HUSSAIN H RAMODIYA, MUMBAI V. ADDL CIT RG 18(1), MUMBAI

ITA 7146/MUM/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8297 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-11-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: H
• Next Hearing Date: 01-11-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 21-10-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K C P PATNAIK
• Assessee Lawyers: HARESH PURUSHOTTAMDAS SHAH
• Keywords: Capital asset; Cost of acquisition

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES H MUMBAI . . , / BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER /AND , SHRI RAJENDRA, ACCOUNTANT MEMBER I.TA. NO. 7146/MUM/2011 ASSESSMENT YEAR 2008-09 MR. HUSSAIN H RAMODIYA, 4 TH FLOOR, RAMODIYA MANSION 1, DR. ANNIE BESANT ROAD, PRABHADEVI, MUMBAI 400 025. PAN: AADPR 9145 C VS. THE ADDITIONAL COMMISSIONER OF INCOME TAX 18(1), 1 ST FLOOR, PIRAMAL CHAMBER, PAREL, MUMBAI-400 012. ( / APPELLANT ) ( ! / RESPONDENT ) ' / APPELLANT BY : SHRI HARESH PURUSHOTTAMDAS SHAH ! # ' /RESPONDENT BY : SHRI K.C.P. PATNAIK $ # %& / DATE OF HEARING : 01-11-2012 '() # %& / DATE OF PRONOUNCEMENT : 07-11-2012 * / O R D E R PER RAJENDRA, AM THIS APPEAL IS DIRECTED AGAINST THE ORDER PASS ED BY THE CIT(A)-29, MUMBAI ON 28.07.2011, RAISING THE FOLLOWING GROUNDS: THE GROUNDS MENTIONED HERE UNDER ARE WITHOUT PREJUDICE TO ONE ANOTHER 1.ON THE FACTS AND CIRCUMSTANCES THE CASE THE LEARN ED COMMISSIONER OF INCOME TAX (APPEALS) 29 HAS FAILED TO APPRECIATE THE FACT THAT THE INTEREST PAID ON HOSING LOAN IS COST OF ACQUIRING CAPITAL ASSET. 2.THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) 29 HAS FAILED TO APPRECIATE AND ACCEPT THE JUDGMENT ON WHICH THE APPELLANT HAD RELI ED IN THE CASE OF S BALAN VS DCIT 120 ITD 469 (PUNE). I.TA. NO. 7146/MUM/2011 MR. HUSSAIN H RAMODIYA 2 3.THE APPELLANT CRAVES LEAVE TO ADD, TO ALTER OR T O AMEND ANY ONE OR MORE OF GROUNDS AS MENTIONED HEREIN ABOVE, AS AND WHEN NECE SSARY. 2. ASSESSEE, AN INDIVIDUAL, ENGAGED IN THE BUSINESS OF RENTING AND SUB-LETTING, FILED HIS RETURN OF INCOME ON 19.03.2009 DECLARING TOTAL INCO ME OF RS.2.61 CRORES. ASSESSING OFFICER (AO) FINALISED THE ASSESSMENT ORDER U/S.143 (3) OF THE INCOME-TAX ACT, 1961(ACT), ON 24.12.2010,DETERMINING THE TOTAL INCO ME AT RS.3.19 CRORES. THE EFFECTIVE GROUND OF APPEAL IS AGAINST DISALLOWANCE OF RS.42, 41,072/- BEING INTEREST ON ACCOUNT OF LOAN RELATING TO RESIDENTIAL FLAT WHI CH HAD BEEN CLAIMED AS ADDITIONAL COST TO THE FLAT BY THE ASSESSEE. DURING THE ASSESS MENT PROCEEDINGS AO FOUND THAT APPELLANT HAD DISCLOSED SHORT TERM CAPITAL GAIN ON SALE OF ZHARA FLAT AT RS. 2,30,31,727/- COMPUTED AS UNDER: SALE CONSIDERATION RS.5,25,00,000/- LESS: A) COST OF ACQUISITION 2,40,00,000/- B) STAMP DUTY 11,84,831/- C) REGISTRATION CHARGES 31,820/- D) PROCESSING FEES 10,550/- E) COST OF IMPROVEMENT & RENOVATION (CAPITALISED INTEREST) 42,41,072/- RS.2,94,68,273/- --------------------- ------ --------------- NET SHORT TERM CAPITAL GAIN RS.2,30,31,727/- --------------------- AO HELD THAT THE DEDUCTION; AMOUNTING TO RS.42 ,41,072/- CLAIMED TOWARDS COST OF IMPROVEMENT AND REMUNERATION; WAS NOTHING BUT CAPIT ALISATION OF INTEREST, THAT SUCH A DEDUCTION WAS NOT ALLOWABLE UNDER CAPITAL GAIN PROV ISIONS, THAT IT WAS NEITHER COST OF IMPROVEMENT NOR RELATED TO THE TRANSFER OF ASSET. 3. ASSESSEE FILED APPEAL BEFORE THE FIRST APPELLATE AU THORITY (FAA). AFTER CONSIDERING THE FACTS OF THE CASE, ARGUMENTS OF THE AO AND THE WRITTEN SUBMISSIONS OF THE AUTHORISED REPRESENTATIVE (AR) OF THE APPELLANT HE HELD THAT THAT CAPITAL GAIN PROVISIONS UNDER SECTION 48 ONLY ALLOWED SPECIFIC E XPENDITURE-EXPENSES INCURRED WHOLLY AND EXCLUSIVELY IN CONNECTION WITH THE TRANS FER OF THE ASSET AND THE COST OF THE ACQUISITION OF THE ASSET AND THE COST OF ANY IMPROV EMENT THERETO. HE FURTHER HELD THAT THE INTEREST EXPENSES DID NOT FALL THE COST OF ASSE T, THAT THE ASSET HAD ALREADY BEEN ACQUIRED BY THE APPELLANT AT THE REGISTERED ACQUISI TION OR PURCHASE VALUE, THAT THE INTEREST CLAIM COULD BE THE CARRYING COST OF THE AS SET RELATING TO CERTAIN LOANS, THAT IT COULD NOT FORM PART OF THE ASSET. 4. BEFORE US, AR SUBMITTED THAT INTEREST PAID BY THE A SSESSEE ON HOSING LOAN IS COST OF ACQUIRING CAPITAL ASSET, THAT INTEREST PAID CANN OT BE TREATED AS CAPITALIZATION OF INTEREST, THAT PROPERTY IN QUESTION WAS PURCHASED F ROM LOAN ADVANCED BY THE STANDARD CHARTERED BANK(SCB). HE REFERRED TO PAGE NO.17 OF THE PAPER BOOK. HE RELIED UPON THE CASE OF S BALAN DELIVERED BY THE PUNE BENCH OF THE TRIBUNAL(120 ITD 469). HE ALSO REFERRED TO THE CASE OF CASES OF K RAJGOAL RAO OF HONBLE MADRAS HIGH COURT(252ITR459)AND SRI HARIRAM HOTELS P LTD.(325IT R136) OF HONBLE HIGH COURT OF KARNATAKA. DR SUPPORTED THE ORDERS OF THE REVEN UE AUTHORITIES. HE SUBMITTED I.TA. NO. 7146/MUM/2011 MR. HUSSAIN H RAMODIYA 3 THAT DURING THE ASSESSMENT PROCEEDINGS AR OF THE AS SESSEE HAD AGREED TO THE ADDITIONS MADE BY THE AO. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON FILE. WE FIND THAT ISSUE IS COVERED BY THE DECISION OF SRI H ARIRAM HOTELS (SUPRA) DELIVERED BY THE HONBLE KARNATAKA HIGH COURT. FACTS OF THE CAS E IN SRI HARIRAM HOTELS (SUPRA) WERE AS UNDER- THE ASSESSEE HAD BORROWED LOANS FROM SOME OF I TS DIRECTORS AND PURCHASED AN IMMOVABLE PROPERTY IN ORDER TO PUT UP A HOTEL BUILD ING BUT IT COULD NOT MATERIALIZE ON ACCOUNT OF VARIOUS REASONS. ULTIMATELY, THE ASSESSE E SOLD THE PROPERTY AND WHILE FILING THE RETURN FOR COMPUTATION OF THE CAPITAL GAIN, IT CLAIMED A SUM OF RS. 37,45,042 TOWARDS INTEREST PAID TO THE DIRECTORS ON THE LOAN BORROWED FROM THEM IN ORDER TO PURCHASE THE PROPERTY. AO DISALLOWED THE CLAIM MADE BY THE ASSESSEE, BUT THE TRIBUNAL ALLOWED IT. ON APPEAL BY THE REVENUE, HON BLE HIGH COURT HELD AS UNDER : SINCE THE PROPERTY HAD BEEN PURCHASED OUT OF THE LOANS BORROWED FROM THE DIRECTORS ANY INTEREST PAID THEREON WAS TO BE INCLU DED WHILE CALCULATING THE COST OF ACQUISITION OF THE ASSET. 5.1 IN THE CASE UNDER CONSIDERATION, FROM THE PAPER BOO K FILED, IT IS FOUND THAT THE ASSESSEE HAD TAKEN A LOAN FROM THE SCB AND HAD PURC HASED A PROPERTY. HE HAD TO PAY INTEREST ON IT AND INTEREST PAYMENT WAS CLAIMED AS ALLOWABLE EXPENDITURE WHEN CAPITAL GAINS WERE OFFERED FOR TAXATION ON SALE OF THE PROP ERTY. IN OUR OPINION INTEREST PAID TO BANK FOR PURCHASE OF PROPERTY WAS PART OF ACQUISITI ON OF PROPERTY AND HENCE ALLOWABLE EXPENDITURE. CASES RELIED UPON BY THE ASSESSEE ALSO SUPPORT THE SUBMISSION MADE BY THE AR. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE WE ARE OF THE OPINION THAT DISALLOWANCE MADE BY THE AO AND CONFIRMED BY THE FA A DESERVES TO BE DELETED. AS FAR AS CONSENT OF THE ASSESSEE FOR THE ADDITION IS CONCERNED WE ARE OF THE OPINION THAT THERE IS NO ESTOPPELS AGAINST THE LAW. DEDUCTIONS ALLOWABLE BY LAW HAVE TO BE ALLOWED BY THE AO. EVEN IF AN ASSESSEE AGREES TO AN ADDITIO N THAT IS ALLOWABLE TO HIM AS PER THE PROVISIONS OF LAW, HIS CONSENT DOES NOT DEPRIVE HIM OF THE ALLOWANCE GRANTED BY LAW. AO, A REPRESENTATIVE OF THE SOVEREIGN, IS ENT ITLED AND REQUIRED TO COLLECT DUE TAXES ONLY FROM THE SUBJECTS. TAX WHICH IS NOT DUE TO THE STATE, AS PER THE PROVISIONS OF LAW CANNOT BE IMPOSED OR COLLECTED EVEN IF ASSES SEE AGREES FOR IT. AFTER CONSIDERING THE PECULIAR FACTS AND CIRCUMSTANCES OF THE CASE WE ARE OF THE OPINION THAT IN THE INTEREST OF JUSTICE, MATTER SHOULD BE RESTORED BACK TO THE FILE OF THE AO FOR FRESH ADJUDICATION. HE IS DIRECTED TO AFFORD A REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. APPEAL FILED BY THE ASSESSEE STANDS PARTLY ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 7 TH NOVEMBER, 2012. SD/- SD/- ( . . / I.P. BANSAL ) ( / RAJENDRA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI, +$ DATE: 7 TH NOVEMBER, 2012 I.TA. NO. 7146/MUM/2011 MR. HUSSAIN H RAMODIYA 4 TNMM * * * * # ## # %, %, %, %, -,)% -,)% -,)% -,)% / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT 2. RESPONDENT 3. THE CONCERNED CIT (A) 4. THE CONCERNED CIT 5. DR H BENCH, ITAT, MUMBAI 6. GUARD FILE !,% % //TRUE COPY// *$ *$ *$ *$ / BY ORDER, . .. . / / / / / DY./ASSTT. REGISTRAR , / ITAT, MUMBAI