DCIT, Circle -8, Kolkata, Kolkata V. Shri Raja Ram Agarwal, Kolkata

ITA 934/KOL/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 75038 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 7 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2014
• Appeal Filed By: Department
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 14-06-2012
• Court: TRIBUNAL
• Department Lawyers: AMIT KUMAR MAITRA
• Assessee Lawyers: H S BHATTACHARJEE
• Keywords: Business expenditure; Date of conversion
• Section: 143(3)

Judgement Text

, A , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: KOL KATA () BEFORE , /AND . . . . ' '' ''# '#'# '#, $% ) [BEFORE SHRI MAHAVIR SINGH, JM & SHRI ABRAHAM P. GEORGE, AM] & & & & / I.T.A NO. 934/KOL/2012 '( )* '( )* '( )* '( )*/ // / ASSESSMENT YEAR: 2008-09 DEPUTY COMMISSIONER OF INCOME-TAX, VS. SHRI RAJA R AM AGARWALA CIRCLE-8, KOLKATA (PAN:ACFPA5444B) (,- /APPELLANT ) (./,-/ RESPONDENT ) DATE OF HEARING: 28.01.2014 DATE OF PRONOUNCEMENT: 30.01.2014 FOR THE APPELLANT: SHRI AMIT KUMAR MAITRA, JCIT, SR . DR FOR THE RESPONDENT: SHRI H. S. BHATTACHARJEE, FC A $0 / ORDER PER SHRI MAHAVIR SINGH, JM: THIS APPEAL BY REVENUE IS ARISING OUT OF ORDER OF C IT(A)-VIII, KOLKATA IN APPEAL NO.185/CIT(A)-VIII/KOL/10-11DATED 22.03.2012. ASSE SSMENT WAS FRAMED BY DCIT, CIRCLE-8, KOLKATA U/S. 143(3) OF THE INCOME-TAX ACT, 1961 (HE REINAFTER REFERRED TO AS THE ACT) FOR ASSESSMENT YEAR 2008-09 VIDE HIS ORDER DATED 29.10. 2010. 2. THE ONLY ISSUE IN THIS APPEAL OF REVENUE IS AGAI NST THE ORDER OF CIT(A) ALLOWING THE FOLLOWING EXPENSES: A. INTEREST RS.11,73,952/- B. RENT RS. 1,800/- C. LEGAL EXPENSES RS. 2,000/- 3. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE AO DISALLOWED THE ABOVE NARRATED B USINESS EXPENSES ON THE GROUND THAT THE EXPENSES WERE DEBITED IN THE PERSONAL ACCOUNT OF AS SESSEE AND THESE WERE NOT INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. AGGRI EVED, ASSESSEE PREFERRED APPEAL BEFORE CIT(A), WHO ALLOWED THE CLAIM OF ASSESSEE BY OBSERV ING AS UNDER: I HAVE CAREFULLY CONSIDERED THE SUBMISSION MADE BY THE APPELLANT ALONG WITH THE DETAILS FURNISHED, PERUSED THE FACTS OF THE CASE INCLUDING THE IMPUGNED ASSESSMENT ORDER AND OTHER MATERIALS ON RECORD. I FIND SUFFICIENT FORCE IN THE ARGUMENT PUT FORTH BY THE APPELLANT. IT IS SUBMITTED THAT THE ASSESSING OFFI CER ADDED INTEREST ON LOAN OF 2 ITA NO. 934/K/2012 SHRI RAJA RAM AGARWALA , AY:2008-09 RS.11,73,952/- PAID BY THE APPELLANT AS PROPRIETOR OF SUNDARI SAREE CENTRE AND HAS ALSO DISALLOWED THE CLAIM OF THE APPELLANT TOWARDS RENT PAID OF RS.1,800/- FOR THE BUSINESS PLACE AND LEGAL EXPENSES OF RS. 2,000/- ON THE ALLE GED GROUNDS THAT THE EXPENSES WERE DEBITED BY THE APPELLANT IN HIS PERSONAL PROFIT& LO SS ACCOUNT, ALTHOUGH THE EXPENSES WERE INCURRED BY THE APPELLANT FOR THE PURPOSE OF T HE BUSINESS. IT IS CONTENDED BEFORE ME THAT THE APPELLANT TOOK L OAN FROM THE PERSONS IN EARLIER YEARS AND INTEREST PAYMENT ON LOAN AND BALANCES TO THE LO AN CREDITORS WERE ALWAYS SHOWN IN THE PERSONAL PROFIT & LOSS ACCOUNT OF THE APPELLANT . THE AMOUNT BORROWED BY THE APPELLANT FROM VARIOUS PERSONS WAS UTILIZED BY THE APPELLANT IN HIS PROPRIETARY BUSINESS UP TO 31.08.2007 AND WAS RETURNED TO THE BORROWERS BEFORE THE DATE OF CONVERSION FROM THE PROPRIETARY CONCERN TO THE PARTNERSHIP FIRM. T HE AR OF THE APPELLANT EXPLAINED THAT U/S. 36(1)(III) I. T. ACT 1961, THREE CONDITIONS AR E REQUIRED TO BE SATISFIED IN ORDER TO ENABLE THE APPELLANT TO CLAIM A DEDUCTION IN RESPEC T OF INTEREST ON BORROWED CAPITAL, NAMELY, (A) THAT MONEY (CAPITAL) MUST HAVE BEEN BOR ROWED BY THE APPELLANT, (B) THAT IT MUST HAVE BEEN BORROWED FOR THE PURPOSE OF BUSINESS , AND (C) THAT THE APPELLANT MUST HAVE PAID INTEREST ON THE SAID AMOUNT AND CLAIMED I T AS A DEDUCTION. IT IS ARGUED THAT SINCE ALL THE CONDITIONS WERE COM PLIED WITH BY THE APPELLANT, THE EXPENSES TOWARDS INTEREST SHOULD BE ALLOWED IN FULL . THE APPELLANT ALSO DEDUCTED TAX AT SOURCE FROM THE BORROWERS AND DEPOSITED TDS OF RS. L,21,182/- ON THE INTEREST OF RS.11,73,952/-. THE A/R FURTHER ARGUED THAT THIS PA RTICULAR SYSTEM IS FOLLOWED BV THE APPELLANT CONSISTENTLY YEAR AFTER YEAR AND IT HAS B EEN ACCEPTED BY THE DEPARTMENT IN EARLIER YEARS TOO AND THE ASSESSING OFFICER WHILE P ASSING THE ORDER U/S. L43(3) FOR THE ASSESSMENT YEAR 2002-03 ACCEPTED THE METHOD OF ACCO UNTS FOLLOWED BY THE APPELLANT AND ALLOWED INTEREST ON LOAN SHOWN IN HIS PERSONAL PROF IT & LOSS ACCOUNT. AS REGARDS THE RENT FOR BUSINESS PREMISES AND THE L EGAL CHARGES, THE APPELLANT SUBMITTED THAT THESE EXPENSES WERE ALSO INCURRED BY THE APPEL LANT WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE BUSINESS. THE SETTLED LAW AS CONTEND ED THAT IF A PARTICULAR .ACCOUNTING SYSTEM HAS BEEN FOLLOWED AND ACCEPTED AND THERE IS NO ACCEPTABLE REASON TO DIFFER WITH IT, THE DOCTRINE OF CONSISTENCY WOULD COME INTO PLAY. I N SUPPORT OF ITS ABOVE CONTENTION, THE APPELLANT FURNISHED THE EVIDENCES IN THE FORM OF A PAPER BOOK SEPARATELY AND URGED TO DIRECT THE AO TO ALLOW THE BUSINESS EXPENSES CLAIME D BY THE APPELLANT. IN THE LIGHT OF THE ABOVE FINDINGS AND DISCUSSION, AFTER CAREFULLY CONSIDERING THE SUBMISSION OF THE APPELLANT ALONG WITH THE DETAILS/ EVIDENCES FURNISHED AND PERUSING THE FACTS AND CIRCUMSTANCES OF THE CASE, IT IS HELD THA T THE AO IS NOT JUSTIFIED IN MAKING THE DISALLOWANCES OF RS. 11,73,952/- ON ACCOUNT OF INTE REST, RS. 1,800/- ON ACCOUNT OF RENT AND RS. 2000/- ON ACCOUNT OF LEGAL EXPENSES. THEREF ORE, THE ADDITION MADE BY THE AO ON ACCOUNT OF VARIOUS DISALLOWANCES IS DIRECTED TO BE DELETED. THUS, THIS GROUND OF APPEAL OF THE APPELLANT IS ALLOWED. AGGRIEVED, REVENUE CAME IN APPEAL BEFORE US. 4. WE FIND THAT THE ASSESSEE HAS DEBITED THESE EXPE NSES I.E. INTEREST PAYMENT ON LOAN, RENT AND LEGAL EXPENSES IN THE PERSONAL P&L ACCOUNT OF T HE ASSESSEE BUT THE AMOUNT BORROWED BY ASSESSEE FROM VARIOUS PERSONS WERE UTILISED FOR THE PURPOSE OF BUSINESS AND RETURNED TO BORROWERS BEFORE THE DATE OF CONVERSION OF PROPRIET ARY CONCERN TO THE PARTNERSHIP FIRM. THE ASSESSEE CONTENDED BEFORE THE CIT(A) AND EVEN NOW B EFORE US THAT THESE EXPENSES WERE 3 ITA NO. 934/K/2012 SHRI RAJA RAM AGARWALA , AY:2008-09 ALLOWED BY THE REVENUE YEAR AFTER YEAR AND EVEN DUR ING THE COURSE OF ASSESSMENT FRAMED U/S. 143(3) OF THE ACT AND PARTICULARLY FOR ASSESSMENT Y EAR 2002-03. EVEN THE ASSESSEE HAS DEDUCTED TDS AND TDS TO THE TUNE OF RS.1,21,182/- O N THE INTEREST OF RS.11,79,952/- WAS DEPOSITED. THE REVENUE COULD NOT CONTROVERT THE FI NDING OF THE CIT(A). GOING THROUGH THE FACTS AND CIRCUMSTANCES, WE FEEL THAT THESE EXPENSES ARE FOR THE PURPOSE OF BUSINESS AND WE CONFIRM THE ORDER OF CIT(A). APPEAL OF REVENUE IS DISMISSE D. 5. IN THE RESULT, APPEAL OF REVENUE IS DISMISSED. 6. ORDER IS PRONOUNCED IN THE OPEN COURT ON 30.01.2 014 SD/- SD/- . . . . ' '' ''# '#'# '# , $% , (ABRAHAM P. GEORGE) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 30TH JANUARY, 2013 12 '3' 4 JD.(SR.P.S.) $0 5 . 6$ )7- COPY OF THE ORDER FORWARDED TO: 1 . ,- / APPELLANT DCIT, CIRCLE-8, KOLKATA. 2 ./,- / RESPONDENT SHRI RAJA RAM AGARWALA, C/O, SUNDARI SAREES (P) LTD., 101, PARK STREET, 2 ND FLOOR, KOLKATA-16. 3 . 0' ( )/ THE CIT(A), KOLKATA 4. 5. 0' / CIT KOLKATA <= .' / DR, KOLKATA BENCHES, KOLKATA / ./ TRUE COPY, $0'>/ BY ORDER, ' /ASSTT. REGISTRAR .