ALPEX INTERNATIONAL P.LTD, MUMBAI V. ASST CIT CIR 6(1), MUMBAI

ITA 779/MUM/2014

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 6032 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 7 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-09-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 03-02-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ANADI VERMA
• Assessee Lawyers: J D MISTRY AW SHRI RONAK DOSHI
• Keywords: Earning of tax free income; Proportionate interest; Additional evidence; Rule 8D
• Section: 14A; 250

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY , JUDICIAL MEMBER AND SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ITA NO . 779 / MUM . /2014 ( ASSESSMENT YEAR : 20 09 10 ) ALPEX INTERNATIONAL PVT. LTD. NOW KNOWN AS PIRAMAL ESTATE P. LTD. PIRAMAL TOWER, GANPATRAO KADAM MARG LOWER PAREL, MUMBAI 400 013 PAN AACCA7777K . APPELLANT V/S ASSTT. COMMISSIONER OF INCOME TAX CIRCLE 6(1), MUMBAI . RESPONDENT ITA NO .519 /MUM. /2014 ( ASSESSMENT YEAR : 2009 10 ) DY. COMMISSIONER OF INCOME TAX CIRCLE 7(1), MUMBAI . APPELLANT V/S PIRAMAL ESTATES PVT. LTD. (FORMERLY KNOWN AS ALPEX INTERNATIONAL LTD.) , 8 TH FLOOR, PIRAMAL TOWER GANPATRAO KADAM MARG LOWER PAREL, MUMBAI 400 013 PAN AACCA7777K . RESPONDENT ASSESSEE BY : SHRI J.D. MISTRY A/W SHRI RONAK DOSHI REVENUE BY : SHRI ANADI VERMA DATE OF HEARING 26 .0 6 .2019 DATE OF ORDER 23.09.2019 2 PIRAMAL ESTATES PVT. LTD. (FORMERLY KNOWN AS ALPEX INTERNATIONAL LTD.) O R D E R PER SAKTIJIT DEY, J.M. CAPTIONED CROSS APPEALS ARISE OUT OF THE ORDER DATED 18 TH NOVEMBER 2013, PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) 14, MUMBAI, FOR THE ASSESSMENT YEAR 2009 10. ITA NO.779/MUM./2014 ASSESSEES APPEAL : A.Y. 2009 10 2 . AS PER GROUND NO.(I ) OF THE MODIFIED GROUND OF APPEAL, THE ASSESSEE HAS CHALLENGED DISALLOWANCE OF INTEREST EXPENDITURE AMOUNTING TO ` 36,27,796, UNDER SECTION 36(1)(III) OF THE INCOME TAX ACT, 1961 (FOR SHORT 'THE ACT'). 3 . BRIEF FACTS ARE, AS STATED BY THE ASSESSING OFFICER, THE ASSESSEE IS ENGAGED IN SERVICE CENTRE BUSINESS, LEASING OF PREMISES, ETC. IN SIMPLE WORDS, THE ASSESSEE IS IN REAL ESTATE BUSINESS. FOR THE ASSESSMENT YEAR UNDER DISPUTE, THE ASSESSEE FILED ITS RETURN OF INCOME ON 30 TH SEPTEMBER 2009. SUBSEQUENTLY, IT FILED A REVI SED RETURN OF INCOME ON 10 TH FEBRUARY 2011, DECLARING INCOME OF ` 9,68,61,713. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER ON EXAMINING THE BALANCE SHEET OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION NOTICED THAT THE ASSESSEE HAD TAKEN SECU RED AND UNSECURED LOAN AGGREGATING 3 PIRAMAL ESTATES PVT. LTD. (FORMERLY KNOWN AS ALPEX INTERNATIONAL LTD.) TO ` 41,21,88,995, IN RESPECT OF WHICH IT HAS CLAIMED INTEREST PAYMENT OF ` 52,12,41,939, AND FINANCIAL CHARGES OF ` 1,75,67,680. HE ALSO NOTICED THAT THE ASSESSEE HAD GIVEN LOANS AND ADVANCES OF ` 1 88,83,93,532. AFTER CA LLING FOR AND EXAMINING THE BREAK UP OF LOANS AND ADVANCES, HE WAS OF THE VIEW THAT THE ASSESSEE HAD DIVERTED INTEREST BEARING FUND FOR ADVAN CING LOANS TO RELATED ENTITIES AT MUCH LOWER RATE OF INTEREST THAN THE RATE OF INTEREST AT WHICH IT HAD AVAILED THE LOAN. FURTHER, HE FOUND THAT THE ASSESSEE HAD DIVERTED INTEREST BEARING FUND FOR NON BUSINESS PURPOSE , SUCH AS , ADVANCES GIVEN FOR FLAT AT BANDRA KURLA COMPLEX, FLAT AT ASHOK GARDEN, TO EMPLOYEES OF GROUP COMPANY, SUBSIDIARY COMPANY AND REAL ESTATE BUSINE SS WITHOUT CHARGING ANY INTEREST. THUS, HE QUANTIFIED THE INTEREST BEARING FUND DI VERTED FOR NON BUSINESS PURPOSE AT ` 9,49,69,730. SINCE , THE ASSESSEE HAD AVAILED THE LOANS BY PAYING AVERAGE RATE OF INTEREST OF 11.73%, APPLYING THE SAID RATE TO THE INTEREST BEARING FUND DIVERTED FOR NON BUSINESS PURPOSE, HE WORKED OUT THE PROPORTIONATE INTEREST DISALLOWANCE UNDER SECTION 36(1)(III) OF THE ACT AT ` 1,11,39, 949. THE ASSESSEE C HALLENGED THE AFORESAID DISALLOWANCE BEFORE THE FIRST APPELLATE AUTHORITY. 4 . AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND THE DETAILS AVAILABLE ON RECORD, LEARNED COMMISSIONER (APPEALS) DELETED THE 4 PIRAMAL ESTATES PVT. LTD. (FORMERLY KNOWN AS ALPEX INTERNATIONAL LTD.) INTEREST DISALLOWANCE ON ADVANCES GIVEN TOWARDS PU RCHASE OF FLAT AT BANDRA KURLA COMPLEX AND ASHOK GARDEN SINCE , ACCORDING TO HIM , SUCH ADVANCES WERE GIVEN IN THE NORMAL COURSE OF BUSINESS. HOWEVER, HE SUSTAINED THE DISALLOWANCE OF INTEREST EXPENDITURE ON ADVANCE GIVEN TO NARI MAN INFRASTRUCTURE PVT. LTD., A SUBSIDIARY COMPANY , AND KHUSRU JUJINA AND RAMESH JOGANI EMPLOYEES OF GROUP COMPANY , BY HOLDING THAT THEY ARE NOT FOR THE PURPOSE OF BUSINESS. ACCORDINGLY, HE SUSTAINED THE DISALLOWANCE TO THAT EXTENT. 5 . SHRI J.D. MISTRY, THE LEARNED SR. COUNSEL FOR THE ASSESSEE SUBMITTED , THE LOANS ADVANCED TO THESE PARTIES WERE OUT OF INTEREST FREE FUND AVAILABLE WITH THE ASSESSEE. THEREFORE, NO DISALLOWANCE OF INTEREST EXPENDITURE SHOULD BE MADE. IN THIS REGARD, HE RELIED UPON THE DECISION OF THE HON'BLE SUPREME COURT IN CIT V/S RELIANCE INDUSTRIES LTD., 410 ITR 466 (SC). FURTHER, HE SUBMITTED , THE LOAN WAS SANCTIONED TO PIRAMAL HOLDINGS LTD. FOR CONSTRUCTION OF A BUILDING. S UBSEQUENTLY, THE LOAN ALONG WITH BUILDING WAS SPUN OFF TO THE ASSESSEE AND THE ASSESSEE IS SERVI CING THE LOAN. HE SUBMITTED , NARIMAN INFRASTRUCTURE LTD. IS A SUBSIDIARY IN THE SAME LINE OF BUSINESS. THEREFORE, IT CANNOT BE SAID THAT SUCH LOAN IS NOT FOR BUSINESS PURPOSE. AS REGARDS LOAN GIVEN TO THE TWO EMPLOYEES , HE SUBMITTED, THEY HAVE PLAYED SIGNI FICANT ROLE IN ADVANCING ASSESSEE S BUSINESS INTEREST . THUS, 5 PIRAMAL ESTATES PVT. LTD. (FORMERLY KNOWN AS ALPEX INTERNATIONAL LTD.) HE SUBMITTED , THE INTEREST ON SUCH LOAN HAVING BEEN ADVANCED FOR BUSINESS PURPOSE IS ALLOWABLE. IN THIS REGARD, HE RELIED UPON THE DECISION OF THE TRIBUNAL, MUMBAI BENCH, IN RIOPLAST TECHNOLOGIES PVT. LTD. V/S DCIT, ITA NO.7502/MUM./2016. 6 . SHRI ANADI VERMA, THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED , ASSESSEES CLAIM REGARDING AVAILABILITY OF SUFFICIENT INTEREST FREE FUND HAS NOT BEEN EXAMINED EITHER BY THE ASSESSING OFFICER OR BY LEARNED C OMMISSIONER (APPEALS). THEREFORE, IT REQUIRES VERIFICATION. FURTHER, HE SUBMITTED , ASSESSEES CLAIM THAT THE LOANS WERE UTILISED FOR THE PURPOSE OF BUSINESS ALSO REQUIRE S VERIFICATION SINCE THE ASSESSEE NEEDS TO ESTABLISH ITS CLAIM THROUGH PROPER EVIDENCE. THUS, HE SUBMITTED , THE ISSUE MAY BE RESTORED BACK TO THE ASSESSING OFFICER FOR FRESH ADJUDICATION. 7 . WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED MATERIAL ON RECORD. WE HAVE ALSO APPLIED OUR MIND TO THE DECISIONS RELIED UPON. AS NOTICED FROM THE ORDER OF LEARNED COMMISSIONER (APPEALS), DISALLOWANCE OF INTEREST EXPENDITURE ON LOANS ADVANCED TO THREE PARTIES HAVE BEEN SU STAINED BY HIM PRIMARILY FOR THE REASON THAT INTEREST BEARING FUNDS HAVE BEEN ADVANCED FOR NON BUSINESS PURPOSE. AS REGARDS ASSESSEES CLAIM THAT THE LOAN ADVANCED TO THE AFORESAID THREE PARTIES WERE FOR THE PURPOSE OF BUSINESS, WE MUST OBSERVE THAT 6 PIRAMAL ESTATES PVT. LTD. (FORMERLY KNOWN AS ALPEX INTERNATIONAL LTD.) THE LO AN ADVANCED TO THE TWO INDIVIDUALS I.E., KHUSRU JUJINA AND RAMESH JOGANI CANNOT BE CONSIDERED TO BE FOR THE PURPOSE OF ASSESSEES BUSINESS AS THEY ARE NOT THE EMPLOYEE OF THE ASSESSEE BUT ARE EMPLOYEE S OF AN OTHER GROUP COMPANY AND THE ASSESSEE HAS NOT ESTA BLISHED THE BUSINESS GAIN DERIVED BY IT BY ADVANCING SUCH LOAN . BY MERELY STATING THAT THE CONCERNED PARTIES HAVE RENDERED SOME SERVICES , ASSESSEES CLAIM CANNOT BE ACCEPTED. INSOFAR AS THE LOAN ADVANCE D TO NARIMAN INFRASTRUCTURE PVT. LTD., THE ASSESSEE IS REQUIRED TO ESTABLISH T HE BUSINESS EXPEDIENCY IN ADVANCING THE LOAN. BY MERELY CLAIMING THAT THE SUBSIDIARY IS IN REAL ESTATE BUSINESS ASSESSEES CLAIM CANNOT BE ALLOWED. 8 . HOWEVER, I T IS THE SPECIFIC CONTENTION OF THE LEARNED SR. COUNSEL FOR THE ASSESSEE THAT THE ASSESSEE HAD SUFFICIENT INTEREST FREE FUND AVAILABLE TO MAKE SUCH ADVANCES. THE AFORESAID CONTENTION OF THE ASSESSEE REQUIRES VERIFICATION AS NEITHER THE ASSESSING OFFICER NOR LEARNED COMMISSIONER (APPEALS) HAVE FACTUALLY VERIFIED THE AVAILABILIT Y OF SUFFICIENT INTEREST FREE FUND WITH THE ASSESSEE. IN CASE, THE ASSESSEE IS FOUND TO BE HAVING SUFFICIENT INTEREST FREE FUNDS TO ADVANCE THE AFORESAID LOANS, NO DISALLOWANCE OF INTEREST EXPENDITURE SHOULD BE MADE. 7 PIRAMAL ESTATES PVT. LTD. (FORMERLY KNOWN AS ALPEX INTERNATIONAL LTD.) 9 . IN GROUND NO.(II ), THE ASSESSEE HAS C HALLENGED DISALLOWANCE OF EXPENDITURE UNDER SECTION 14A R/W RULE 8D. 10 . BRIEF FACTS ARE, DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS MADE INVESTMENT OF ` 109,67,30,099. W HEREAS , IT HAS BORROWED FUNDS OF ` 441,21,88,995. FURTHER, HE OBSERVED THAT THE ASSESSEE HAS VOLUNTARILY DISALLOWED AN AMOUNT OF ` 13,88,6 6,018, BEING INTEREST PAYMENT ON BORROWED FUNDS UTILIZED FOR THE PURPOSE OF INVESTMENT. HOWEVER, BEING OF THE VIEW THAT THE DISALLOWANCE MADE BY THE A S SESSEE IS NOT IN TERMS WITH RULE 8D, HE PROCEED ED TO COMPUTE DISALLOWANCE AT ` 25,99,13,363. THE ASSESSEE HAVING ALREADY MADE A DISALLOWANCE OF ` 13,88,66,018, THE ASSESSING OFFICER MADE A FURTHER DISALLOWANCE OF ` 12,10,47,345. THE ASSESSEE CHALLENGED THE AFORESAID DISALLOWANCE BEFORE THE FIRST APPELLATE AUTHORITY. 11 . THE LEARNED COMMISSIONER (APPEALS) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, GRANTED PARTIAL RELIEF TO THE ASSESSEE BY DIRECTING THE ASSESSING OFFICER TO RE COMPUTE THE DISALLOWANCE UN DER SECTION 14A R/W RULE 8D AFTER EXCLUDING SHARE APPLICATION MONEY AND INVESTMENT IN FLAT AT BANDRA KURLA COMPLEX FROM THE AVERAGE VALUE OF INVESTMENT. 8 PIRAMAL ESTATES PVT. LTD. (FORMERLY KNOWN AS ALPEX INTERNATIONAL LTD.) 12 . THE LEARNED SR. COUNSEL FOR THE ASSESSEE SUBMITTED , DURING THE YEAR UNDER CONSIDERATION , THE ASSESSEE HAS NOT EARNED AN Y EXEMPT INCOME. THEREFORE, NO DISALLOWANCE UNDER SECTION 14A R/W RULE 8D CAN BE MADE. IN SUPPORT OF SUCH CONTENTION, HE RELIED UPON THE FOLLOWING DECISIONS: I ) CIT V/S CHETTINAD LOGISTICS PVT. LTD., [2018] 98 TAXMANN. COM 250 II ) DCIT V/S L &T POWER DEVELOPMENT LTD., ITA NO.874/MUM./ 2017; 09.08.2018; III ) DCIT V/S FUTURE MARKET NETWORKS LTD., ITA NO.5781/MUM./ 2016, ETC., DATED 03.10.2018; IV ) TEJASKIRAN PHARMACHEM INDUSTRIES PVT. LTD. V/S DCIT, ITA NO.3307/MUM./2014, DATED 13.12.2017; V ) SAJJAN INDIA LTD. V/S ACIT, [2018] 89 TAXMANN.COM 21 (MUM.)(TRIB.); VI ) CHAND N. BHOJAWANI V/S DCIT, ITA NO.272/MUM./2015, ETC., DATED 28.07.2017; AND VII ) TECHPROCESS PAYMENT SERVICES LTD. V/S DCIT, ITA NO.8547/ MUM./2011, DATED 12.10.2018. 13 . THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED UPON THE OBSERVATIONS OF THE ASSESSING OFFICER AND LEARNED COMMISSIONER (APPEALS). 14 . WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED MATERIAL ON RECORD. WE HAVE ALSO APPLIED OUR MIND TO THE DECISIONS RELIED UP ON. 9 PIRAMAL ESTATES PVT. LTD. (FORMERLY KNOWN AS ALPEX INTERNATIONAL LTD.) NOTABLY, BEFORE THE FIRST APPELLATE AUTHORITY, THE ASSESSEE HAD SPECIFICALLY PLEADED THAT NO DISALLOWANCE UNDER SECTION 14A R/W RULE 8D CAN BE MADE IN THE ABSENCE OF ANY EXEMPT INCOME EARNED BY THE ASSESSEE DURING THE YEAR. THE FACT THAT THE ASSESSEE H AS NOT EARNED ANY EXEMPT INCOME DURING THE YEAR, HAS NOT BEEN DISPUTED BY THE REVENUE. THAT BEING THE CASE, AS PER THE RATIO LAID DOWN IN THE DECISIONS CITED BEFORE US BY THE LEARNED SR. COUNSEL FOR THE ASSESSEE, NO DISALLOWANCE UNDER SECTION 14A R/W RULE 8D CAN BE MADE. IT NEEDS TO BE OBSERVED , THE SLP FILED BY THE REVENUE AGAINST THE DECISION OF THE HONBLE MADRAS HIGH COURT IN CIT V/S CHELLINAD LOGISTICS PVT. LTD. (SUPRA) HAS BEEN DISMISSED BY THE HON'BLE SUPREME COURT. EVEN , THE HON'BLE JURISDICTIONAL H IGH COURT IN PCIT V/S BALLARPUR INDUSTRIES LTD., ITA NO.51/2016, DATED 13 TH OCTOBER 2016, HAS EXPRESSED SIMILAR VIEW. THUS, FOLLOWING THE RATIO LAID DOWN IN THE DECISIONS REFERRED TO ABOVE, WE DELETE THE DISALLOWANCE MADE UNDER SECTION 14A R/W RULE 8D. AS REGARDS THE DECISIONS OF THE T RIBUNAL, AMRITSAR BENCH, IN LALLY MOTORS (SUPRA) , CITED BY THE LEARNED DEPARTMENTAL REPRESENT ATIVE, IN OUR VIEW, IN VIEW OF THE DECISION S OF THE DIFFERENT HIGH COURTS INCLUDING HON'BLE JURISDICTIONAL HIGH C OURT REFERRED TO ABO VE, THE DECISION CITED BY LEARNED DEPARTMENTAL REPRESENTATIVE WILL NOT APPL Y . GROUNDS ARE ALLOWED. 10 PIRAMAL ESTATES PVT. LTD. (FORMERLY KNOWN AS ALPEX INTERNATIONAL LTD.) 15 . IN THE RESULT, APPEAL IS PARTLY ALLOWED. ITA NO.519/MUM./2014 REVENUES APPEAL 16 . IN GROUNDS NO.(I) AND (II), THE REVENUE HAS CHALLENGED THE DELETION OF ADDITION OF ` 7,23,51,153, MADE FROM DEDUCTION OF INTEREST EXPENDITURE CLAIMED UNDER SECTION 24(B) OF THE ACT. 17 . BRIEF FACTS ARE, DURING THE ASSESSMENT PROCEEDI NGS, THE ASSESSING OFFICER UPON VERIFYING THE COMPUTATION OF INCOME NOTICED THAT WHILE COMPUTING THE INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY, THE ASSESSEE HAD CLAIMED DEDUCTION UNDER SECTION 24(B) OF THE ACT ON ACCOUNT OF INTEREST PAID ON BORROWED FUNDS. HE, THEREFORE, CAL LED UPON THE ASSESSEE TO FURNISH LOAN SANCTION LETTER, DETAILS OF INTEREST PAID, UTILIZATION OF BORROWED FUNDS, ETC. IN RESPONSE TO THE QUERY RAISED BY THE ASSESSING OFFICER, THE ASSESSEE FURNISHED ITS REPLY VIDE LETTER DATED 5 TH DECEMBER 2011, WHEREIN , TH E ASSESSEE FURNISHED THE BASIS OF ALLOCATION OF INTEREST EXPENDITURE TO RENTAL INCOME. FROM THE SAID REPLY, THE ASSESSING OFFICER FOUND THAT THE ASSESSEE ALLOCATED INTEREST EXPENDITURE FOR CLAIMING DEDUCTION UNDER SECTION 24(B) OF THE ACT ON THE BASIS OF A REA USED FOR COMMERCIAL PURPOSE AND THE AREA LET OUT. THE ASSESSING OFFICER OBSERVED THAT THE DEDUCTI ON OF INTEREST ON BORROWED FUND AS PER SECTION 24(B) OF THE ACT IS NOT DEPENDENT UPON 11 PIRAMAL ESTATES PVT. LTD. (FORMERLY KNOWN AS ALPEX INTERNATIONAL LTD.) THE AREA USED FOR LETTING OUT BUT THE UTILIZATION OF FUND . A LLEGING T HAT THE ASSESSEE FAILED TO PROVIDE ANY EVIDENCE SHOWING UTILIZATION OF FUND FOR CONSTRUCTION OF HOUSE PROPERTY , HE DISALLOWED THE DEDUCTION CLAIMED UNDER SECTION 25(B) OF THE ACT AMOUNTING TO ` 7,23,51,153. THE ASSESSEE CHALLENGED THE AFORESAID DISALLOWANC E BEFORE THE FIRST APPELLATE AUTHORITY. 18 . THE LEARNED COMMISSIONER (APPEALS) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE IN THE CONTEXT OF FACTS AND MATERIAL ON RECORD WAS CONVINCED WITH ASSESSEES CLAIM, HENCE, ALLOWED THE DEDUCTION OF INTEREST ON BO RROWED FUND AS CLAIMED UNDER SECTION 24(B) OF THE ACT. 19 . THE LEARNED DEPARTMENTAL REPRESENTATIVE STRONGLY RELYING UPON THE OBSERVATIONS OF THE ASSESSING OFFICER SUBMITTED , THE BASIS FOR DEDUCTION UNDER SECTION 24(B) OF THE ACT IS THE UTILIZATION OF BORROWE D FUND FOR THE CONSTRUCTION OF PROPERTY FROM WHICH RENTAL INCOME IS DERIVED. HE SUBMITTED , IT HAS NOTHING TO DO WITH THE AREA LET OUT. FURTHER, HE SUBMITTED , THE ASSESSING OFFICER HAS MADE OUT A STRONG CASE THAT THE ASSESSEE IS CHANGING THE AREA USED FOR C OMMERCIAL PURPOSE AND FOR THE PURPOSE OF LETTING OUT ACCORDING TO ITS OWN WISH. HE SUBMITTED , THIS ASPECT HAS NOT AT ALL BEEN CONSIDERED BY THE LEARNED COMMISSIONER (APPEALS). THUS, HE SUBMITTED , THE ASSESSEE 12 PIRAMAL ESTATES PVT. LTD. (FORMERLY KNOWN AS ALPEX INTERNATIONAL LTD.) HAVING NOT PROVED THE UTILIZATION OF BORROWED F UNDS FOR CONSTRUCTION OF THE HOUSE PROPERTY, THE DEDUCTION CLAIMED UNDER SECTION 24(B) OF THE ACT IN RESPECT OF THE INTEREST PAID ON BORROWED FUNDS IS NOT ALLOWABLE. IN SUPPORT OF SUCH CONTENTION, HE RELIED UPON THE FOLLOWING DECISIONS: I ) K.K. KHULLAR VS. DCIT 116 ITD 301 (DEL) ; AND II ) SMT. PRABHAVATI S. SHAH V/S CIT, (1998) 231 ITR 001 . 20 . THE LEARNED SR. COUNSEL FOR THE ASSESSEE SUBMITTED , THE LOAN WAS SANCTIONED IN THE NAME OF PIRAMAL HOLDINGS BY HDFC BANK TO BUILD A 10 STORY BUILDING VIZ. PIRAMAL TOWER. HE SUBMITTED , SUBSEQUENTLY, THE BUILDING AS WELL AS THE LOAN AVAILED WERE TRANSFERRED TO THE ASSESSEE AND THE ASSESSEE BECAME THE OWNER O F THE BUILDING AND IS ALSO SERVICING THE LOAN. HE SUBMITTED , A PART OF THE BUILDING IS USED BY THE ASSESSEE AND ITS GROUP COMPANY FOR COMMERCIAL PURPOSE AND MAJOR PORTION OF THE BUILDING IS LEASED OUT TO VARIOUS OTHER ENTITIES. HE SUBMITTED , SINCE A PART O F BUILDING WAS USED FOR COMMERCIAL BUILDING AND PART OF IT WAS LET OUT , THE ASSESSEE HAD ALLOCATED THE INTEREST ON LOAN PROPORTIONATE LY, ON THE BASIS OF ARE A LET OUT. HE SUBMITTED , THERE IS NO DISPUTE WITH REGARD TO THE PAYMENT OF INTERES T ON THE LOAN. THE REFORE, THE INTEREST EXPENDITURE HAS TO BE ALLOWED EITHER UNDER SECTION 24(B) OF THE ACT OR UNDER SECTION 36(1)(III) OF THE ACT. THEREFORE, THE ISSUE IS REVENUE NEUTRAL. 13 PIRAMAL ESTATES PVT. LTD. (FORMERLY KNOWN AS ALPEX INTERNATIONAL LTD.) 21 . IN REJOINDER, THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED , THE BASIS OF ALLOCA TION OF INTEREST EXP ENDITURE DEVISED BY THE ASSESSEE IS DE HORS THE STATUTORY PROVISIONS, HENCE, CANNOT BE ALLOWED. 22 . WE HAV E CONSIDERED RIVAL SUBMISSIONS AND PERUSED MATERIAL ON RECORD. THE FACT UAL MATRIX OF THE ISSUE REVEALS THAT THE LOAN WAS SANCTIONED BY HDFC BANK FOR CONSTRUCTING A 10 STORY BUILDING NAMED PIRAMAL TOWERS BY PIRAMAL HOLDINGS PVT. LTD. SUBSEQUENTLY, THE BUILDING AND THE LOAN SANCTIONED WAS TRANSFERRED TO THE ASSESSEE. A PART OF THE BUILDING WAS UTILIZED BY TH E ASSESSEE AND ITS GROUP COMPANIES FOR COMMERCIAL PURPOSE AND THE REST OF THE BUILDING WAS LEASED OUT BY THE ASSESSEE. IT IS EVIDENT , THE ARE A LEASED OUT FOR RENTAL PURPOSE DEPENDS ON THE OCCUPANCY OF THE PROPERTY FOR COMMERCIAL PURPOSE. THEREFORE, THE ARE A LET OUT CHANGES FROM TIME TO TIME. IT IS ALSO EVIDENT , FROM THE PAST YEARS THE ASSESSEE HAD BEEN ALLOCATING THE INTEREST ON LOAN ON THE BASIS OF AREA LET OUT AND THE AFORESAID BASIS OF ALLOCATION OF INTEREST COMMENSURATE WITH THE AREA LET OUT WAS ACCEPTE D BY THE DEPARTMENT FROM THE ASSESSMENT YEAR 2004 05 ONWARDS , EXCEPT , THE IMPUGNED ASSESSMENT YEAR. AS COULD BE SEEN, THE ASSESSING OFFICER HAS DISALLOWED THE DEDUCTION CLAIMED UNDER SECTION 24(B) OF THE ACT, BASICALLY FOR TWO REASONS VIZ. (I) THE ASSESSEE HAS NOT 14 PIRAMAL ESTATES PVT. LTD. (FORMERLY KNOWN AS ALPEX INTERNATIONAL LTD.) PROVED UTILIZATION OF FUND FOR CONSTRUCTION OF PROPERTY; AND (II) THE DEDUCTION UNDER SECTION 24(B) OF THE ACT CANNOT BE ALLOWED ON THE BASIS OF AREA LET OUT. IN OUR VIEW, THE REASON S ON THE BASIS OF WHICH THE ASSESSING OFFICER DISALLOWED DEDUCTIO N UNDER SECTION 24(B) OF THE ACT, ARE UNACCEPTABLE. UNDISPUTEDLY, THE LOAN WAS SANCTIONED FOR CONSTRUCTION OF THE ENTIRE BUILDING. WHEN A PART OF THE BUILDING IS USED FOR COMMERCIAL PURPO SE AND THE REST OF IT IS LET OUT , THE INTEREST EXPENDITURE ON THE LOA N AVAILED FOR CONSTRUCTION OF BUILDING HAS TO BE APPORTIONED BETWEEN THE AREA LET OUT AND ARE A USED FOR COMMERCIAL PURPOSE, AS THIS IS THE MOST SCIENTIFIC BASIS ON WHICH THE INTEREST CAN BE ALLOCATED. IT IS ALSO VERY MUCH CLEAR THAT THE ASSESSING OFFICER H AS NOT POINTED OUT ANY MAJOR DEFICIENCY IN ALLOCATION OF INTEREST EXPENDITURE BETWEEN THE AREA USED FOR COMMERCIAL PURPOSE AND AREA LET OUT. THE ALLEGATION OF THE ASSESSI NG OFFICER THAT THE ASSESSEE AT ITS OWN WILL CHANGES THE AREA LET OUT IS ON A MERE PRE SUMPTION. WE DO NOT FIND ANY MATERIAL ON RECORD TO INDICATE THAT THE ASSESSING OFFICER HAD CARRIED OUT ANY SPECIFIC ENQUIRY TO DISPROVE ASSESSEES CLAIM REGARDING THE AREA LET OUT. MOREOVER, WHEN THE ALLOCATION OF INTEREST EXPENDITURE IN IDENTICAL MANNER H AS BEEN ACCEPTED BY THE ASSESSING OFFICER IN PAST ASSESSMENT YEARS, THERE IS NO VALID REASON FOR NOT ACCEPTING IT IN THE IMPUGNED ASSESSMENT YEAR WHEN THE FACTS ARE IDENTICAL. IN ANY CASE OF THE MATTER, THE EXPENDITURE INCURRED BY THE ASSESSEE WOULD BE 15 PIRAMAL ESTATES PVT. LTD. (FORMERLY KNOWN AS ALPEX INTERNATIONAL LTD.) ALL OWABLE EITHE R UNDER SECTION 24(B) OR UNDER SECTION 36(1)(III) OF THE ACT. THAT BEING THE CASE, IT WILL MAKE NO DIFFERENCE TO THE REVENUE. FOR THE AFORESAID REASONS, WE ARE INCLINED TO UPHOLD THE DECISION OF THE LEARNED COMMISSIONER (APPEALS) ON THE ISSUE. GROUNDS ARE DISMISSED. 23 . IN G ROUNDS NO.(III) AND (IV), THE REVENUE HAS CHALLENGED PARTIAL RELI EF GRANTED TO THE ASSESSEE BY THE LEARNED COMMISSIONER (APPEALS) ON ACCOUNT OF DEDUCTION OF INTEREST EXPENDITURE CLAIMED ON LOAN ADVA NCED TO RELATED PARTIES. IT IS THE CASE OF THE REVENUE THAT LEARNED COMMISSIONER (APPEALS) WITHOUT FOLLOWING THE MANDATE OF SECTION 46A OF THE ACT HAS ACCEPTED ADDITIONAL EVIDENCES AND DELETE D PART OF THE ADDITION. 24 . WE HAVE ALREADY DEALT WITH THE ISSUE WHILE DECIDING GROUND NO.(I) OF ASSESSEES APPEAL IN ITA NO.779/MUM./2014. IN VIEW OF OUR DECISION, THEREIN, SEPARATE ADJUDICATION OF THESE GROUNDS IS NOT REQUIRED. HENCE, THEY ARE DISMISSED. 25 . IN GROUND NO.(V) AND (VI), THE ASSESSEE HA S CHALLENGED THE DECISION OF LEARNED COMMISSIONER (AP PEALS) IN GRANTING PARTIAL RELIEF WITH REGARD TO THE DISALLOWANCE UNDER SECTION 14A R/W RULE 8D. IN VIEW OF OUR DECISION IN GROUND NO.(II) OF ASSESSEES APPEAL I N ITA NO. 779/MUM./2014, HEREIN BEFORE, THERE IS NO NECESSITY TO ADJUDICATE 16 PIRAMAL ESTATES PVT. LTD. (FORMERLY KNOWN AS ALPEX INTERNATIONAL LTD.) THESE GROUNDS SEPARA TELY. SUFFICE TO SAY , THE DECISION OF THE TRIBUNAL, AMRITSAR BENCH, IN LALLI MOTORS INDIA PVT. LTD. V/S PCIT, [2018] 93 TAXMANN.COM 39, CITED BY THE LEARNED DEPARTMENTAL REPRESENTATIVE WOULD BE OF NO HELP TO THE REVENUE IN VIEW OF THE VARIOUS DECISIONS OF THE HIGH COURTS INCLUDING THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT AS REFERRED TO ABOVE BY US. ACCORDINGLY, THESE GROUNDS ARE DISMISSED. 26 . IN THE RESULT, REVENUES APPEAL IS DISMISSED. 27 . TO SUM UP, ASSESSEES APPEAL IS PARTLY ALLOWED AND REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN C OURT ON 25.09.2019 SD/ - G. MANJUNATHA ACCOUNTANT MEMBER SD/ - SAKTIJIT DEY JUDICIAL MEMBER MUMBAI, DATED: 25.09.2019 17 PIRAMAL ESTATES PVT. LTD. (FORMERLY KNOWN AS ALPEX INTERNATIONAL LTD.) COPY OF THE ORDER FORWARDED TO : ( 1 ) THE ASSESSEE; ( 2 ) THE REVENUE; ( 3 ) THE CIT(A); ( 4 ) THE CIT, MUMBAI CITY CONCERNED; ( 5 ) THE DR, ITAT, MUMBAI; ( 6 ) GUARD FILE . TRUE COPY BY ORDER PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY ASSISTANT REGISTRAR ITAT, MUMBAI