY 2013-14 ON 22/07/2013 D ECLARING TOTAL INCOME OF RS. 8,10,780/-. THE RETURN WAS PROCESSED U/S 143(1) OF THE INCOME-TAX ACT, 1961 (IN SHORT THE ACT) ON 27/01/ 2014. THE CASE WAS SELECTED FOR SCRUTINY UNDER CASS AND A NOTICE U/S 1 43(2) OF THE ACT WAS ISSUED ON 02/09/2014. NOTICES U/S 143(2) AND 14 2(1) DATED 14/08/2015 HAD BEEN ISSUED TO THE ASSESSEE CALLING FOR THE INFORMATION. THE ASSESSEE FURNISHED THE INFORMATION AS CALLED FOR. 2.1 . THE ASSESSEE IS DERIVING INCOME FROM SALARY, HOU SE PROPERTY AND OTHER SOURCES. THE ASSESSEE HAD ADMITTED INCOME OF RS18,90,000/- AND 25,505/- FROM SALARY AND HOUSE PR OPERTY 2 ITA NO. 703 /HYD/2017 JYOTI AGARWAL, HYD. RESPECTIVELY. FURTHER, THE ASSESSEE ADMITTED LOSS OF RS.10,04,728/- UNDER THE HEAD 'INCOME FROM OTHER SOURCES', SET OFF THE SAME AGAINST THE INCOME FROM SALARY AND HOUSE PROPERTY AND ARRIV ED AT GROSS TOTAL INCOME OF RS.9,10,777/-. ON VERIFICATION OF THE IN FORMATION FURNISHED, THE AO NOTICED THAT THE ASSESSEE HAD ARRIVED AT THE LOSS AFTER DEDUCTING INTEREST PAID OF RS. 11,19,167/- TO BANK AGAINST INCOME SHOWN AS INTEREST RECEIVED FROM BANK, PROFIT ON MUT UAL FUND AND TUITION FEE TOTALLING TO RS.1,77,116/-. THE INTERES T OF RS.11,39,167/- WAS ON HOUSING LOAN TAKEN FROM STATE BANK OF HYDERA BAD FOR AN AMOUNT OF RS. 1,13,30,000/- FOR ACQUIRING VILLA AT SY.NO.386, SHAMSHABAD VILLAGE, CHEVELLA ROAD, R.R. DIST. THE A SSESSEE HAD FURNISHED COPY OF STATEMENT OF ACCOUNT FROM STATE B ANK OF HYDERABAD, GUNFOUNDRY, HYDERABAD FOR THE RELEVANT P ERIOD. WHEN QUESTIONED, ABOUT THE EXPENDITURE INCURRED TO EARNE D INCOME, THE A.R. OF THE ASSESSEE SUBMITTED THAT THE ASSESSEE PA ID INTEREST TO STATE BANK OF HYDERABAD ON HOUSING LOAN TAKEN AND U TILIZED THE PREMISES TO CONDUCT THE TUITIONS AND RECEIVED AN AM OUNT OF RS.1,20,000/- FROM TUITION. THE AO OBSERVED THAT TH E SUBMISSION OF THE A.R WAS NOT TENABLE AS IT WAS EVIDENT FROM THE ARRANGEMENT LETTER-HOUSING FINANCE OF STATE BANK OF HYDERABAD D ATED 05.07.2010 THAT THE LOAN WAS SANCTIONED TO THE ASSESSEE FOR TH E PURPOSE OF PURCHASE/CONSTRUCTION/ EXTENSION/ REPAIRS/RENOVATI ON OF NEW/SECOND- HAND RESIDENTIAL HOUSE/FLAT/PLOT OF LAND/PURCHASE O F CONSUMER DURABLES/FURNISHINGS' AT VILLA NO.1, PLOT NO.1, IT SURVEY NO.386, SHAMSHABAD VILLAGE CHEVELLA ROAD, R.R. DIST. SINCE THERE WAS NO CORRELATION BETWEEN THE AMOUNT PAID TO THE BANK AND THE INCOME RECEIVED FROM TUITIONS, THE AO REJECTED THE CLAIM O F INTEREST EXPENDITURE OF RS.11,39,169/- U/S 57 OF THE ACT. A GGRIEVED WITH THE ORDER OF AO, THE ASSESSEE PREFERRED AN APPEAL BEFOR E THE CIT(A). 3. BEFORE THE CIT(A), IT WAS SUBMITTED THAT IN THE PRECEDING PREVIOUS YEAR THE PREMISES WAS USED FOR MONEY LENDI NG AND IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION, IT 3 ITA NO. 703 /HYD/2017 JYOTI AGARWAL, HYD. WAS USED FOR GIVING TUITIONS, THEREFORE, THE INTERE ST ON SUCH LOAN SHOULD BE ALLOWED AS DEDUCTION FROM INTEREST EARNED UNDER THE HEAD 'INCOME FROM OTHER SOURCES. FURTHER, IT WAS SUBMITT ED THAT THE ASSESSEE HAD PURCHASED THE HOUSE FOR THE PURPOSE OF DOING SOME ACTIVITY WHICH COULD GENERATE INCOME FOR HERSELF AN D SINCE THIS WAS THE BEGINNING FOR THE ASSESSEE TO EXPLORE DIFFERENT KIND OF ACTIVITY TO GENERATE INCOME, THE EARNINGS WERE NOT VERY HANDSOM E. OTHERWISE THE ASSESSEE WOULD HAVE GIVEN THE HOUSE FOR RENT AN D DERIVED INCOME OUT OF THE SAME. ASSESSEE RELIED ON THE DECISION IN THE CASE OF CIT VS. RAJENDRA PRASAD MOODY, CALCUTTA [1978) (1979 AI R 373), 4. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSE E, THE CIT(A) CONFIRMED THE ADDITION MADE BY THE AO BY OBSERVING AS UNDER: 05.2 A HOUSING LOAN AMOUNT OF RS.1,13,30,000/- WAS TAKEN FOR HOUSING PURPOSE AND ASSESSEE INCURRED INTEREST EXPE NDITURE OF RS.11,39,167/- ON HOUSING LOAN. THE ASSESSEE HAD CL AIMED DEDUCTION FOR INTEREST ON BORROWED CAPITAL FOR A.Y. 2012-13 ON THE GROUND THAT SHE HAD RUN MONEY LENDING BUSINESS FROM THERE. IN THAT YEAR, A LOAN HAD BEEN GIVEN TO THE COMPANY IN WHICH SHE WAS A DIRECTOR. HENCE, THE CLAIM OF DOING MONEY LENDING BUSINESS FROM THE HOUSE PROPERTY WAS REJECTED AND T HE NET INTEREST EXPENDITURE WAS DISALLOWED. THIS YEAR, THE ASSESSEE CLAIMS TO HAVE RUN A TUITION BUSINESS ON THE SAME P REMISES. THE PROCEEDS FROM THE SAME IS STATED TO BE RS.1.20 LAKHS, I.E. RS.10,000/- PER MONTH. THE ASSESSEE'S RESIDENCE IS AT ROAD NO.12, BANJARA HILLS, HYDERABAD. THE VILLA IN QUEST ION IS SITUATED AT SHAMSHABAD VILLAGE, I.E., AT A DISTANCE OF OVER 30 KMS. IT IS A RIDICULOUS PROPOSITION THAT SHE SHOULD BE TRAVELLING THIS DISTANCE ON DAY TO DAY BASIS THROUGHOUT THE YE AR FOR EARNING TUITION FEES OF RS.1.20 LAKHS. THE CLAIM IS PRIMA-FACIE BOGUS AND IS REJECTED. THE DISALLOWANCE OF INTEREST IS CONFIRMED. THE RELIANCE OF THE ASSESSEE ON THE DECI SION OF HON'BLE SUPREME COURT IN THE CASE OF RAJENDRA PRASA D MOODY (SUPRA) WILL NOT COME TO ASSESSEE'S RESCUE AS IT IS IN DIFFERENT CONTEXT. IN THAT CASE, THE APEX COURT HAD HELD THAT WHEN INVESTMENT IS MADE FOR EARNING INCOME THEN EXPENDIT URE FOR EARNING THAT INCOME SHOULD BE ALLOWED IRRESPECTIVE OF WHETHER INCOME HAS BEEN EARNED OR NOT. IN THIS CASE, ACCORD ING TO THE ASSESSEE, INCOME WAS ACTUALLY EARNED (TUITION FEE). HENCE DECISION IN THAT IS NOT APPLICABLE TO THE FACTS OF ASSESSEE'S CASE. AS REGARDS THE QUESTION WHETHER THE EXPENDITU RE SHOULD 4 ITA NO. 703 /HYD/2017 JYOTI AGARWAL, HYD. BE ALLOWED OR NOT, GIVEN THE FACTS OF THE CASE, THE SAME HAS ALREADY BEEN DISCUSSED AND ADJUDICATED. 5. AGGRIEVED BY THE ORDER OF CIT(A), THE ASSESSEE I S IN APPEAL BEFORE US RAISING THE FOLLOWING GROUNDS OF APPEAL: 1. THE ASSESSING OFFICER OUGHT TO HAVE ALLOWED THE INTEREST ON HOUSING LOAN WHICH IS IN THE NATURE OF EXPENDITURE MADE TOWARDS EARNING INCOME FROM OTHER SOURCES LIKE MONE Y LENDING, TUITION ETC., THE ASSESSEE IS UTILIZING THE HOUSE P REMISES PURCHASED OUT OF BANK LOAN FOR THE PURPOSE OF DOING THE BUSINESS OF MONEY LENDING ACTIVITY IN THE PRECEDING YEAR AND FOR THE CURRENT YEAR FOR DOING SOME PROFESSION OF T UITION FEES. THEREFORE THE NEXUS OF INTEREST INCOME AND INTEREST EXPENDITURE IS MATCHING. 2. THE HON'BLE CIT (A) HAS PRESUMED THAT 'IT IS RID ICULOUS PROPOSITION THAT THE ASSESSE SHOULD BE TRAVELLING D ISTANCE OF ABOUT 30 KM ON DAY TO DAY BASIS THROUGHOUT THE YEAR TO EARN TUITION FEES OF RS. 1.20 LAKH.' THE CIT(A) HAS NOT RELIED ON ANY GROUNDS TO SUPPORT THE PRESUMPTION. IN FACT THE ASS ESSEE USED TO TRAVEL ALONG WITH HER SPOUSE TO THE FACTORY WHER E HER SPOUSE IS A DIRECTOR AND IS NEAR TO VILLA WHERE TUITIONS W ERE TAKEN. 3. THE ASSESSING OFFICER OUGHT TO HAVE EXAMINED THE PROVISIONS OF SECTION 57 CAREFULLY ABOUT THE ALLOWABILITY OF E XPENDITURE AS EXAMINED BY THE SUPREME COURT OF INDIA IN THE CASE OF CIT VS RAJENDRA PRASAD MOODY, CALCUTTA ( 1978 )(COPY ENCLO SED) . 'HELD: WHAT SEC 57 (III) REQUIRES IS THAT THE EXPEN DITURE MUST BE LAID OUT OR EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF MAKING OR EARNING INCOME' ' IF THERE IS SOME INCOME, HOWEVER SMALL OR M EAGER, THE EXPENDITURE WOULD BE ELIGIBLE FOR DEDUCTION' FOR THESE AND OTHER REASONS THAT MAY BE URGED AT TH E TIME OF HEARING, THE APPELLANT ASSESSEE PRAYS THAT THE ADDI TIONS MADE TO THE INCOME BE DELETED. 6. CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL FACTS ON RECORD. ASSESSEE CLAIMS TO HAVE RUN TUITION CENT RE AT THE PLACE, FOR WHICH ASSESSEE HAS TAKEN HOUSING LOAN IN THE RELEVA NT PREVIOUS YEAR. IT IS A SETTLED PRINCIPLE THAT WHERE INCOME IS EARN ED FROM A SOURCE, THE RELATED EXPENDITURE, IRRESPECTIVE OF QUANTUM OF INCOME, SHOULD BE 5 ITA NO. 703 /HYD/2017 JYOTI AGARWAL, HYD. ALLOWED. FIRST OF ALL, ASSESSEE HAS NOT PROVED SATI SFACTORILY THE INCOME EARNED BY RUNNING TUITION CENTRE, LIKE HOW M ANY STUDENTS ATTENDED, HOW MANY MAN HOURS ETC., TO THE SATISFACT ION OF THE AO, AT LEAST, NOTHING HAS BEEN BROUGHT ON RECORD. SECONDLY , EVEN IF ASSESSEE RUNS A TUITION CENTRE, THE EXPENDITURE SHO ULD BE RELATED TO THE RUNNING OF TUITION CENTRE, LIKE ELECTRICITY BIL L, TRAVELLING EXPENSES TO & FRO TO THE PLACE OF TUITION ETC. FOR COMPUTING T HE INCOME FROM THE TUITION, IT IS ONLY RELATED COST WHICH IS RELEVANT. THE INTEREST ON HOUSING LOAN ON THE PROPERTY IN WHICH TUITION CENTR E IS LOCATED NO WAY CONNECTED TO THE EARNING OF TUITION INCOME. THEREFO RE, THE CONTENTION OF THE ASSESSEE IS REJECTED & ACCORDINGLY, WE UPHOL D THE ORDER OF CIT(A) AND DISMISS THE GROUNDS RAISED BY THE ASSESS EE. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMISS ED. PRONOUNCED IN THE OPEN COURT ON 24 TH JANUARY, 2018. SD/- SD/- (P. MADHAVI DEVI) (S. RIFAUR RAHM AN) JUDICIAL MEMBER A CCOUNTANT MEMBER HYDERABAD, DATED: 24 TH JANUARY, 2018 KV COPY TO:- 1) SMT. JYOTI AGARWAL, 8-2-684/3K/11&12, ROAD NO. 12, BANJARA HILLS, HYDERABAD 500 034 2) ITO, WARD 14(2), IT TOWERS, AC GUARDS, HYD. 3) CIT(A) 6, HYDERABAD. 4) PR. CIT 6 , HYDERABAD. 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDE RABAD. 6) GUARD FILE