ITO, Mohali V. M/s MSJ & Sons Realtors & Promoters (P) Ltd., Mohali

ITA 71/CHANDI/2011

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 1366 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 21-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N K SAINI
• Keywords: Capital asset; Capital expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL: A BENCH: CH ANDIGARH BEFORE HONBLE SHRI D K SRIVASTAVA, AM AND HONBLE MS. SUSHMA CHOWLA, JM ITA NO. 71/CHANDI/2011 ASSESSMENT YEAR: 2006-07 INCOME-TAX OFFICER, V MSJ & SONS REALLTORS & PROM OTERS (P) LTD. WARD 6(1) BOOTH NO.15, PHASE IX, MOHALI MOHALI NOW #88, SECTOR 70 MOHALI. PAN: AAECM3702C (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI N.K.SAINI, DR RESPONDENT BY: SHRI TEJ MOHAN SINGH ORDER D K SRIVASTAVA: THE APPEAL FILED BY THE DEPARTMEN T IS DIRECTED AGAINST THE ORDER PASSED BY THE COMMISSIONER OF INCOME-TAX (A) ON 30.8.2010 ON THE FOLLOWING GROUNDS OF APPEAL : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) HAS ERRED IN ALLOWING APPEAL OF THE ASSESSEE WITHOUT APPRECIATING THE FACTS OF THE CASE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.7,2 5,401/- MADE BY THE A.O. ON ACCOUNT OF DISALLOWANCE OF INTEREST BEING C APITAL IN NATURE AS THE UNSECURED LOAN WAS RAISED TO ACQUIRE CAPITAL ASSET (LAND) AND WHCH HAS NOT BEEN PUT TO USE. 3. IT IS PRAYED THAT THE ORDER OF THE CIT(A) BE SET ASIDE AND THAT OF THE ASSESSING OFFICER MAY BE RESTORED. 4. THE APPELLANT CRAVES LEAVE TO ADD OR AMEND ANY G ROUNDS OF APPEAL BEFORE THE APPEAL IS HEARD OR IS DISPOSED OFF. 2. BRIEFLY STATED, FACTS OF THE CASE ARE THAT THE A SSESSEE FILED ITS RETURN OF INCOME ON 30.11.2006 RETURNING LOSS AT RS.4,42,234/ -, AS AGAINST WHICH ASSESSMENT WAS COMPLETED ASSESSING THE TOTAL INCOME OF THE ASSESSEE AT RS.7,83,167/-. ITO VS. M/S MSJ & SONS REALTORS & PROMOTERS I.T.A.NO. 71/CHANDI/20 11 2 3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, TH E ASSESSING OFFICER NOTICED THAT THE ASSESSEE WAS ENGAGED IN THE BUSINE SS OF PURCHASING AND SELLING LAND. HE FOUND THAT THE ASSESSEE HAD RAISED LOANS ON INTEREST FOR PURCHASING THE LAND. ACCORDING TO THE ASSESSING OFFICER, THE INTE REST ON LOANS RAISED FOR PURCHASING THE LAND WAS IN THE NATURE OF CAPITAL EX PENDITURE. HE, THEREFORE, CAPITALIZED A SUM OF RS.7,25,401/- BEING INTEREST O N LOAN UTILIZED FOR PURCHASING THE LAND. 4. ON APPEAL THE LEARNED CIT(APPEALS) HAS DELETED T HE IMPUGNED DISALLOWANCE WITH THE FOLLOWING OBSERVATION : AFTER TAKING INTO CONSIDERATION THE WRITTEN SUBMIS SIONS, HAS WRONGLY DISALLOWED EXPENSES OF RS.7,25,401/-. THE APPELLAN T IS IN THE BUSINESS OF REAL ESTATE AND THE LAND PURCHASED IS ITS STOCK-IN- TRADE, WHEREAS THE AO CONSIDERED THE STOCK-IN-TRADE AS THE CAPITAL ASSET OF THE APPELLANT AND DISALLOWED THE INTEREST PAID ON ACCOUNT OF THESE PU RCHASES. THE LOAN WAS TAKEN BY THE APPELLANT FOR PURCHASE OF STOCK-IN-TRA DE AND ANY INTEREST PAID ON THIS LOAN IS ALLOWABLE U/S 36(1)(III). IF IT IS FOUND THAT THE CAPITAL WAS BORROWED FOR THE PURPOSE OF THE BUSINESS OF THE ASS ESSEE, THE INTEREST PAYABLE THEREON IS ADMISSIBLE U/S 36(1)(III). IT I S IMMATERIAL WHETHER THE SAME IS IN THE NATURE OF CAPITAL EXPENDITURE OR REV ENUE EXPENDITURE. THE CASE LAWS RELIED UPON BY THE APPELLANT FULLY SUPPOR T ITS CONTENTION. IN VIEW OF THIS, THE APPEAL ON THIS GROUND IS ALLOWED, DELE TING THE ADDITION OF RS.724401/-. 5. IN SUPPORT OF APPEAL THE LEARNED D.R. RELIED UPO N THE ASSESSMENT ORDER WHILE THE LEARNED COUNSEL FOR THE ASSESSEE RELIED U PON THE APPELLATE ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME-TAX (A). 6. WE HAVE HEARD BOTH THE PARTIES. THE ASSESSING O FFICER HIMSELF HAS STATED IN THE ASSESSMENT ORDER THAT THE ASSESSEE IS ENGAGE D IN THE BUSINESS OF PURCHASE AND SALE OF LAND. IT HAS ALSO BEEN STATED IN THE A SSESSMENT ORDER THAT THE ASSESSEE HAS TAKEN LOAN FOR PURCHASING OF LAND. IN THIS FACTUAL BACKGROUND, THE LEARNED CIT(APPEALS) HAS RIGHTLY HELD THAT THE IMPU GNED EXPENDITURE WAS NOT IN ITO VS. M/S MSJ & SONS REALTORS & PROMOTERS I.T.A.NO. 71/CHANDI/20 11 3 THE NATURE OF CAPITAL EXPENDITURE. WE ARE IN AGREE MENT WITH HIS DECISION. HIS ORDER IS, THEREFORE, CONFIRMED. 7. IN THE RESULT, THE APPEAL FILED BY THE DEPARTMEN T IS DISMISSED. ORDER PRONOUNCED ON 28 FEBRUARY 2011 SD/- SD/- (SUSHMA CHOWLA) (D K SRIVASTAVA) JUDICIAL MEMBER ACCOUNTANT MEMBER CHANDIGARH: THE 28 FEBRUARY 2011 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A), 4. THE CIT 4. THE D.R. TRUE COPY BY ORDER ASSISTANT REGISTRAR, ITAT, CHANDIGARH