Rajhans Sales (P) Ltd., New Delhi V. ACIT, New Delhi

ITA 919/DEL/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 86908 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-03-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 10-05-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 24-02-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: RAKHI BIM AL
• Keywords: Deemed to accrue or arise in india

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH F, NEW DELHI BEFORE SRI S.V.MEHROTRA, AM AND SRI C.M.GARG, JM ITA NO. 919/DEL./2012 : A SSTT. YEAR : 2007-08 RAJHANS SALES (P) LTD. C/O. RAJ KUMAR & ASSOCIATES, CA. 4435/7, ANSARI ROAD, DARYA GANJ NEW DELHI VS ACIT CENTRAL CIRCLE- 8 NEW DELHI (APPELLANT) (RESPONDENT) PAN NO. AAACR1447F ASSESSEE BY : SH. RAJ KUMAR GUPTA, CA REVENUE BY : MS. RAKHI BIM AL, SR. DR DATE OF HEARING : 10.05.2016 DATE OF PRONOUNCEMENT : 01.07.2016 ORDER PER C.M.GARG, J.M. THIS APPEAL BY THE ASSESSEE HAS BEEN FILED AGAINST THE ORDER OF THE CIT(A)-XXXII, NEW DELHI DATED 15.12.2011 PASSED IN FIRST APPEAL NO. 465/2009-10/ 219-(A) 32 FOR AY 2007-08. THE GROUNDS RAISED BY THE ASSESSEE READ AS FOLLOWS : ITA NO. 919/DEL/2012 RAJHANS SALES (P) LTD. 2 1. THAT UNDER THE FACTS AND CIRCUMSTANCES, THE LOWER A UTHORITIES ERRED IN LAW AND ON MERITS IN NOT ALLOWING THE DEDU CTION OF INTEREST EXPENSES OF RS. 20,64,347/- OUT OF RENTAL INCOME AN D ALTERNATIVELY PARTLY OUT OF RENTAL INCOME AND PARTLY UNDER THE HE AD, INCOME FROM BUSINESS AND PROFESSION AND / OR ANY OTHER APPROP RIATE HEAD OF INCOME. 2.1. THAT UNDER THE FACTS AND CIRCUMSTANCES ADDITI ON OF RS. 55 LACS AS DEEMED INCOME U/S. 2(22)(E) ON PROTECTIVE BASIS, IS ABSOLUTELY UN- WARRANTED. 2.2. THAT THE LD. CIT(A) FURTHER ERRED IN NOT APP RCIATING AND CONSIDERING THE CORRECT FACTS RELATING TO THIS ISSU E ACCORDINGLY TO WHICH THE ASSESSEE DID NOT RECEIVED ANY AMOUNT DURI NG THE YEAR FROM M/S. SNEREA ESTATES (P) LTD. SO AS TO ATTRACT SEC. 2(22)(E). GROUND NO. 1 : 2. APROPOS GROUND NO. 1 OF THE ASSESSEE, THE LD. ASS ESSEES REPRESENTATIVE (AR) CONTENDED THAT LOWER AUTHORITIE S ERRED IN LAW AND ON THE MERITS IN NOT ALLOWING THE DEDUCTION OF INTE REST EXPENSES OF RS. 20,64,347/- OUT OF RENTAL INCOME. THE LD. AR ALTERN ATIVELY, CONTENDED THAT THE SAME MAY BE ALLOWED PARTLY OUT OF RENTAL I NCOME AND PARTLY OUT OF INCOME FROM BUSINESS AND PROFESSION OR ANY A PPROPRIATE HEAD OF INCOME. THE LD. AR POINTED OUT THAT SIMILAR ISSUE F OR 2008-09 WAS ALSO SET ASIDE TO THE FILE OF THE CIT(A) FOR RE-ADJ UDICATION HENCE, FOR THIS AY. THE SAME MAY BE RESTORED TO THE FILE OF TH E AO FOR AFRESH ADJUDICATION. 3. THE LD. AR VEHEMENTLY POINTED OUT THAT THE AUTHORIT IES BELOW HAS NOT PROPERLY CONSIDERED THIS FACT THAT THE ASSE SSEE PAID RS. 20,64,347/- INTEREST TO SBI ON THE LOAN OF RS. 2 CR ORES TAKEN IN AY ITA NO. 919/DEL/2012 RAJHANS SALES (P) LTD. 3 2006-07 WHICH WAS CLAIMED AS DEDUCTION U/S 24 (B) O F THE INCOME TAX ACT, 1961 ( FOR SHORT THE ACT). 4. REPLYING TO THE ABOVE THE LD. DR SUPPORTED THE ACTI ON OF THE AO AND CIT(A). HOWEVER, HE DID NOT OBJECTED TO THE PRAYER OF THE LD. AR THAT ISSUE MAY BE RESTORED TO THE FILE FO THE EI THER AO OR CIT(A) FOR AFRESH ADJUDICATION. 5. ON CAREFUL CONSIDERATION OF ABVOE WE OBSERVE THAT T HE AO DISALLOWED CLAIM OF THE ASSESSEE ON THE GROUND THAT THE PROPERTY HAS NOT BEEN CONSTRUCTED OR ACQUIRED OR REPAIRED FROM B ORROWED FUNDS AND IT WAS ALREADY IN EXISTENCE AT THE TIME OF TAKING L OAN OF RS. 2 CRORES WHICH WAS INVESTED IN SHARES THUS THE SAME IS NOT A LLOWABLE U/S 24(B) OF THE ACT. WHEREAS NEITHER THE AO NOR THE CIT(A) H AVE DOUBTED SOME RELEVANT FACTS OF THE ISSUE VIZ. THE LOAN OF R S. 60 LACS WAS TAKING FROM STATE BANK OF BIKANER & JAIPUR (SBBJ) ON 18.02 .04 FOR CONSTRUCTION OF PROPERTY NO. 52, ISHWAR NAGAR, NEW DELHI AND OUT OF THIS LOAN RS. 33,30,613/- OF SBBJ WAS OUTSTANDING W HEN THE LOAN OF RS. 2 CRORES WAS SANCTIONED BY SBI WITH A CONDITION TO LIQUIDATE THE BALANCE OUTSTANDING LOAN DUE TO SBBJ OF RS. 33,30,6 13/- . UNDER SAID CONDITION THE ASSESSEE PAID RS. 33,30,613/- TO SBBJ AND THIS WAY SWITCHED OVER THE LOAN TO SBI WHICH IS INCLUDED IN RS. 2 CRORES LOAN FROM SBBJ TO SBI. THEREFORE, IN VIEW OF ABOVE FACTS WE ARE OF THE OPINION THAT SINCE RS. 33,30,613/- OUT OF SECOND LO AN OF RS. 2 CRORES WAS BORROWED FROM SBI FOR REPAYMENT OF ORIGINAL HOU SING LOAN FROM ITA NO. 919/DEL/2012 RAJHANS SALES (P) LTD. 4 SBBJ, THEN ASSESSEE WAS ENTITLED TO DEDUCTION OF IN TEREST PAID UP TO THIS EXTENT I.E. ON RS. 33,30,613/- WHICH COMPUTING THE INCOME FROM HOUSE PROPERTY UNDER SECTION 24(B) OF THE ACT. IN OUR CONSIDERED OPINION LOAN RAISED FOR REPAYMENT OF ORIGINAL LOAN TAKEN TO PURCHASE HOUSE PROPERTY PERTAKES THE CHARACTER OF ORIGINAL L OAN AND THEREFORE, THE INTEREST PAID ON SUCH SUBSEQUENT LOAN IS DEDUCT IBLE U/S 24(B) OF THE ACT FROM RENTAL INCOME OF RELEVANT PROPERTY. 6. IN THE PRESENT CASE, THE ASSESSEE USED A PART OF SE COND LOAN FROM SBI TO SWITCH OVER THE EARLIER LOAN FROM SBBJ, WHIC H WAS TAKEN TO PURCHASE HOUSE PROPERTY, THUS INTEREST PAID ON RS. 33,30,613/- IS DEDUCTIBLE U/S 24(B) OF THE ACT FROM RENTAL ACCRUED FROM RELEVANT PROPERTY. HOWEVER, WE MAKE IT CLEAR THAT AS PER SUB MISSIONS OF THE ASSESSEE REMAINING AMOUNT WAS USED FOR REPAYMENT OF UNSECURED BUSINESS LOAN FROM ENTEX FABTRADE P. LTD., SHARE AP PLICATION MONEY, REPAYMENT OF 1 ST INSTALMENT OF TERM LOAN FROM SBI AND REMAINIGN AMOUNT WAS KEPT AS BANK BALANCE WITH CITI BANK HENC E THE AO IS DIRECTED TO VERIFY THE SAME AND TO ADJUDICATE THE A LTERNATE CLAIM OF THE ASSESSEE AS PER PROVISIONS OF THE ACT. THE ISSUE IS RESTORED TO THE FILE OF AO WITH ABOVE DIRECTIONS TO COMPUTE THE DEDUCTIO N U/S 24(B) OF THE ACT OUT OF TOTAL INTEREST PAID AND REMAINING AMOUNT OF INTEREST PAID BE ALLOWED AS BUSINESS EXPENSE SUBJECT TO VERIFICATION ABOUT ITS USE FOR BUSINESS PURPOSES. WITH THESE DIRECTIONS THIS ISSUE IS RESTORED TO THE FILE OF THE AO FOR COMPUTATION OF DEDUCTION U/S 24( B) OF THE ACT AND ITA NO. 919/DEL/2012 RAJHANS SALES (P) LTD. 5 ALTERNATE CLAIM OF BUSIENSS EXPENSE AND THE AO IS D IRECTED TO DECIDE THE SAME AFTER AFFORDING THE OPPORTUNITY OF HEARING FOR THE ASSESSEE AND WITHOUT BEING PREJUDICED FROM THE EARLIER ASSES SMENT AND FIRST APPELLATE IMPUGNED ORDER. CONSEQUENTLY, GROUND NO. 1 OF THE ASSESSEE IS ALLOWED FOR SATISTICAL PURPOSES. GROUND NO. 2.1 & 2.2 : 7. THE LD. AR, APROPOS THESE GROUNDS, CONTENDED TH AT AS PER THE AO RS. 55 LAC LOAN HAS BEEN RECEIVED FROM U/S SNERE S ESTATES P. LTD. (SEPL). THE ONLY TWO SHARE HOLDERS IN BOTH THE COMP ANIES ARE COMMON WHICH HOLD 50% SHARES IN ASSESSEE CO. AS WEL L AS SEPL AND ASSESSEE IS NOT A SHAREHOLDER IN SEPL. THE LD. AR V EHEMENTLY CONTENDED THAT A PROTECTIVE ADDITION U/S 2(22)(E) O F THE ACT WAS MADE BY THE AO WITH A FINDING THAT SUBSTANTIVE ADDITION SHOULD BE MADE IN THE CASE OF SHARE HOLDERS FOR WHICH SEPARATE INTIMA TION IS BEING SENT TO RESPECTIVE AOS. THE LD. AR POINTED OUT THE ADDITIO N U/S 2(22)(E) CAN BE MADE ONLY IN THE HANDS OF SHARE HOLDERS AND IS P OINTED BY THE ASSESSEE CO. IS NOT A SHAREHOLDER IN SEPL THUS ADDI TION CANNOT BE MADE U/S 2(22)(E) OF THE ACT NEITHER ON PROTECTIVE BASIS NOT ON SUBSTANTIVE BASIS. 8. THE LD. DR SUPPORTED THE ACTION OF THE AO. HO WEVER, HE FAIRLY ACCEPTED THAT THE ASSESSEE COMPANY IS NOT A SHARE HOLDER IN SEPL THUS PROTECTIVE ADDITION U/S 2(22)(E) OF THE A CT WAS MADE IN THE CASE OF PRESENT ASSESSEE. THE LD. DR REPLIED THAT T HE AO COULD NOT GET ITA NO. 919/DEL/2012 RAJHANS SALES (P) LTD. 6 OPPORTUNITY TO VERIFY ABOVE FACTS AS NARRATED BY TH E ASSESSEE AT APPELLATE STATE THUS, AO MAY BE ALLOWED TO VERIFY T HE SAME. 9. ON CAREFUL CONSIDERATION OF ABOVE, WE ARE OF THE CONSIDERATE OPINION THAT AS PER ASSESSMENT ORDER THE AO HAS ALR EADY GIVEN A FINDING IT HAS TO BE MADE IN THE HANDS OF SHARE HOL DERS AN SUBSTANTIVE BASIS, THEN WE ARE AGREE WITH THE CONTENTION OF THE ASSESSEE THAT THERE REMAINS NO REASON OR OCCASION MAKING ANY PROTECTIVE ADDITION IN THE HEADS OF ASSESSEE CO. MERELY BECAUSE THE EQUAL SHAR E HOLDER ARE COMMON IN THE ASSESSEE COMPANY & SEPL. AS PER RATIO OF THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT OF DE LHI IN THE CASE OF CIT U/S ANKITECH PRIVATE LTD. (2011) 57 DTR (DEL) 3 45 ADDITION U/S 2(22) (E) OF THE ACT CAN ONLY BE MADE IN THE HANDS OF THE REGISTERED AND BENEFICIAL SHARE HOLDER. FURTHER MORE, AS PER C ONTENTIONS RAISED BY THE ASSESSEE BEFORE AUTHORITIES BELOW AND BEFORE TR IBUNAL, IN FACT, ASSESSEE HAD GIVEN SHARE APPLICATION MONEY OF RS. 1 .45 CRORES TO SEPL, WHICH DUE TO ACCOUNTING ERROR IN THE BOOKS OF THE ASSESSEE, WRONGLY POSTED IN A MANNER WHEREBY SHARE APPLICATIO N MONEY STOOD 2 CRORES AND IN A SEPARATE LEDGER A/C. OF SEPL, APPEA RED IN ASSESSEES BOOK SHOWING A CLOSING CREDIT BALANCE OF RS. 53 LAC S OF SEPL IN THE BOOKS OF ASSESSEE. ON THESE FACTS EMERGED FROM ACCO UNTING ENTRIES THE AO MISUNDERSTOOD BY THE AO AS RECEIPT OF LOAN. THE LD. AR VEHEMENTLY NARRATED THE FACTUAL POSITION THAT THE A SSESSEE DID NOT RECEIVED ANY LOAN/AMOUNT FROM SEPL DURING THE YEAR UNDER ITA NO. 919/DEL/2012 RAJHANS SALES (P) LTD. 7 CONSIDERATION AND IT WAS ONLY ACCOUNTING ERROR WAS NOTICED ONLY DURING THE COURSE OF PREPARING THE APPEAL BEFORE CI T(A), AND THUS THESE FACTS WERE PLACED BEFORE THE LD. CIT(A) WITH ALL RELEVANT EVIDENCES. THE LD. AR, ALSO CONTENDED THAT AS PER R ATIO OF THE DECISION OF HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. SMT. SATITHRISAN 236 ITR 1003 (MAD.) SECTION 2(22)(E) IS NOT APPLICA BLE ON BOOK ENTRIES. 10. IN VIEW OF FOREGOING DISCUSSION, IN OUR CONSIDERED OPINION WHEN THE FINDING HAS BEEN GIVEN BY THE AO THAT SUBS TANTIVE ADDITION HAS TO BE MADE IN THE HANDS OF RESPECTIVE SHARE HOL DERS U/S 2(22)(E) OF THE ACT THEN NO PROTECTIVE ADDITION CAN BE MADE IN THE HANDS OF ASSESSEE COMPANY EVEN ON PROTECTIVE BASIS. HOWEVER, SO FAR AS ERROR IN ACCOUNTING ENTRIES ARE CONCERNED, THE AO SHOULD BE GIVEN OPPORTUNITY TO VERIFY THE SAME AS REQUESTED BY THE LD. DR. THEREFORE, THIS ISSUE IS ALSO RESTORED TO THE FILE OF THE AO F OR LIMITED PURPOSE VERIFICATION THAT THE ERROR CREPT IN DUE TO WRONG A CCOUNTING ENTRIES AND TO VERIFY THIS CONTENTION OF THE ASSESSEE THAT THE ASSESSEE DID NOT RECEIVE ANY LOAN/AMOUNT. FROM SEPL DURING FY 2006-0 7 I.E. AY 2007-08. FOR ABOVE NOTED LIMITED PURPOSE VERIFICATI ON THE ISSUES IS RESTORED TO THE FILE OF THE AO AND THE AO IS DIRECT ED THAT IF NO LOAN OR AMOUNT HAS BEEN RECEIVED BY THE ASSESSEE FROM SEPL THEN NO PROTECTIVE ADDITION U/S 2(22)(E) OF THE ACT IS TO B E MADE IN THE HANDS ITA NO. 919/DEL/2012 RAJHANS SALES (P) LTD. 8 OF THE ASSESSEE. CONSEQUENTLY, GROUND NO. 2.1 & 2.2 OF THE ASSESSEE ARE ALLOWED, SUBJECT TO VERIFICATION BY THE AO AS D IRECTED ABOVE. 11. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FO R STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT ON 01/07/2016. SD/- SD/- ( S.V.MEHROTRA ) (C.M.GARG) ACCOUNTANT MEMBER JUDICIAL MEM BER DATED: 01/ 07/2016 *BINITA* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) ITA NO. 919/DEL/2012 RAJHANS SALES (P) LTD. 9 DATE INITIAL 1. DRAFT DICTATED ON (HAND WRITTEN) HANDWRITTEN 2. DRAFT PLACED BEFORE AUTHOR 22.06.2016 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS PS/PS 6. KEPT FOR PRONOUNCEMENT ON PS 7. FILE SENT TO THE BENCH CLERK PS 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER.