BHIMASHANKAR PROPERTIES DEVELOPMENT P. LTD, MUMBAI V. ITO 3(1)(2), MUMBAI

ITA 897/MUM/2009

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 92681 (ITAT-MUMBAI)
• Duration Of Justice: 6 year(s) 3 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-06-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 04-03-2015
• Assessment Year: 2004-2005
• Appeal Filed On: 10-02-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Business income; Depreciation; Business expenditure; Notional interest
• Section: 143(3); 147; 56; 263; 63

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUM BAI , , BEFORE SHRI JOGINDER SINGH, JM AND SHRI SANJAY ARO RA, AM ./I.T.A. NO. 3359/MUM/2008 ( / ASSESSMENT YEAR: 2002-03) BHIMASHANKAR PROPERTIES DEVELOPMENT PVT. LIMITED, 910, RAHEJA CHAMBERS, 213, NARIMAN POINT, MUMBAI-400021 / VS. INCOME TAX OFFICER-3(1)(2), AAYAKAR BHAVAN, 6 TH FLOOR, R.NO. 667A, M.K.ROAD, MUMBAI-20 ./ ./PAN/GIR NO. AAACB 2308R ( /APPELLANT ) : ( ! / RESPONDENT ) ./I.T.A. NO. 897/MUM/2009 ( / ASSESSMENT YEAR: 2004-05) BHIMASHANKAR PROPERTIES DEVELOPMENT PVT. LIMITED, 910, RAHEJA CHAMBERS, 213, NARIMAN POINT, MUMBAI-400021 / VS. INCOME TAX OFFICER-3(1)(2), AAYAKAR BHAVAN, 6 TH FLOOR, R.NO. 667A, M.K.ROAD, MUMBAI-20 ./ ./PAN/GIR NO. AAACB 2308R ( /APPELLANT ) : ( ! / RESPONDENT ) '#$%& ' / ASSESSEE BY : SHRI NITESH JOSHI ) ' / REVENUE BY : SHRI JITENDRA KUMAR ') ' &, / DATE OF HEARING : 10.03.2015 ITA NO. 3359/M/08 BHIMASHANKAR PROPERTIES DEVELOPMENT P.LTD. 2 ' &, / DATE OF PRONOUNCEMENT : 08.06.2015 / O R D E R PER SANJAY ARORA, A. M.: THIS IS A SET OF TWO APPEAL BY THE ASSESSEE, DIRECT ED AGAINST THE ORDERS BY THE COMMISSIONER OF INCOME TAX (APPEALS)-XXVII, MUMBAI (CIT(A) FOR SHORT) DATED 28.02.2008 & 20.11.2008, DISMISSING THE ASSESSEES APPEALS CONTESTING ITS ASSESSMENTS U/S.143(3) R/W S. 263 OF THE INCOME TAX ACT, 1961 (THE ACT HEREINAFTER) FOR ASSESSMENT YEAR (A.Y.) 2002-03 AND U/S. 143(3) R/W.S.147 FOR AY 2004-05 RESPECTIVELY. ITA NO. 3359/MUM/2008 (A.Y. 2002-03) THE APPEAL RAISES THREE ISSUES, PER ITS SEVERAL GRO UNDS, AND WHICH WE SHALL TAKE UP IN SERIATIM:- 1. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS ) OUGHT TO HAVE HELD THAT THE ORDER PASSED BY THE LEARNED INCOME-TA X OFFICER ('THE ASSESSING OFFICER') UNDER SECTION 143(3) R.W.S.263 OF THE ACT IS ILLEGAL, NULL AND VOID AND BAD IN LAW AND TO BE CANCELLED AS THE ORDER PASSED UNDER SECTION 263 OF THE ACT IS A SUBJECT MATTER OF APPEA L BEFORE THE INCOME-TAX APPELLATE TRIBUNAL, MUMBAI. 2. THE LEARNED COMMISSIONER OF INCOME-TAX(APPEALS) ERRED IN UPHOLDING THE ACTION OF THE ASSESSING OFFICER IN TREATING THE INTEREST INCOME ON LOANS AS 'INCOME FROM OTHER SOURCES' AS AGAINST INCOME UN DER THE HEAD 'PROFITS & GAINS OF BUSINESS OR PROFESSION', AS CONSIDERED B Y THE APPELLANT. 3. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN UPHOLDING THE ACTION OF THE ASSESSING OFFICER IN DISALLOWING A SUM OF RS.7,25,385/- BEING AGGREGATE OF VARIOUS EXPENSES OUT OF TOTAL EX PENSES INCURRED FOR EARNING THE BUSINESS INCOME. 4.(A) THE LEARNED COMMISSIONER OF INCOME-TAX (APPEA LS) ERRED IN UPHOLDING THE ACTION OF THE ASSESSING OFFICER IN MA KING AN ADDITION OF RS.2,04,000/- BEING NOTIONAL INTEREST ON ADVANCES P AID TO M/S B.U. BHANDARI TREATING THE SAME AS A LOAN. ITA NO. 3359/M/08 BHIMASHANKAR PROPERTIES DEVELOPMENT P.LTD. 3 (B) THE APPELLANT SUBMITS THAT SIMILAR ADDITIONS MA DE BY THE ASSESSING OFFICER IN EARLIER YEARS HAS BEEN DELETED BY THE CO MMISSIONER OF INCOME- TAX (APPEALS) & THE LEARNED COMMISSIONER OF INCOME- TAX (APPEALS) WAS NOT JUSTIFIED IN TAKING A DIFFERENT VIEW WITHOUT AN Y REASONING FOR THE SAME. (C) THE APPELLANT SUBMITS THAT WITHOUT PREJUDICE TO ITS ARGUMENT THAT THE AFORESAID AMOUNT WAS NOT A LOAN, IN ANY CASE THERE CAN BE NO ADDITION FOR NOTIONAL INTEREST AS THE SAME IS NOT WARRANTED UNDE R THE PROVISIONS OF THE ACT. 5. THE APPELLANT SUBMITS THAT THE ASSESSING OFFICER BE DIRECTED: (I) TO TREAT INTEREST INCOME AS INCOME UNDER THE HE AD 'PROFIT & GAINS OF BUSINESS OR PROFESSION' AND NOT UNDER THE HEAD 'INC OME FROM OTHER SOURCES'; (II) TO DELETE THE DISALLOWANCE OF A SUM OFRS.725,3 85/- OUT OF TOTAL EXPENSES; (III) TO DELETE THE ADDITION OFRS.2,04,000/- BEING NOTIONAL INTEREST ON ADVANCES AGAINST OFFICE PREMISES; AND TO MODIFY THE ASSESSMENT IN ACCORDANCE WITH THE PROVISIONS OF THE ACT. 2. GROUND NO.1 WAS NOT PRESSED DURING THE HEARING. THE SAME, AS APPARENT, IS EVEN OTHERWISE NOT MAINTAINABLE INASMUCH AS ALL IT AGITATES IS THE LEGALITY OF THE IMPUGNED ORDER IN VIEW OF THE ASSESSEE HAVING A PPEALED AGAINST THE SECTION 263 ORDER, PURSUANT TO WHICH THE IMPUGNED ASSESSMEN T HAS BEEN FRAMED, BEFORE THE APPELLATE TRIBUNAL. CLEARLY THE TWO, I.E., THE SECTION 263 ORDER AND THE IMPUGNED ORDER, ARE SEPARATE ORDERS, BOTH APPEALABL E BEFORE THE TRIBUNAL. THIS EXPLAINS OUR REASON FOR STATING THE SAID GROUND AS NOT VALID OR MAINTAINABLE IN LAW. WE DECIDE ACCORDINGLY. 3. THE SECOND GROUND RELATES TO THE ASSESSMENT OF T HE INTEREST INCOME UNDER THE HEAD INCOME FROM OTHER SOURCES, INSTEAD OF AS BUSINESS INCOME, I.E., AS RETURNED BY THE ASSESSEE. THE LEARNED CIT(A), BEFOR E WHOM THE SAME WAS RAISED AS GROUND 4, DECLINED TO ADJUDICATE THE SAME IN VIEW OF THE SPECIFIC DIRECTION FOR ASSESSING THE INTEREST INCOME UNDER T HE HEAD INCOME FROM OTHER SOURCES BY THE LD. CIT VIDE ORDER U/S. 263 DATED 2 6.08.2005 (COPY ON RECORD). ITA NO. 3359/M/08 BHIMASHANKAR PROPERTIES DEVELOPMENT P.LTD. 4 WE ARE IN AGREEMENT WITH THE LD. CIT(A) THAT INASMU CH AS THE LD. CIT HAD ISSUED A SPECIFIC DIRECTION U/S. 263, BINDING ON TH E ASSESSING OFFICER (A.O.), SO THAT HE WAS OBLIGED TO FOLLOW THE SAME, AND HAD NO DISCRETION TO TAKE ANY DIFFERENT VIEW IN THE MATTER, ASSESSING IN THE MANN ER AS DIRECTED IS ONLY IN DIRECT CONSEQUENCE OF SECTION 263 ORDER, AND WHICH CANNOT THEREFORE BE ADJUDICATED UPON BY THE LD. CIT(A) AS THE FIRST APPELLATE AUTHO RITY; THE SAME BEING OUTSIDE THE PURVIEW OF S.246A. 4. WITHOUT PREJUDICE, WE OBSERVE THE AO TO HAVE ALS O CONSIDERED THE ASSESSEES CASE ON MERITS, ISSUING HIS FINDINGS, WH ICH SUPPLEMENT THAT BY THE LD. CIT PER THE REVISION ORDER. THOUGH, THEREFORE, HE ( AO) WAS NOT OBLIGED TO DO SO, WHERE AND TO THE EXTENT INCONSISTENT WITH THE F INDINGS BY THE REVISIONARY AUTHORITY, COULD ONLY BE ENTERTAINED IN APPEAL BEFO RE THE FIRST APPELLATE AUTHORITY. AND WHICH, AS AFORE-STATED, IS NOT THE C ASE. WE, ACCORDINGLY, DECLINE INTERFERENCE, DISMISSING THE ASSESSEES GROUND NO.2 . WE MAY, HOWEVER, THIS BEING A SUBSISTING ISSUE, WIT H THE ASSESSMENT FOR AY 2004-05, THE OTHER YEAR IN APPEAL, HAVING BEING REOPENED U/S. 147 ON THIS GROUND, DWELL ON THIS ISSUE IN SOME DETAIL. THE ASS ESSEE, INCORPORATED IN THE YEAR 1994, WITH THE MAIN OBJECT OF DEVELOPMENT OF T HE PROPERTY, SITES THE REASON FOR A LULL IN THE REAL ESTATE MARKET FOR HAVING NEV ER COMMENCED THE SAID BUSINESS, I.E., SINCE ITS INCEPTION. IT FURTHER STA TES TO HAVE, FOR THIS REASON, DECIDED TO EMBARK ON THE HOUSING FINANCE BUSINESS, PASSING A RESOLUTION BY ITS BOARD OF DIRECTORS TO THAT EFFECT, BESIDES SEEKING A CLARIFICATION FROM THE RESERVE BANK OF INDIA (RBI), AND WHICH IS STATED TO HAVE CLARIFIED THAT NO SEPARATE PERMISSION FROM IT WAS REQUIRED FOR THE PU RPOSE, I.E., TO COMMENCE THE HOUSING FINANCE BUSINESS. IT IS ON THIS BASIS THAT THE INTEREST INCOME IS CLAIMED FOR BEING TREATED AS A BUSINESS RECEIPT. THE ONLY A CTIVITY, HOWEVER, UNDERTAKEN BY THE COMPANY SINCE INCEPTION IS A LOAN OR ADVANCE TO SHRI MANEKLAL BHANDARI , ITA NO. 3359/M/08 BHIMASHANKAR PROPERTIES DEVELOPMENT P.LTD. 5 DIRECTOR, AND WHICH WAS IN FACT EXTENDED EARLIER PERHAPS SINCE INCEPTION, BEING OUTSTANDING SINCE F.Y. 1996-97, THE SECTION 2 63 ORDER TABULATING THE BALANCE OUTSTANDING AS AT EACH YEAR END, BEGINNING 31.03.1997 (AT RS. 107.83 LACS) UP TO THE CURRENT YEAR (AT RS. 83.76 LACS). N O INTEREST, THOUGH CHARGED, HAD BEEN RECOVERED, AND THE ENTIRE INTEREST CHARGED FRO M YEAR TO YEAR STANDS ACCUMULATED IN A SEPARATE ACCOUNT AS INTEREST RECOV ERABLE (BEING AT RS. 60.20 LACS AS ON 31.03.2002). THE REVENUES STAND OF THE INTEREST INCOME BEING, UNDER THE CIRCUMSTANCES, NOT ARISING OUT OF BUSINES S ACTIVITY IS UNMISTAKABLE. TO BEGIN WITH, THE OBJECT OF ADVANCING OF LOANS IS ONLY AN ANCILLARY OR AN INCIDENTAL OBJECT, I.E., TO THE ATTAINMENT OF THE M AIN OBJECT/S, WHICH CONTINUES TO BE OF DEVELOPMENT OF PROPERTY. THE ASSESSEES STATE S OF A LULL IN THE REAL ESTATE MARKET AS A REASON FOR NOT EMBARKING ON THE SAID BU SINESS. THE SAID CONTENTION IS NOT ONLY WHOLLY UNSUBSTANTIATED, BUT AGAINST COM MON OBSERVATION AS WELL. WHY, HOW COULD, ONE MAY ASK, HOUSING FINANCE BUSINE SS OR EVEN FOR PROPERTIES IN GENERAL, THRIVE UNDER THE CONDITION OF A LULL IN THE REAL ESTATE MARKET? THE ASSESSEE, THUS, ONLY CONTRADICTS ITSELF. FURTHER, T HERE IS NO EVIDENCE OF ANY ORGANIZED ACTIVITY OR EMBARKING ON HOUSING FINANCE BUSINESS IN ANY MANNER. THE LOAN, GIVEN TO A DIRECTOR, PRIOR TO THE STATED DECISION OF CHANGE IN THE BUSINESS, IS NOT SHOWN TO BE FOR THE PURCHASE OR AC QUISITION OF ANY HOUSE PROPERTY. FURTHER, RATHER THAN THE SAME BEING RECAL LED, IT CONTINUES TO OUTSTAND YEAR AFTER YEAR, WITH EVEN THE INTEREST THEREON BEI NG NOT RECEIVED OR RECOVERED. THE INTEREST INCOME, UNDER THE CIRCUMSTANCES, WHICH ARE ADMITTED AND BORNE OUT BY THE RECORD, WOULD NECESSARILY FALL TO BE CLA SSIFIED FOR ASSESSMENT PURPOSES UNDER THE RESIDUARY HEAD OF INCOME, I.E., AS INCOME FROM OTHER SOURCES, OR U/S. 56 OF THE ACT. WE FIND THE RELIANC E BY REVENUE ON THE DECISIONS IN THE CASE OF SOUTH INDIA SHIPPING CORPORATION VS. CIT [1999] 240 ITR 24 (MAD) AND TUTICORIN ALKALI CHEMICALS & FERTILIZERS LTD. VS. C IT [1997] 227 ITR 172 (SC) FOR THE PURPOSE AS APPOSITE. ITA NO. 3359/M/08 BHIMASHANKAR PROPERTIES DEVELOPMENT P.LTD. 6 5. THE SECOND ISSUE, RAISED VIDE GROUND 3 BEFORE US , IS IN RESPONSE TO THE EXPENDITURE CLAIMED BY THE ASSESSEE THROUGH ITS PRO FIT & LOSS ACCOUNT AS BUSINESS EXPENSES. THE AO, IN VIEW OF HIS FINDING OF THE ASSESSEE NOT CARRYING ON ANY BUSINESS DURING THE YEAR AND, IN FA CT, FOR THE PRECEDING YEAR AS WELL, RESTRICTED THE SAME ONLY TO THE EXPENDITURE I N RESPECT OF FILING FEES; BANK CHARGES; AND AUDIT FEES, BEING THE STATUTORY, MINIM UM CHARGES PAYABLE BY THE ASSESSEE IN VIEW OF ITS STATUS AS A COMPANY. THE LD . CIT(A), BEFORE WHOM LIKE SUBMISSIONS WERE RAISED BY THE ASSESSEE, REITERATIN G ITS CASE OF THE EXPENDITURE BEING IN PURSUANCE OF ITS BUSINESS ACTIVITY, SO THA T IT IS TO BE ALLOWED ALL EXPENSES INCURRED IN ITS REGULAR COURSE AS BUSINESS EXPENDITURE, DECIDED THE MATTER THUS: I HAVE GONE THROUGH THE SUBMISSION, FACTS OF THE C ASE AND ALSO THE ASSTT.ORDER. I HAVE NOTED THAT THE APPELLANT SIMPLY CLAIMED INTEREST INCOME AS ITS BUSINESS RECEIPT AND CLAIMED VARIOUS EXPENSES. AS THE INTEREST INCOME IS TREATED AS INCOME FROM OTHER SOURCES. A.O. IS BOUND TO CONSIDER WHETHER ANY SUCH EXPENSES CLAIMED HAVE A DIRECT NEXUS IN EARNIN G INTEREST INCOME AND THEREFORE ALLOWABLE U/S. 57(III). I HAVE NOTED THAT THE A.O. HAS GIVEN HIS FINDING IN THE ASSTT.ORDER AS TO WHICH OF SUCH EXPE NSES HAS NEXUS TO EARN INTEREST 'INCOME. AS SUCH I DO NOT FIND ANY REASON TO INTERFERE THE ACTION OF THE ASSESSING OFFICER. THIS GROUND IS DISMISSED. 6. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. THE LD. CIT WHILE PASSING THE REVISION ORDER HAD ALSO DIREC TED THE AO TO CONSIDER THE ALLOWABILITY OF THE VARIOUS EXPENSES CLAIMED BY THE ASSESSEE IN TERMS OF SECTION 57 OF THE ACT (REFER PARA 6 OF THE REVISION ORDER). THE SAME IS, AGAIN, A SPECIFIC DIRECTION, SO THAT WHAT THE ASSESSEE WAS REQUIRED B EFORE THE AO IN ASSESSMENT, AS WELL IN THE APPELLATE PROCEEDINGS FOLLOWING THE SAME, WAS TO JUSTIFY THE ALLOWABILITY OF THE SAID EXPENDITURE ON THE ANVIL A ND THE TOUCHSTONE OF SECTION 57(III) OF THE ACT. THE EXPENDITURE DISALLOWED, TAB ULATED BELOW (REFER PARA 4 OF THE ASSESSMENT ORDER): ITA NO. 3359/M/08 BHIMASHANKAR PROPERTIES DEVELOPMENT P.LTD. 7 EXPENSE HEAD AMOUNT RS. REMARKS COMPENSATION 1,08,000/- PAID FOR OFFICE PREMISES OFFICE EXPENSES 7,280/- EXPENSES ON ACCOUNT OF TEA, SNACKS ETC. TELEPHONE EXPENSES 49,100/- COMMUNICATION EXPENSES. MOTOR CAR EXPENSES -- EXPENSES ON CAR RENTAL. PROFESSIONAL FEES 44,272/- ADVISE ON TAXATION. FILING FEES -- STATUTORY REQUIREMENT. SALARY 12,000/- SALARY TO STAFF. TRAVELLING EXPENSES 4,94,518/- TRAVELLING OF DIRECTORS. PRELIMINARY EXPENSES 8,689/- INCORPORATION OF COMPANY. DEPRECIATION 2,556/- MOTOR CAR. THE FOREGOING WOULD MAKE IT ABUNDANTLY CLEAR THAT T HE SAID EXPENDITURE IS GENERAL EXPENDITURE INCURRED FOR VARIOUS FUNCTIO NS/ACTIVITIES, OSTENSIBLY FOR MAINTAINING THE ESTABLISHMENT OF THE ASSESSEES UND ERTAKING. THE SAME WOULD THUS NOT FALL TO BE COVERED WITHIN THE COMPASS OF S ECTION 57(III), GIVEN ITS LIMITED SCOPE, I.E., FOR EARNING INCOME, AND WHICH IS ONLY THE INTEREST INCOME ON A SINGLE LOAN GRANTED BY THE ASSESSEE TO, ONE, SHRI MANEKLAL BHANDARI. IN FACT, THE EXPENDITURE ALLOWED, I.E., ON FILING FEES, BANK CHARGES AND AUDIT FEE, WOULD, AGAIN, STRICTLY SPEAKING, NOT FALL WITHIN THE PURVI EW OF SECTION 57(III), AND STANDS ALLOWED ON BEING THE MINIMUM STATUTORY EXPEN SES REQUIRED TO BE INCURRED IN VIEW OF THE LEGAL REQUIREMENT INCIDENT ON THE ASSESSEE AS A COMPANY. THE DECISION BY THE AO, SINCE ENDORSED BY THE LD. CIT(A), CANNOT, THEREFORE, BE FAULTED WITH. WE DECIDE ACCORDINGLY, DISMISSING THE ASSESSEES GROUND # 3 IN RESULT. 7. GROUND # 4 RAISES THE THIRD ISSUE BEING AGITATED BY THE ASSESSEE PER ITS INSTANT APPEAL. THE FACTS IN RELATION THERETO ARE T HAT THE ASSESSEE WAS OBSERVED TO HAVE PAID A SUM OF RS. 17 LAKHS TOWARD BOOKING O F TWO SHOPS, TO MANEKLAL ITA NO. 3359/M/08 BHIMASHANKAR PROPERTIES DEVELOPMENT P.LTD. 8 BHANDARI , AS PROPRIETOR OF B.U. BHANDARI & CO., IN PURSUANCE TO AN AGREEMENT DATED 18.04.1995, AGAINST THE TOTAL COST OF THE SAI D TWO PROPERTIES AT RS. 18.10 LAKHS, BEING RS. 9 LACS AND RS. 9.10 LACS RESPECTIV ELY. WHILE THE CONVEYANCE WAS AGREED TO BE EXECUTED WITHIN A PERIOD OF THREE YEARS, NEITHER THE POSSESSION OF THE PROPERTY HAD BEEN TAKEN BY THE ASSESSEE-COMP ANY AFTER NEARLY A DECADE, NOR THE AMOUNT RECOVERED. THE ASSESSEE CLARIFIED IT TO BE AN ADVANCE FOR OFFICE PREMISES. THE PROLONGED DELAY WAS STATED TO BE ON A CCOUNT OF WANT OF NECESSARY PERMISSIONS. THE SAME WAS NOT FOUND TENAB LE BY THE AO IN THE ABSENCE OF SUBSTANTIATION BY THE ASSESSEE OF ITS C LAIMS. THE CORRESPONDENCE ADDUCED IN SUPPORT WAS ONLY BETWEEN THE ASSESSEE AN D SHRI M.B. BHANDARI, A DIRECTOR, SO THAT IT WOULD BE OF LITTLE CONSEQUENCE ; THE PERMISSIONS BEING REQUIRED FROM THIRD PARTIES. NO STEPS TO TAKE POSSE SSION OF THE FLATS HAD BEEN TAKEN BY THE ASSESSEE. UNDER THE CIRCUMSTANCES, THE IMPUGNED ADVANCE WAS INFERRED TO BE A LOAN TO THE PAYEE AND, ACCORDINGLY , INTEREST COMPUTED @ 12% P.A., BRINGING AN AMOUNT OF RS. 2,04,000/- AS INCOM E FROM OTHER SOURCES. THE SAME FOUND CONFIRMATION IN APPEAL AS THE ASSESSEE H AD FAILED TO GIVE ANY REASONABLE EXPLANATION FOR THE PURCHASE OF THE TWO SHOPS, WHILE THE AMOUNT CONTINUED TO BE RETAINED BY THE PAYEE-DEVELOPER/SEL LER. 8. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. THE REVENUE IS NO DOUBT EMPOWERED, NAY, OBLIGED UNDER L AW, TO ASCERTAIN OR UNVEIL THE REAL NATURE OF THE TRANSACTION. THE INFERENCE O F A LOAN IS NOT MISPLACED IN THE ABSENCE OF THE ASSESSEE FAILING ABYSMALLY TO EXHIBI T THE REASONS FOR THE EXTREME DELAY IN THE PERFORMANCE OF THE CONTRACT, I.E., A D ELIVERY OF THE TWO SHOPS/FLATS, EVEN AS THE PAYMENT STOOD MADE IN A SUBSTANTIAL PRO PORTION YEARS AGO, AND WHICH WOULD RATHER SIGNIFY THE PROXIMITY TO COMPLET ION OF THE PROPERTY OR A STATE OF READINESS FOR BEING DELIVERED WITHIN A SHO RT PERIOD. THE TRANSACTION, WHICH IS BETWEEN THE COMPANY, IN WHICH THE PUBLIC I S NOT SUBSTANTIALLY INTERESTED, AND ITS DIRECTOR, THUS CLEARLY DOES NOT APPEAR TO BE A N ARMS LENGTH ITA NO. 3359/M/08 BHIMASHANKAR PROPERTIES DEVELOPMENT P.LTD. 9 TRANSACTION, IN WHICH CASE SERIOUS STEPS TOWARD REC OVERY OF THE AMOUNT WOULD HAVE BEEN TAKEN. WHAT ARE THE VARIOUS PERMISSIONS/A PPROVALS BEING SOUGHT, SINCE ALMOST A DECADE, AND WHAT STEPS HAVE BEEN TAK EN TO MEET THE DEFICIENCIES FOR WHICH THE SAME STAND WITHHELD BY THE RELEVANT A UTHORITIES? WHY IS THE BUILDER OR THE SELLER NOT BROUGHT TO BOOK OR TO ACC OUNT FOR THE SAME, ESPECIALLY CONSIDERING THAT THE PROPERTY WAS SUPPOSED TO HAVE BEEN DELIVERED WITHIN A PERIOD OF THREE YEARS, AND WHICH EXPIRED YEARS AGO. FUNDS HAVE OPPORTUNITY COST AND, BESIDES, THIS CONSIDERABLY IMPAIRS AND DI SLOCATES THE COMPANYS ACTIVITIES/BUSINESS, CAUSING SUBSTANTIAL LOSS. IN F ACT, THE BUSINESS WAS NEVER BEEN ABLE TO BE COMMENCED. IN A NORMAL, COMMERCIAL TRANSACTION, SUCH A DISPUTE OR IMBROGLIO WOULD HAVE BEEN EITHER RESOLVE D OR DAMAGES CLAIMED, SEEKING, IN ANY CASE, ADEQUATE COMPENSATION. IN FAC T, EVEN THE STATUS OF THE COMPLETION OF THE PROPERTY, I.E., WITH REGARD TO TI ME, IS NOT KNOWN. THE ASSESSEES CASE IS IN FACT WHOLLY UN-EVIDENCED. UND ER THE CIRCUMSTANCES, WE DO NOT FIND ANY INFIRMITY IN THE REVENUE INFERRING THE SAID TRANSACTION TO BE IN FACT REPRESENTING A LOAN TO THE PAYEE UNDER THE GARB OF PURCHASE OF PROPERTY, AND NOT A GENUINE BUSINESS TRANSACTION AND, ACCORDINGLY, EN DORSE THE SAME. SO HOWEVER, WE INCLINED TO, HOWEVER, NOT TO IMPUTE OR ASSIGN ANY INTEREST COST THERETO. WHEN THE PRINCIPAL AMOUNT ITSELF IS N OT FORTHCOMING, THERE IS GREAT UNCERTAINTY IN COLLECTING INTEREST, WHICH HAS NOT B EEN PROVIDED FOR. THE SAME CAN, UNDER THE CIRCUMSTANCES, BE EITHER AGREED TO B ETWEEN THE PARTIES, OR DIRECTED BY A THIRD PARTY, AS AN ARBITRATOR, FOR EX AMPLE, TO WHOM THE PARTIES MAY APPROACH, OR A COURT OF LAW. WE ARE CONSCIOUS, WHEN WE STATE SO, THAT WE PRESUME A NORMAL, GENUINE PROBLEM ON HAND, WHILE TH E REVENUES CASE IS BASED ON THE TRANSACTION, AS BEING REFLECTED, IN THE ABSE NCE OF ANY EVIDENCE, AS NOT TRUE, RAISING SERIOUS AND VALID DOUBTS WITH REGARD TO ITS GENUINENESS. TRUE, BUT THAT WOULD NOT BY ITSELF IMPLY OF THE ASSESSEE-COMP ANY TO HAVE BENEFITED, AT THE COST OF THE PAYEE, TO ANY EXTENT. TAX, IT IS TRITE LAW, CAN ONLY BE CHARGED ON REAL ITA NO. 3359/M/08 BHIMASHANKAR PROPERTIES DEVELOPMENT P.LTD. 10 INCOME, WHILE WE FIND NO BASIS FOR INFERRING THE IN TEREST COST ON THE PART OF REVENUE. WE DECIDE ACCORDINGLY, AND THE ASSESSEE SU CCEEDS ON THIS GROUND. ITA NO. 897/MUM/2009 (AY-2004-05) 9. THE ONLY ISSUE/S RAISED IN THIS APPEAL IS THAT R AISED FOR AY 2002-03 VIDE GROUNDS 2 AND 3 BEFORE US, I.E., THE TAXABILITY OF INTEREST INCOME AS BUSINESS INCOME AND ALLOWANCE OF EXPENDITURE THERE-AGAINST. THE SAME STAND DECIDED BY US VIDE PARAGRAPHS 3 TO 6 OF OUR ORDER FOR AY 2002- 03 (SUPRA), AND WHICH; THE FACTS BEING IDENTICAL, SHALL APPLY IN EQUAL MEASURE FOR THIS YEAR AS WELL, I.E., QUA MERITS. THE ONLY OTHER GROUND/S IS IN RESPECT OF IN TEREST U/S. 234B, WHICH, BEING MANDATORY, IS CONSEQUENTIAL. WE DECIDE ACCORDINGLY. 10. BEFORE PARTING WITH THIS ORDER, WE MAY ADD THAT THE ASSESSEE DURING HEARING CITED A FEW DECISIONS, RAISING LEGAL ISSUES . AS APPARENT FROM THE FOREGOING, WE HAVE DECIDED THE APPEALS BASED ON DEF INITE FINDINGS OF FACT; THE LAW IN THE MATTER/S UNDER THE REFERENCE BEING TRITE . THIS EXPLAINS OUR NON- REFERENCE TO THE SAID DECISIONS, WHICH THOUGH HAVE BEEN DULY PERUSED, FINDING THEM AS INAPPLICABLE IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 11. IN THE RESULT, THE ASSESSEES APPEAL FOR AY 200 2-03 IS PARTLY ALLOWED, AND ITS APPEAL FOR AY 2004-05 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON JUNE 08, 2015 SD/- SD/- (JOGINDER SINGH) (SANJAY ARO RA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; 2' DATED : 08.06.2015 ' . ./SHARWAN . PS !'#$ %$' / COPY OF THE ORDER FORWARDED TO : ITA NO. 3359/M/08 BHIMASHANKAR PROPERTIES DEVELOPMENT P.LTD. 11 1. / THE APPELLANT 2. ! / THE RESPONDENT 3. 3& ( ) / THE CIT(A) 4. 3& / CIT - CONCERNED 5. 4)5 &'# , , # , / DR, ITAT, MUMBAI 6. $ / GUARD FILE / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI