ACIT, Jaipur V. SHRI RAVINDRA KUMAR TONGIA, Jaipur

ITA 850/JPR/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 4898 (ITAT-JAIPUR)
• Duration Of Justice: 9 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-08-2013
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 07-11-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: D C SHARMA
• Keywords: Business expenditure; Question of law

Judgement Text

1 ITA 850-12 IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH : JAIPUR. BEFORE SHRI B.R. JAIN AND SHRI KUL BHARAT ITA NO. 850/JP/2012 ASSESSMENT YEAR : 2008-09. THE ACIT, CIRCLE 7, VS. SHRI RAVINDRA KUMAR TONG IA, JAIPUR. R-8, YUDHISTHIR MARG, C-SCHEME, JAIPUR. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI DC SHARMA RESPONDENT BY : SHRI RAJEEV SOGANI DATE OF HEARING : 21.08.2013. DATE OF PRONOUNCEMENT : 22.08.2013 ORDER PER B.R. JAIN, A.M. THIS APPEAL BY REVENUE AGAINST THE ORDER DATED 09. 08.2012 OF LD. CIT (A)-III, JAIPUR RAISES THE FOLLOWING GROUNDS :- I. THE CIT (A) HAS ERRED IN FACT AND IN LAW IN DELE TING THE DISALLOWANCE OF RS. 16,40,214/- BEING THE INTEREST PAYMENT ON LOAN. II. THE CIT (A) HAS ERRED IN FACT AND IN LAW HOLDIN G THAT THE PROVISIONS OF SECTION 40(A)(IA) WERE NOT ATTRACTED TO THE PAYMENTS, ON LEGAL EXPENSE AND REPAIRS & MAINTENANCE, TOTALIN G RS. 1,77,630/-. 2. IN RESPECT OF FIRST GROUND IN APPEAL, BRIEFLY TH E FACTS ARE THAT THE ASSESSEE HAS CLAIMED DEDUCTION FOR INTEREST PAID TOWARDS LOAN TA KEN FROM ICICI BANK WHICH STOOD 2 INVESTED IN THE ASSOCIATED CONCERN. THIS CONCERN S TOOD SOLD BY THE ASSESSEE. THE ASSESSING OFFICER BEING OF THE OPINION THAT THE SAL E PRICE INCLUDED COST OF LOAN, INTEREST PAID ON SUCH LOAN CANNOT BE ALLOWED AS DEDUCTION AG AINST BUSINESS EXPENSES. HOWEVER, THE LD. CIT (A) FOLLOWING TRIBUNAL ORDER DATED 31.5 .2011 IN ITA NO. 1210/JP/2010, TOOK IT THAT THE ISSUE IS IDENTICAL DURING THE YEAR UNDE R CONSIDERATION AND ALLOWED THE DEDUCTION FOR THE YEAR UNDER CONSIDERATION AS WELL. 3. THE LD. D/R WHILE ASSAILING THE ORDER, CONTENDED THAT THERE IS A MATERIAL DIFFERENCE BETWEEN THE FACTS OF THE EARLIER YEAR ON WHICH THE APPELLATE TRIBUNAL DIRECTED DEDUCTION OF INTEREST AS THE ASSETS AGAINST WHICH T HE DEDUCTION WAS CLAIMED WAS INTACT AND HELD BY THE ASSESSEE WHILE THE SAID ASSETS STANDS D ISPOSED OFF DURING THE YEAR UNDER CONSIDERATION. 4. ON THE OTHER HAND, ASSESSEES COUNSEL CONCEDED T HE GROUND TO BE ANSWERED AGAINST HIM WITH THE FOLLOWING NOTE LAID ON RECORD :- THE RESPONDENT, DR. RAVINDRA KUMAR TONGIA IS CAR DIAC PHYSICIAN. HE BORROWED CERTAIN MONEY FROM ICICI BAN K AND INVESTED THE SAME IN A COMPANY NAMELY CARDIC CARE & ALLIED HEAL TH PVT. LTD. OF WHICH HE WAS PROMOTER/DIRECTOR. HE WAS RECEIVING PR OFESSIONAL INCOME ON SHARING BASIS FROM THE SAID COMPANY, WHICH WAS CHAR GEABLE UNDER THE HEAD INCOME FROM PROFESSION. THE DEDUCTION OF INTER EST WAS CLAIMED FROM THIS PROFESSIONAL INCOME. THIS DEDUCTION WAS DISALL OWED BY LD. A.O. IN A.Y. 2007-08 WHICH MATTER WAS CARRIED TO HON'BLE TR IBUNAL, WHICH ALLOWED THE DEDUCTION OF SAID INTEREST IN ASSESSEE S OWN CASE IN ITA NO. 1217/JP/2010 VIDE ORDER DATED 31.05.2011. SUBSEQUENTLY, THE SHAREHOLDING IN CARDIC CARE & ALL IED HEALTH PVT. LTD WAS SOLD BY DR. TONGIA AND HE WITHDREW HIS FINANCIAL INTEREST AS WELL AS PROFESSIONAL INTEREST FROM THE SAID COMPANY AND STARTED HIS OWN PROPRIETARY CLINIC TONGIA HEART CLINIC AT C-68, S AROJINI MARG, C- SCHEME, JAIPUR. THE DEDUCTION OF INTEREST IN THIS YEAR WAS ALSO CLA IMED BECAUSE THE BUSINESS INVESTMENT WITHDRAWN FROM THE CARDIC CARE & ALLIED HEALTH PVT. LTD WAS AGAIN INVESTED IN THE PROPRIETARY CLINIC. 3 LD. CIT (A) ALLOWED THE DEDUCTION BASED ON HON'BLE ITATS FINDING IN ASSESSEES OWN CASE FOR A.Y. 2007-08. HO WEVER, ON VERIFICATION OF FURTHER FACTS IN DETAILS, IT WAS FOUND THAT THE INVESTMENT IN PROPRIETARY CLINIC WAS NOT SUFFICIENT TO WARRANT DEDUCTION IN T HIS YEAR. IN VIEW OF THE ABOVE, THE DEPARTMENTAL GROUND NO . 1 IS CONCEDED. 5. HAVING HEARD PARTIES AND AFTER CAREFULLY PERUSAL OF RECORD, IT IS FOUND THAT THE INVESTMENT IN PROPRIETARY CLINIC MADE BY THE ASSESS EE WAS NOT SUFFICIENT ENOUGH ON WHICH DEDUCTION OF INTEREST COULD BE ALLOWED AND AS SUCH THE LD. CIT (A) HAS ERRED IN ALLOWING DEDUCTION OF INTEREST FOR RS. 16,40,214/-. WE, THE REFORE, SET ASIDE HIS ORDER AND ALLOW THE GROUND RAISED IN APPEAL. 6. IN GROUND NO. 2, THE LD. CIT (A) FOLLOWING THE J UDGMENT BY SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF MERILYN SHIPPING & TRANSPOR TS, 16 ITR 1 (VISKH.)(SB) DELETED THE DISALLOWANCE AS IT WAS THE ACTUAL AMOUNT OUT OF EXPENSES OUTSTANDING AT THE END OF THE RELEVANT ASSESSMENT YEAR WHICH WAS COVERED UNDER TH E TDS SCHEME. HE, THEREFORE, DELETED THE ADDITION OF RS. 1,77,630/- MADE UNDER S ECTION 40(A)(IA) OF THE ACT. IN RESPECT OF THE PAYMENTS MADE ON ACCOUNT OF AMC OF REPAIRS A ND MAINTENANCE AND LEGAL EXPENSES ON WHICH TAX AT SOURCE WAS NOT DEDUCTED. 7. WE HAVE HEARD PARTIES WITH REFERENCE TO MATERIAL ON RECORD. THE JUDGMENT BY SPECIAL BENCH OF THE TRIBUNAL IN CASE OF MERILYN SH IPPING & TRANSPORTS (SUPRA) HAS NOT BEEN APPROVED BY THE HON'BLE ANDHRA PRADESH HIGH CO URT AS THE PROPOSITION FOUND BY THE SPECIAL BENCH IS NOT A GOOD LAW. THE HON'BLE AN DHRA PRADESH HIGH COURT AFTER INTERPRETING STATUTORY PROVISIONS AS CONTAINED IN S ECTION 40(A)(IA) OF THE ACT HAVE LAID DOWN THAT THE DEDUCTION HAS TO BE MADE BOTH ON THE AMOUNT PAYABLE OR PAID DURING THE PREVIOUS YEAR PROVIDED OTHER CONDITIONS ARE SATISFI ED.IT THUS HELD THAT THE ASSESSEE IS LIABLE 4 TO MAKE DEDUCTION ON THE SERVICES ON WHICH TAX IS R EQUIRED TO BE DEDUCTED WHETHER THE AMOUNT OF SUCH SERVICES HAVE BEEN PAID DURING THE Y EAR OR THE SAME IS OUTSTANDING. THE HON'BLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. CRESCENT EXPORT SYNDICATE (2013) 354 ITR 1 (CAL.)(ONLINE EDITION) HAS ENTERTAINED A VIEW THAT DISALLOWANCE UNDER SECTION 40(A)(IA) IS NOT TO BE RESTRICTED TO MONEY WHICH IS YET TO BE PAID. THE LEGISLATURES HAS USED CREDIT OR PAID IN THE BILL AND AS SUCH PA YABLE IN THE PROVISIONS CONTAINED IN SECTION 40(A)(IA) OF THE ACT IS OF NO RELEVANCE. THE HON'BLE GUJARAT HIGH COURT ALSO HAS DISAPPROVED THE JUDGMENT BY SPECIAL BENCH OF THE TR IBUNAL IN THE CASE OF MERILYN SHIPPING & TRANSPORTS VS. ADDITIONAL CIT BY HOLDING THAT THE PROVISIONS OF SECTION 40(A)(IA) WOULD COVER NOT ONLY THE AMOUNT WHICH ARE PAYABLE AS ON 31 ST MARCH OF A PARTICULAR YEAR BUT ALSO WHICH ARE PAYABLE AT ANY T IME DURING THE YEAR. THIS JUDGMENT HAS BEEN REPORTED AS CIT VS. SIKANDARKHAN N. TUNVAR & O THERS (2013) 259 CTR 57. THE ASSESSEES RELIANCE ON THE JUDGMENT BY HON'BLE ALLA HABAD HIGH COURT IN THE CASE OF CIT VS. VECTOR SHIPPING SERVICES (P) LTD. IN I.T. APPEA L NO. 122 OF 2013 VIDE ITS ORDER DATED 9.7.2013 WAS WITH REFERENCE TO THE QUESTION OF FACT S AND DID NOT RELATE TO INTERPRETATION OF PROVISIONS AS CONTAINED IN SECTION 4(A)(IA) OF THE ACT. THE HON'BLE ALLAHABAD HIGH COURT, THEREFORE, DID NOT FIND ANY QUESTION OF LAW ARISING IN THE SAID APPEAL FOR ITS CONSIDERATION. IN THIS VIEW OF THE MATTER, WE SET ASIDE THE ORDER OF LD. CIT (A) AND ALLOW THE GROUND RAISED IN APPEAL BY THE REVENUE. 8. IN THE RESULT, APPEAL STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 22.8.2013. SD/- SD/- ( KUL BHARAT ) ( B. R. JAIN ) JUDICIAL MEMBER ACCOUNTANT MEMBER JAIPUR, DATED : 22/08/2013. 5 D/- COPY FORWARDED TO :- THE ACIT, CIRCLE-7, JAIPUR. SHRI RAVINDRA KUMAR TONGIA, JAIPUR. THE CIT (A) THE CIT THE D/R GUARD FILE (ITA NO. 850/JP/2012. BY ORDER, AR ITAT JAIPUR.