ACIT CEN CIR 5(2), MUMBAI V. PRAFUL N SATRA, MUMBAI

ITA 7125/MUM/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 2372 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-07-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2009-2010
• Appeal Filed On: 28-11-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RADHA KATYAL NARAN G
• Assessee Lawyers: VIJAY MEHTA HARSH BHU TAAR
• Section: 143(3); 142(1); 153A

Judgement Text

, LH LHLH LH INCOME TAX APPELLATE TRIBUNAL,MUMBAI - C BENCH , IOU FLAG IOU FLAG IOU FLAG IOU FLAG BEFORE S/SH. RAJENDRA,ACCOUNTANT MEMBE R & PAWAN SINGH,JUDICIAL MEMBER /.ITA NO.7125/MUM/2014, /ASSESSMENT YEAR-2009-10 ACIT, CC-5(2), EARLIER CC-33, ROOM NO. 32(3), GROUND FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MARINE LINES, MUMBAI-400020 VS SH. PRAFUL N. SATRA, 702, REHANA HEIGHTS, 6 TH CHAPEL LANE, SANTACRUZ (W), MUMBAI-400058. PAN:AHZPS4559A ( / ASSESSEE) ( / RESPONDENT) / REVENUE BY : MS. RADHA KATYAL NARANG (DR) /ASSESSEE BY : SHRI VIJAY MEHTA, HARSH BHU TA(AR) ' / DATE OF HEARING : 28 - 06 -2016 / DATE OF PRONOUNCEMENT : 29 -07-2016 ORDER/ % & IOU FLAG IOU FLAG IOU FLAG IOU FLAG PER PAWAN SINGH, JM - 1. THE PRESENT APPEAL IS FILED BY REVENUE AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) (CIT(A)-41, MUMBAI DATED 26.08.2014 F OR ASSESSMENT YEAR (AY)-2009- 10. THOUGH THE REVENUE HAS RAISED AS MANY AS FOUR G ROUNDS OF APPEAL, HOWEVER, AS PER OUR CONSIDERED OPINION THE ONLY SUBSTANTIAL GROUND IS WHETHER THE CIT(A) ERRED IN ALLOWING SUM OF RS. 48,00,000/- AS INTEREST EXPENSE U/S. 24 OF THE ACT. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PROMOTER AND MANAGING DIRECTOR OF M/S. SATRA PROPERTIES(I) LTD., FILED RETURN OF INCOME FO R RELEVANT AY DECLARING TOTAL INCOME OF RS. 1,50,98,166/-. M/S SATRA PROPERTIES (I) LTD . IS ENGAGED IN PREMIUM RESIDENTIAL APARTMENT, COMMERCIAL PREMISES MALLS AND HOTELS AND MAJORITY OF THE PROJECTS LOCATED AT PREMIUM LOCATION IN MUMBAI. A SEARCH & SEIZURE ACTION WAS CONDUCTED IN CASE OF M/S SATRA PROPERTIES (I) LTD. ALONG WITH ITS GROUP CONCERNS ON 23.12.2010. WHILE FRAMING ASSESSMENT A NOTICE U/S 143(2) AND 142(1) DATED 04.12.2012 WAS ISSUED TO THE ASSESSEE TO EXPLAIN REPAYMENT OF INTEREST ON HOUSI NG LOAN AMOUNTING TO RS.48,00,000/-. THE ASSESSEE FILED REPLY TO THE SHOW CAUSE AND CONT ENDED THAT ASSESSEE HAS TAKEN LOAN FROM ASHOK COMMERCIAL ENTERPRISES IN PREVIOUS YEAR. SUBSEQUENTLY, IN THE YEAR UNDER CONSIDERATION THE LOAN WAS REPAID BACK AFTER AVAILI NG FRESH LOAN FROM COSMOS BANK LTD. THE CONTENTION OF ASSESSEE WAS NOT ACCEPTED BY THE AO HOLDING THAT ASSESSEE HAS ITA NO.7125 /MUM//2014- SH. PRAFUL N. SATRA 2 AVAILED THIS LOAN FROM COSMOS BANK LTD. FOR REPAYME NT OF LOAN TO M/S ASHOK COMMERCIAL ENTERPRISES. THE AO CONCLUDED THAT THE PROPERTY WAS ALREADY CONSTRUCTED, THUS CANNOT BE SAID THAT LOAN TAKEN FROM COSMOS BA NK WAS FOR HOUSING PURPOSE. NO INTEREST TO M/S ASHOK COMMERCIAL ENTERPRISES HAS BE EN CLAIMED BY ASSESSEE IN PREVIOUS YEAR. THUS, THE AO DISALLOWED RS. 48,00,000/- OF IN TEREST ON ACCOUNT OF HOUSING LOAN IN THE ORDER PASSED U/S 143(3) R.W.S. 153A OF THE ACT. AGGRIEVED BY THE ORDER OF AO, THE ASSESSEE FILED APPEAL BEFORE THE CIT(A), WHEREIN TH E APPEAL OF THE ASSESSEE WAS ACCEPTED AND ADDITION MADE ON ACCOUNT OF DISALLOWAN CE OF INTEREST EXPENSES OF RS. 48,00,000/- WAS DELETED. AGGRIEVED BY THE ORDER OF CIT(A), THE REVENUE HAS FILED THE PRESENT APPEAL BEFORE US. 3. WE HAVE HEARD THE LD DEPARTMENTAL REPRESENTATIVE OF REVENUE AND LD AUTHORISED REPRESENTATIVE (AR) OF ASSESSEE AND PERUSED THE MAT ERIAL AVAILABLE ON RECORD. DR FOR REVENUE ARGUED THAT LD. CIT(A) WRONGLY ALLOWED THE CLAIM OF INTEREST EXPENSES OF RS. 48,00,000/- ON THE BASIS OF CBDT CIRCULAR NO. 363 D ATED 24.06.1983. LD. DR FOR REVENUE ALSO ARGUED THAT ASSESSEE HAS NOT CLAIMED I NTEREST IN THE EARLIER AY AND HAS DEVELOPED A DEVICE TO AVOID THE TAX SHOWING IT AS T HE LOAN WAS TAKEN FOR BUSINESS ACTIVITIES. AR FOR ASSESSEE ARGUED THAT THE ASSESSE E HAS PURCHASED OFFICE PREMISES AT 2 ND FLOOR, DEV PLAZA, ANDHERI FROM M/S. DEV CONSTRUCTIO N FOR A CONSIDERATION OF RS. 3.45 CRORES. THE SAID CONSIDERATION WAS PAID TO M/S DEV CONSTRUCTION TEMPORARILY BY ARRANGING FUNDS FROM M/S ASHOK COMMERCIAL ENTERPRIS ES ON THE INTEREST @ 12% P.A. SUBSEQUENTLY, TO PAY THE SAID LOAN, THE ASSESSEE AP PROACHED THE COSMOS CO-OP. BANK LTD. AND THE LOAN WAS SANCTIONED AS A TERM LOAN OF RS. 15 CRORES AND SOME PART OF LOAN WAS UTILIZED FOR RE-PAYMENT OF LOAN TO M/S ASHOK C OMMERCIAL ENTERPRISES. THE ASSESSEE OFFERED THE INCOME FROM RENT RECEIVED FROM THE SAID OFFICE PREMISES STARTING FROM FY-2008-09. LD AR OF ASSESSEE FURTHER ARGUED THAT BOARD CIRCULAR NO. 363 DATED 24.06.1983 PROVIDES THAT WHERE THE PROPERTY H AS BEEN ACQUIRED, CONSTRUCTED, RENEW OR REPAIRED WITH BORROWED CAPITAL, THE AMOUNT OF INTEREST PAYABLE OF SUCH CAPITAL SHALL BE ALLOWED AS ADMISSIBLE DEDUCTION IN COMPUTA TION OF INCOME OF THE SAID PROPERTY, WHETHER A FRESH LOAN IS RAISED OR REPAID OR BY WAY OF REPAYMENT OF ORIGINAL LOAN FOR THE SAID PURPOSE. THE INTEREST PAYABLE IN RESPECT OF T HE SAID SECOND LOAN WOULD ALSO BE ADMISSIBLE FOR DEDUCTION U/S 24(1)(VI) OF THE ACT. 4. WE HAVE CONSIDERED THE RIVAL CONTENTION OF THE PART IES AND CONSIDERED THE MATERIAL AVAILABLE ON RECORD. THE AO WHILE MAKING THE RE-ASS ESSMENT PROCEEDING RAISED THE QUESTION AS TO WHY THE INTEREST OF HOUSING LOAN SHO ULD NOT BE DISALLOWED. THE ASSESSEE ITA NO.7125 /MUM//2014- SH. PRAFUL N. SATRA 3 CONTENDED THAT HE AVAILED A LOAN FROM COSMOS BANK FOR REPAYMENT OF LOAN TO M/S ASHOK COMMERCIAL ENTERPRISES. THE AO DISALLOWED THE INTEREST EXPENSES HOLDING THAT PROPERTY WAS ALREADY CONSTRUCTED AND THE LOAN TAKEN FROM COSMOS BANK CANNOT BE SAID TO TAKEN FOR HOUSING PURPOSE. THE SIMILAR CONTENTIO N WAS MADE BEFORE THE CIT(A). THE CIT (A) WHILE CONSIDERING THE CONTENTION OF THE ASS ESSEE AND THE CONTENTS OF CBDT CIRCULAR NO. 363 DATED 24.06.1983. WE HAVE ALSO CON SIDERED THE SAID CIRCULAR, EXTRACTION OF WHICH REFERRED BY LD. CIT(A) IN PARAG RAPH NO. 5.2 OF ITS ORDER AND THE SAME ARE REPRODUCED BELOW: '1. SECTION 24(1) OF THE INCOME-TAX ACT, 1961 - INS TRUCTION REGARDING - SECTION 24(1)(VI) OF THE INCOME-TAX ACT, 1961, PROVIDES THA T WHERE THE PROPERTY HAS BEEN ACQUIRED, CONSTRUCTED, REPAIRED, RENEWED OR RE-CONS TRUCTED WITH BORROWED CAPITAL, THE AMOUNT OF ANY INTEREST PAYABLE ON SUCH CAPITAL SHALL BE ALLOWED AS ADMISSIBLE DEDUCTION IN THE COMPUTATION OF THE INCO ME FROM THE SAID PROPERTY. 2. A QUESTION HAS BEEN RAISED WHETHER IN A CASE WHE RE A FRESH LOAN HAS BEEN RAISED TO REPAY 'THE ORIGINAL LOAN TAKEN FOR THE AB OVE PURPOSE, THE INTEREST PAYABLE IN RESPECT OF THE SECOND LOAN WOULD ALSO BE ADMISSIBLE AS A DEDUCTION U/S.24(1)(VI) OF THE INCOME-TAX ACT. 3. THE MATTER HAS BEEN CONSIDERED BY THE BOARD AND IT HAS BEEN DECIDED IF THE SECOND BORROWING HAS REALLY BEEN USED MERELY TO REP AY THE ORIGINAL LOAN AND THIS FACT IS PROVED TO THE SATISFACTION OF THE INCOME-TA X OFFICER (NOW ASSESSING OFFICER), THE INTEREST PAID ON THE SECOND LOAN WOUL D ALSO BE ALLOWED AS A DEDUCTION U/S. 24(1)(VI).' 5. IN THE CIRCULAR REFERRED ABOVE, IT HAS CLARIFIED TH AT IF HOUSING LOAN HAS BEEN RAISED MERELY TO RE-PAY THE ORIGINAL LOAN AND THIS FACT IS PROVED TO THE SATISFACTION OF THE AO, THE INTEREST PAID ON SUCH LOAN WOULD BE ALLOWED AS DEDUCTION IN COMPUTATION OF INCOME FROM HOUSE PROPERTY, THEREFORE, THE FINDIN G OF AO IN DISALLOWING THE DEDUCTION OF INTEREST OF RS. 48,00,000/- ON FUNDS B ORROWED FROM COSMOS CO-OP. BANK ARE NOT IN CONSONANCE WITH THE BOARD CIRCULAR. AS P ER OUR CONSIDERED OPINION, ALL FACTS WERE PROPERLY APPRECIATED AND CONSIDERED BY THE CIT (A) WHILE GIVING HIS FINDINGS. 6. WITH THESE OBSERVATION, WE HOLD THAT THE ORDER OF C IT(A) ARE REASONED ONE AND DOES NOT SUFFER FROM ANY ILLEGALITY OR INFIRMITY. AS A RESULT, APPEAL FILED BY THE REVENU E IS DISMISSED. #$ %&' ( ) *+ UK ,- . /0. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH JULY,2016. 3 4 ,5 6%- 29 YK YKYK YK +,20 16 *+ : SD/- SD/- ( /RAJENDRA) ( IOU FLAG IOU FLAG IOU FLAG IOU FLAG / PAWAN SINGH) & / ACCOUNTANT MEMBER / JUDICIAL MEMBER , 4 -+ /MUMBAI, 6%- /DATE: 29.07.2016 ITA NO.7125 /MUM//2014- SH. PRAFUL N. SATRA 4 SK ' ()* +* / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ -(& 4 < , 4. THE CONCERNED CIT / -(& 4 < 5. DR C BENCH, ITAT, MUMBAI / =>* %?& , LH LHLH LH - , . . . , 4 -+ 6. GUARD FILE/ * #+ = //TRUE COPY// 3% 4 / BY ORDER, / / - DY./ASST. REGISTRAR ?& , , 4 -+ /ITAT, MUMBAI.