Merlin Land & Housing Pvt. Ltd., Delhi V. ITO ward-16(4), New Delhi

ITA 8948/DEL/2019

AI Insights

The case involves Merlin Land & Housing Pvt. Ltd., the appellant, contesting the order of the ld. CIT(A)-6, New Delhi, which confirmed the disallowance of a business loss set-off against income from other sources. The appellant argued that the CIT(A) had not considered their submissions and various factual aspects in the decision-making process. The primary legal contention revolved around the non-allowance of set-off of a business loss of Rs. 89,83,900 against income from other sources, which the CIT(A) upheld based on the provisions of section 71 of the Income Tax Act. The Tribunal noted that the CIT(A) had not addressed the issue of the actual recipient of the enhanced compensation from HUDA, leading to the remand of the case for further examination.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 131821 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 3 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-03-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 06-12-2022
• Assessment Year: 2017-2018
• Appeal Filed On: 17-11-2019
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ANAN CHOUDHARY
• Keywords: Business income
• Section: 43D

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL DELHIBENCH ‘E’, NEW DELHI Before Dr. B. R. R. Kumar, Accountant Member Sh. Yogesh Kumar US, Judicial Member ITA No. 8948/Del/2019 : Asstt. Year : 2017-18 Merlin Land & Housing Pvt. Ltd., RZ-D-5, Mahavir Enclave, South West Delhi, New Delhi-110045 Vs Income Tax Officer, Ward-16(4), New Delhi (APPELLANT) (RESPONDENT) PAN No. AAECM7249N Assessee by : Sh. Anan Choudhary, Adv. Revenue by : Sh. Ajay Kumar, Sr. DR Date of Hearing: 07.12.2022 Date of Pronouncement: 03.03.2023 ORDER Per Dr. B. R. R. Kumar, Accountant Member: The present appeal has been filed by the assessee against the order of ld. CIT(A)-6, New Delhi dated 17.09.2019. 2. Following grounds have been raised by the assessee: “1. That the order of the ld. CIT(A) is bad in law and preserve as the same has been passed without considering the submission of the Appellant and into account various factual aspects. 2. That the ld. CIT(A) has erred in law in confirming the disallowance made while sending the intimation to the appellant amounting to Rs.89,83,900/-. 3. that the ld. CIT(A) has erred in not allowing the set-off of the loss of Rs.89,83,900/- under the head income from business & profession from the income from other sources.” ITA No. 8948/Del/2019 Merlin Land & Housing Pvt. Ltd. 2 3. Heard the arguments of both the parties and perused the material available on record. 4. The order of the ld. CIT(A) is as under: 4.1 Ground of appeal No, 1 challenges the not allowing of set-off of current year business loss, of Rs. 89,83,253/- under the head "Profits and gains of business or profession" from income under the head "Income from other sources" in accordance with the provisions of section 71. 4.1.1. I have considered the impugned intimation and thus omissions of the appellant. I have also perused tire copy of the return of income which has been furnished. From the return of income it is seen that interest income of Rs. 89,83,901/-has been shown under the head income from other sources. Further, interest expense of Rs. 89,84,549/- has been shown in the debits to profit and loss account (SI. No. 43ii). From the intimation it is apparent that interest expenditure of Rs. 89,84,549/- has not been allowed as a deduction in computing the income under the head "Profits and gains of business or profession". Since the same has not been allowed as deduction, the question of allowing set off as per the provisions of section 71 does not arise. It is also seen from the return of income that there are no long-term borrowings or short-term borrowings disclosed in the return of income. The appellant is not an investment company. No business income has been earned by the assessee company. 4.1.2 For claiming any deduction under sections 30 to 43D in computing the income of the assessee, the condition precedent is that the income from the connected receipts is computed under the head 'Profits and gains from business or profession'. According to the Scheme of the Income Tax Act, all incomes of the assessee are to be classified under various heads described, under section 14 and then income is to be computed under those very heads in accordance with the provisions contained under those very heads. If the receipt falls under a particular head, then, the income from such receipt must be computed In accordance with the provisions under the very head, irrespective of the nature of receipts. The receipts and the expenditure having nexus with each other must be considered ITA No. 8948/Del/2019 Merlin Land & Housing Pvt. Ltd. 3 under one head only. If the expenditure incurred by the assessee is not allowable under that head, then it cannot be allowed even if it has been incurred by die assessee. 4.1.2 Relevant portion of section 143(1)(a) is reproduced as under: “(1) Where a return has been made under section 139, or in response to a notice under sub-section (1) of section 142, such return shall be processed in the following manner, namely: (a) the total income or loss shall be computed after making the following adjustments, namely: - (i) any arithmetical error in the return; or (ii) an incorrect claim, if such incorrect claim is apparent from any information in the return;..." The Explanation to sub-section (1) defines the expression “an incorrect claim apparent from any information in the return" as under: "Explanation - For the purposes of this sub-section, - (a) "an incorrect claim apparent from any information in the return" shall mean a claim, on the basis of an entry, in the return, - (i) of an item, which is inconsistent with another entry of the same or some other item in such return; (ii) in respect of which the information required to be furnished under this Act to substantiate such entry has not been so furnished; or (iii) in respect of a deduction, where such deduction exceeds specified statutory limit which may have been expressed as monetary amount or percentage or ratio or fraction;..." 4.1.3 In view of the above, it is apparent that any claim of deduction which is inconsistent with any claim made in the return of income will constitute "an incorrect claim apparent from any information in the return" as defined in the Explanation to section 143(1). It is settled law that adjustments to income or loss declared in the return can be made if, on the basis of tire information available in such return accounts or documents, the deduction, allowance, claimed by the assessee is ITA No. 8948/Del/2019 Merlin Land & Housing Pvt. Ltd. 4 inadmissible. It has also been held that the claim of the assessee is inadmissible must necessarily flow from the return as filed. 4.1.4 In the case under consideration, there is no income under the head "Profits and gains of business or profession", interest income has been shown under the head "Income from other sources" and there are no long- term or short-term borrowings on which interest could have been paid, there appears to be no infirmity in the order of the CPC in not allowing deduction interest expenditure of Rs. 89,84,549/-. Ground of appeal No. 1 is dismissed. 4.2 Ground of appeal No. 2 states that the appellant craves leave to add, delete, modify or vary any of the grounds of appeal. No such option has been exercised during the appellate proceedings. Hence, this ground of appeal is considered to be a dismissed ground for statistical purposes.” 5. From the record, we find that the amount of “interest has been received from HUDA on account of enhanced compensation and the said compensation amount was transferred to M/s Orris Infrastructure Pvt. Ltd. as per the agreement between the assessee and the said concern. From the order of ld. CIT(A), we find that this issue has not been examined as to who is the real recipient of the monies. Hence, in the fitness of things, the matter is being remanded to the file of the ld. CIT(A) to examine the agreement, business loss incurred and taxability of the amounts in the hands of the assessee. 6. In the result, the appeal of the assessee is allowed for statistical purpose. Order Pronounced in the Open Court on 03/03/2023. Sd/- Sd/- (Yogesh Kumar US) (Dr. B. R. R. Kumar) Judicial Member Accountant Member Dated: 03/03/2023 *Subodh Kumar, Sr. PS*