DCIT, Circle- 21(1), New Delhi V. Religare Housing Development Finance Corporation Ltd., New Delhi

ITA 7679/DEL/2017

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 1365 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 6 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-06-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2014-2015
• Appeal Filed On: 21-12-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PARMITA M BISWAS
• Assessee Lawyers: ROHIT JAIN
• Keywords: Depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH F, NEW DELHI BEFORE MS. SUCHITRA KAMBLE, JUDICIAL MEMBER DR. B. R. R. KUMAR, ACCOUNTANT MEMBER (THROUGH VIDEO CONFERENCING) ITA NO. 6433/DEL/2017 : ASSTT. YEAR : 2013-14 ITA NO. 7679/DEL/2017 : ASSTT. YEAR : 2014-15 DCIT, CIRCLE-21(1), NEW DELHI VS RELIGARE HOUSING DEVELOPMENT FINANCE CORPORATION LTD.,D-3, P3B, DISTRICT CENTRE, SAKET, NEW DELHI-110017 (APPELLANT) (RESPONDENT) PAN NO. A AA CM6533D PRESENT ASSESSEE BY : SH. ROHIT JAIN, ADV. REVENUE BY : MS. PARMITA M. BISWAS, CIT DATE OF HEAR ING: 1 7 . 06 .20 2 1 DATE OF PRONOUNCEMENT: 29 .06 .20 2 1 ORDER PER DR. B. R. R. KUMAR, ACCOUNTANT MEMBER: THE PRESENT APPEALS HAVE BEEN FILED BY THE REVENUE AGAINST THE ORDERS OF THE LD. CIT(A)-38, NEW DELHI DATED 25.07.2017 AND 14.09.2017. 2. IN ITA NO. 6433/DEL/2017, FOLLOWING GROUNDS HAVE BEEN RAISED BY THE REVENUE: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E LD.CIT(A) HAS ERRED IN DIRECTING THE AO TO RE-COMPU TE THE PROFIT OF ELIGIBLE BUSINESS DEDUCTION BY ALLOCA TING INTEREST EXPENDITURE ON THE BASIS OF TURNOVER OF BU SINESS SEGMENTS WITHOUT ESTABLISHING THE NEXUS OF INTEREST EXPENSES WITH THE BUSINESS CARRIED ON EACH SEGMENT. 2. ON FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF ITA NOS. 6433 & 7679/DEL/2017 RELIGARE HOUSING DEVELOPMENT FINANCE CORP. LTD. 2 RS.7,60,092/- MADE BY THE AO ON ACCOUNT OF CESSATIO N OF TRADE LIABILITY AS THE VALIDITY OF CHEQUES HAD EXPI RED AND THE CREDITORS IN RESPECT OF THE SAID PAYMENTS HAD FOREGONE THEIR LIABILITY. 3. IN ITA NO. 7679/DEL/2017, FOLLOWING GROUNDS HAVE BEEN RAISED BY THE REVENUE: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E LD.CIT(A) HAS ERRED IN DIRECTING THE AO TO RE-COMPU TE THE PROFIT OF ELIGIBLE BUSINESS DEDUCTION BY ALLOCA TING INTEREST EXPENDITURE ON THE BASIS OF TURNOVER OF BU SINESS SEGMENTS WITHOUT ESTABLISHING THE NEXUS OF INTEREST EXPENSES WITH THE BUSINESS CARRIED ON EACH SEGMENT. ITA 6433/DEL/2017: A.Y. 2013-14: 4. BRIEF FACTS OF THE CARE ARE THAT THE AO DISALLOW ED INTEREST AMOUNT OF RS.2,27,56,710/- U/S 36(1)(VIII) ON THE G ROUNDS THAT THE ALLOCATION OF THE ASSESSEE ON ACCOUNT OF INTERE ST WITH REGARD TO SEGMENTAL REPORTING IN RESPECT OF HOUSING LOAN B USINESS, LOAN AGAINST PROPERTY AND OTHER BUSINESS. 5. THE LD. CIT (A) AFTER PERUSING THE SUBMISSIONS O F THE ASSESSEE AND THE ASSESSMENT ORDER FOUND THAT SIMILA R ISSUE HAS BEEN DECIDED BY THE REVENUE IN FAVOUR OF THE ASSESS EE FOR A.Y. 2012-13. THE RELEVANT PORTION OF ORDER OF CIT(APPEA LS)-7, NEW DELHI IN APPEAL NO.376/CIT(A)/DEL/2016-17 DATED 02. 02.2017 IS REPRODUCED BELOW:- 4.31 ..THE APPELLANT IS ENGAGED IN HOUSING FINANCE BUSINESS AND HAS CLAIMED DEDUCTION U/S 36(1)(VIII) OF THE ACT AT RS. 2.87 CRORES. THE AO DISALLOWED CLAIM OF DEDUCTION U/S 36(1)(VIII) OF THE ACT ON THE GROUND THAT THE INTEREST EXPENSE IN RESPECT OF HOUS ING LOAN BUSINESS ELIGIBLE FOR DEDUCTION U/S 36(1)(VIII) WAS MUCH HIG HER THAN THE NON ELIGIBLE BUSINESS AND THEREFORE, THE ALLOCATION WAS NOT PROPER. ITA NOS. 6433 & 7679/DEL/2017 RELIGARE HOUSING DEVELOPMENT FINANCE CORP. LTD. 3 FURTHER, THAT THE APPELLANT HAD INFLATED ITS PROFIT FROM THE HOUSING LOAN SEGMENT IN ORDER TO AVAIL HIGHER DEDUCTION U/S 36(1) (VIII). THE AO WAS OF THE VIEW THAT HOUSING LOANS ARE FOR A LON GER DURATION FETCHING LESSER RATE OF INTEREST AND REQUIRES MORE FUNDING THAT THE LOANS AGAINST PROPERTY, WHICH ARE LOANS AT A HIGHER RATE OF INTEREST AND COMPARATIVELY LESSER PERIOD. 4.4 THE LD. AR HAS CONTENDED THAT THE LOANS IN BOTH BUSINESS SEGMENTS I.E. HOUSING LOANS AND LOANS AGAINST PROPE RTY, [INCOME NOT ENTITLED TO CLAIM DEDUCTION U/S 36(1)(VIII)] ARE OF SAME DURATION AND THE RATE OF INTEREST CHARGE IS ALMOST SIMILAR. IT I S STATED THAT THE COMPANY MAINTAINS SEPARATE ACCOUNTS OF INCOME FROM HOUSING LOANS AND LOAN AGAINST PROPERTY. THE LD. AR HAS FURTHER S TATED THAT LEDGER ACCOUNTS WERE FILED BEFORE THE AO DURING ASSESSMENT AND IT WAS SUBMITTED THAT THE COMPANY APPORTIONS COMMON EXPENS ES SUCH AS SALARY, DEPRECIATION, RENT, ADVERTISEMENTS, PRINTIN G & STATIONARY, TRAVELLING AND CONVEYANCE, COMMUNICATION EXPENSES, REPAIR & MAINTENANCE, AUDITORS FEE AND ELECTRICITY EXPENSES BASED ON THE TURNOVER RATIO OF THE TWO BUSINESS SEGMENTS. FURTHE R, EXPENSES VIZ. PROVISION FOR HOUSING LOAN AND NON HOUSING LOAN, CO NTINGENT PROVISION FOR STANDARD ASSETS WHICH WERE DIRECTLY I DENTIFIABLE, RELATED TO EITHER OF THE TWO BUSINESS SEGMENTS ARE REDUCED FROM THE INCOME OF THESE TWO SEGMENTS. AS REGARDS TO INTEREST EXPEN DITURE, WHICH IS COMMON TO HOUSING LOAN AND LOAN AGAINST PROPERTY, T HE APPORTIONMENT BETWEEN THE TWO BUSINESS SEGMENTS IS ON THE AMOUNTS OF LOANS OUTSTANDING RECOVERABLE AS ON THE YEAR END I.E. 31.03.2012. ACCORDINGLY, ON THIS PRINCIPLE, 65% OF THE INTEREST EXPENSE WAS ALLOCATED TOWARDS HOUSING LOANS AND 35% TOWARDS LOA N AGAINST PROPERTY. IT IS ALSO ARGUED THAT THIS METHODOLOGY O F APPORTIONMENT IS ACCEPTED BY THE AO FOR THE LAST ASSESSMENT YEAR. IT IS NOTED THAT THE AO HAS SUMMARILY DISALLOWED THE DEDUCTION U/S 36(1) (VIII) ON THE GROUND THAT ALLOCATION OF INTEREST EXPENDITURE BETW EEN THE TWO ITA NOS. 6433 & 7679/DEL/2017 RELIGARE HOUSING DEVELOPMENT FINANCE CORP. LTD. 4 SEGMENTS IS NOT IN ORDER AND THE APPELLANT HAS INFL ATED ITS PROFIT FOR HIGHER DEDUCTION. THE AO HAS NOT EXAMINED THE SUBMISSIONS FURNISHED B Y THE APPELLANT COMPANY AND SIMPLY DISALLOWED THE DEDUCTION. THE DE DUCTION CLAIMED U/S 36(1)(VIII) IS DULY SUPPORTED BY SEGMENTAL ACCO UNTING WHICH INCLUDES APPORTIONMENT OF EXPENSES, DETAILS OF WHIC H ARE FILED BEFORE THE AO AND IN APPELLATE PROCEEDINGS. IN MY VIEW, A MORE ACCEPTABLE METHOD FOR DETERMINING THE PROFITS FROM ELIGIBLE BU SINESS WOULD BE ALLOCATION OF INTEREST EXPENDITURE ON THE BASIS OF TURNOVER OF THE ELIGIBLE AND INELIGIBLE BUSINESS SEGMENTS. THE AO I S DIRECTED TO RE- COMPUTE THE PROFIT OF ELIGIBLE BUSINESS DEDUCTION B Y ALLOCATING INTEREST EXPENDITURE ON THE BASIS OF TURNOVER AND N OT ON THE BASIS OF BALANCE OF OUTSTANDING HOUSING LOAN AND LOAN AGAINS T PROPERTY RECOVERABLE AT THE END OF THE YEAR AS APPORTIONED B Y THE APPELLANT COMPANY. THE DEDUCTION U/S 36(1)(VIII) I.E. 20% SHA LL BE ALLOWED ON SUCH PROFITS AND GAINS OF THE ELIGIBLE BUSINESS ARR IVED AFTER APPORTIONMENT OF THE INTEREST EXPENDITURE ON THE BA SIS OF TURNOVER RATIO OF THE TWO SEGMENTS. THIS GROUND OF APPEAL IS DISPOSED OFF ACCORDINGLY. 6. WE HAVE GONE THROUGH THE RECORD AND FIND THAT TH E LD. CIT (A) HAS GONE THROUGH THE ROOT OF THE MATTER, EXAMIN ED THE DISALLOWANCE AND ALLOWED THE APPEAL OF THE ASSESSEE . THE PRESENCE OF THE LD. CIT (A) DURING THE HEARING GAVE US MUCH NEEDED INPUT FOR ADJUDICATION OF THE CASE. HENCE, W E DECLINE TO INTERFERE WITH THE ORDER OF THE LD. CIT (A) ON THIS ISSUE. 7. GROUND NO. 2 RELATES TO DELETION OF RS.7,60,092/ - ON ACCOUNT OF CESSATION OF TRADE LIABILITY. 8. THE AO DISALLOWED AN AGGREGATE AN AMOUNT OF RS.7,60,092/- COMPRISING PROFESSIONAL TAX OF RS.5, 000/-, ITA NOS. 6433 & 7679/DEL/2017 RELIGARE HOUSING DEVELOPMENT FINANCE CORP. LTD. 5 CHEQUES ISSUED FOR REFUND OF EXCESS EMI RECEIVED FR OM CUSTOMERS OF RS.1,26,014/-AND AMOUNT DUE TO SERVICE PROVIDERS/ VENDORS OF RS.6,29,078/-. 9. THE LD. CIT (A) DELETED THE ADDITION ON THE GROU ND THAT THE AMOUNT HAS NOT BEEN REMITTED FROM THE BOOKS OF ACCO UNTS OF THE ASSESSEE AND NOT EVEN THREE YEARS HAVE BEEN PASSED, HENCE, THEY ARE BEYOND THE PROVISIONS OF THE LAW OF LIMITA TION AND CREDITOR CAN ALWAYS CLAIM THE AMOUNT FROM THE ASSES SEE. THE DEBTS STILL SUBSISTS. ON GOING THROUGH THE FACT ON RECORD, WE FIND NO LEGAL INFRACTION IN THE DECISION OF THE LD. CIT (A) AND HENCE DECLINE TO INTERFERE WITH THE ORDER OF THE LD . CIT (A) ON THIS GROUND. ITA NO. 7679/DEL/2017 : A.Y. 2014-15: 10. THE LONE GROUND TAKEN UP BY THE REVENUE DURING THE YEAR IS AKIN TO THE GROUND NO. 1 ADJUDICATED ABOVE IN TH E ITA NO. 6433/DEL/2017 FOR THE ASSESSMENT YEAR 2013-14 AND H ENCE, WE HOLD THAT THE SAME RATIO IS APPLICABLE MUTATIS MUTANDIS. 11. IN THE RESULT, THE APPEALS OF THE REVENUE ARE D ISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 29/06/2021. SD/- SD/- (SUCHITRA KAMBLE) (DR. B. R. R. KUMAR) JUDICIAL MEMBER AC COUNTANT MEMBER DATED: 29/06/2021 *SUBODH* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR