ACIT, CHENNAI V. Shri C.Ramabrahmam , CHENNAI

ITA 943/CHNY/2012

• Counselvise Citation: 94321714 RSA 2012
• Duration Of Justice: 6 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2012
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 29-10-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 26-04-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: GURU BASHYAM IRS
• Assessee Lawyers: ANANDA KUMAR
• Keywords: Capital asset; Cost of acquisition
• Section: 143(3)

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL C BENCH, CHENNAI. BEFORE DR. O.K. NARAYANAN, VICE-PRESIDENT & SHRI S.S. GODARA, JUDICIAL MEMBER I.T.A. NO.943/MDS/2012 ASSESSMENT YEAR : 2007-08 THE ASSISTANT COMMISSIONER OF INCOME TAX, BUSINESS CIRCLE IV, ROOM NO. 507, ANNEXE BUILDING, 5 TH FLOOR, 121, NUNGAMBAKKAM HIGH ROAD, CHENNAI 34. VS. SHRI C. RAMABRAHMAM, 16, 2 ND CANAL CROSS ROAD, GANDHI NAGAR, ADYAR, CHENNAI 600 020. [PAN:AACPR0103K] (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI GURU BASHYAM, IRS, JCIT RESPONDENT BY : SHRI ANANDA KUMAR, C.A. DATE OF HEARING : 29 . 1 0 .201 2 DATE OF PRONOUNCEMENT : 31.10.2012 ORDER PER S.S. GODARA, JUDICIAL MEMBER THIS REVENUES APPEAL IS DIRECTED AGAINST THE ORDE R OF THE COMMISSIONER OF INCOME TAX (APPEALS) VIII CHENNAI D ATED 24.01.2012 IN ITA NO. 53/09-10(A)-VIII FOR THE ASSESSMENT YEAR 20 07-08 IN PROCEEDINGS UNDER SECTION 143(3) OF THE INCOME TAX ACT 1961 [IN SHORT THE ACT]. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE ( INDIVIDUAL), FILED HIS RETURN DECLARING INCOME OF ` .6,40,440/-. IN SCRUTINY PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAD PUR CHASED A HOUSE PROPERTY AT T. NAGAR, CHENNAI ON 20.01.2003 FOR ` .32.64 LAKHS. IN ADDITION TO I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.943 943943 943/M/ /M/ /M/ /M/12 1212 12 2 THE SAID CONSIDERATION, HE PAID ` .4.00 LAKHS TOWARDS REGISTRATION COST AND ALSO HAD ADDED FURTHER AMOUNT OF ` . 39,926/- AS COST OF IMPROVEMENT. IN THIS MANNER, THE ASSESSEE PAID NET COST OF ` .37,03,926/-. IN THE ENCLOSURES WITH THE RETURN, THE ASSESSEE HAD ADDED AN AMOUNT OF ` .4,82,042/- AS INTEREST ON HOUSING LOAN TAKEN IN 2003 FOR PURCHASING THE PROPE RTY. FINALLY, THE ASSESSEE SOLD THE SAID PROPERTY ON 20.04.2006 FOR ` .26.00 LAKHS. AFTER TAKING COGNIZANCE OF THE ABOVE FACTS, THE A SSESSING OFFICER WAS OF THE OPINION THAT SINCE INTEREST IN QUESTION ON H OUSING LOAN, HAD ALREADY BEEN CLAIMED AS DEDUCTION UNDER SECTION 24(B) IN AS SESSMENT YEARS 2004- 05 TO 2006-07, THE SAME COULD NOT BE TAKEN INTO CON SIDERATION FOR COMPUTATION UNDER SECTION 48 OF THE ACT AS THE LE GISLATIVE PROVISION DID NOT PROVIDE SUCH METHOD OF INCLUDING AMOUNT OF DEDUCTIO N UNDER SECTION 24(B) OF THE ACT. THEREFORE, THE ASSESSING OFFICER ADDED B ACK THE ABOVE SAID INTEREST AMOUNT TO THE INCOME OF THE ASSESSEE FROM SHORT TERM CAPITAL GAINS VIDE ASSESSMENT ORDER DATED 24.11.2009. 4. FURTHER, THE ASSESSEE HAD DECLARED INCOME UNDER OTHER SOURCES OF ` .26,127/- ALLEGED TO HAVE BEEN DERIVED FROM TAX FRE E DIVIDEND OF ` .4,720/- WITH INTEREST OF ` .26,127/-. WITH REGARD TO THE ABOVE INCOME, HE DEBI TED AN AMOUNT OF ` .9,94,542/- AS INTEREST ON LOAN AND BROKERAGE AMOUN T AND THE CONSEQUENTIAL LOSS WAS SET OFF AGAINST INCOME FROM OTHER HEADS. 5. THE ASSESSING OFFICER DID NOT ACCEPT THE ASSESS EES CONTENTION BY HOLDING THAT SINCE THERE WAS NO CONSISTENCY AND REG ULAR ACTIVITY OF GRANTING I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.943 943943 943/M/ /M/ /M/ /M/12 1212 12 3 LOANS BY THE ASSESSEE, THE SAME COULD NOT BE CALLED AS A BUSINESS ACTIVITY EVEN IF SOME INTEREST HAD ACCRUED TO THE ASSESSEE. THE ASSESSING OFFICER ALSO NOTICED THAT THE ASSESSEE HAD NOT ADVANCED LOA N TO ANY OTHER PARTY EXCEPT THE ABOVE SAID. IN THIS MANNER, ON LEGAL PRI NCIPLE AS WELL AS ON FACTS, THE ASSESSING OFFICER, ADDED AN AMOUNT OF ` .9,94,542/- IN ASSESSEES TOTAL INCOME. IN THIS MANNER, THE ASSESSEES TOTAL INCOME WAS ASSESSED AS ` .21,17,020/-. 6. THE ASSESSEE PREFERRED APPEAL AGAINST THE ASSES SMENT ORDER, WHEREIN, BOTH THE ADDITIONS MADE BY THE ASSESSING O FFICER (SUPRA) HAVE BEEN DELETED BY THE CIT(A). REGARDING ADDITION OF I NTEREST AMOUNT OF ` .4,82,042/-, THE CIT(A) HAS HELD THAT THE ASSESSEE WAS ENTITLED TO INCLUDE THE INTEREST AMOUNT FOR COMPUTATION UNDER SECTION 4 8 DESPITE THE FACT THAT THE SAME HAD BEEN CLAIMED UNDER SECTION 24(B) WHILE COMPUTING INCOME FROM HOUSE PROPERTY. REGARDING OTHER ADDITION OF ` .9,94,542/- (SUPRA), THE CIT(A) HAS HELD THAT THE PAYMENTS MADE BY THE CONCERNED CREDITOR TO THE ASSESSEE STOOD DULY PROVED FROM THE RECORD, WHICH HAD NOT BEEN CON SIDERED BY THE ASSESSING AUTHORITY. IT IS, IN THIS BACKGROUND, THE REVENUE HAS CHALLENG ED THE CIT(A)S ORDER. 7. THE DR, REPRESENTING THE REVENUE, REITERATED TH E FINDING OF THE ASSESSING AUTHORITY AS WELL AS GROUNDS OF APPEAL AN D PRAYED FOR RESTORING I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.943 943943 943/M/ /M/ /M/ /M/12 1212 12 4 THE ADDITIONS MADE BY THE ASSESSING OFFICER. IT IS THE SUBMISSION OF THE REVENUE THAT ONCE THE ASSESSEE HAD AVAILED SECTION 24(B) OF THE ACT, HE CANNOT INCLUDE THE SAME VERY AMOUNT FOR THE PURPOSE OF COMPUTING CAPITAL GAINS UNDER SECTION 48. IN THE SAME MANNER, REGARDI NG OTHER ADDITION UNDER THE HEAD INCOME FROM OTHER SOURCES (SUPRA), THE C ONTENTION OF THE REVENUE IS THAT THE ASSESSING OFFICER HAD RIGHTLY M ADE THE ADDITION SINCE THE ASSESSEES ACTIVITY OF GRANTING LOAN TO A SINGL E PERSON COULD NOT BE CALLED AS BUSINESS. BY REFERRING TO THE FINDINGS OF THE CI T(A), THE DR HAD SUBMITTED FOR VERIFICATION OF CREDITORS FACTS ONLY THE RECORD HAS BEEN DEALT WITH BY THE CIT(A) AND NOT QUA THE LEGAL ASPECT OF THE ASSESSEE S CLAIM, WHICH WAS NEGATIVED BY THE ASSESSING OFFICER BY HOLDING THAT THE ASSESSEES ACTIVITY COULD NOT BE CALLED AS A BUSINESS. ON THE OTHER HAND, THE AR REPRESENTING ASSESSEE HAS SOUGHT TO PLACE RELIANCE ON CIT(A)S ORDER AS WELL AS FINDINGS CONT AINED THEREIN. IN THE LIGHT THEREOF, HE PRAYED FOR UPHOLDING THE SAME AND DISMI SSAL OF THE REVENUES APPEAL. 8. WE HAVE CONSIDERED SUBMISSIONS OF BOTH PARTIES AT LENGTH AND ALSO PERUSED THE RELEVANT FINDINGS OF THE ASSESSING OFFI CER AS WELL AS CIT(A). REGARDING THE ISSUE OF CAPITAL GAINS, IT TRANSPIRES THAT THERE IS HARDLY ANY DISPUTE THAT THE ASSESSEE HAD AVAILED THE LOAN FOR PURCHASING THE PROPERTY IN QUESTION. SINCE THE ASSESSEE HAD SHOWN THE INCOME U NDER THE HEAD HOUSE PROPERTY, HE PREFERRED TO RAISE THE CLAIM OF DEDUC TION UNDER SECTION 24(B) OF I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.943 943943 943/M/ /M/ /M/ /M/12 1212 12 5 THE ACT, WHICH READS AS UNDER: (B) WHERE THE PROPERTY HAS BEEN ACQUIRED, CONSTRUC TED, REPAIRED, RENEWED OR RECONSTRUCTED WITH BORROWED CAPITAL, THE AMOUNT OF ANY INTEREST PAYABLE ON SUCH CAPITAL: THERE IS NO QUARREL THAT SINCE THE ASSESSEES CLAIM OF DEDUCTION WAS UNDER THE STATUTORY PROVISIONS; THEREFORE, HE SUCCEEDED I N GETTING THE SAME. HOWEVER, AFTER THE PROPERTY WAS SOLD, HE ALSO CHOSE TO INCLUDE THE INTEREST AMOUNT WHILE COMPUTING CAPITAL GAINS UNDER SECTION 48 OF THE ACT, WHICH READS AS UNDER: 48. THE INCOME CHARGEABLE UNDER THE HEAD CAPITAL GAINS SHALL BE COMPUTED, BY DEDUCTING FROM THE FULL VALUE OF THE C ONSIDERATION43 RECEIVED OR ACCRUING AS A RESULT OF THE TRANSFER OF THE CAPITAL ASSET THE FOLLOWING AMOUNTS, NAMELY : (I) EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY IN CONNECTION WITH SUCH TRANSFER; (II) THE COST OF ACQUISITION OF THE ASSET AND THE COST OF ANY IMPROVEMENT THERETO: AFTER PERUSING THE ABOVE SAID PROVISIONS, WE ARE OF THE OPINION THAT DEDUCTION UNDER SECTION 24(B) AND COMPUTATION OF CA PITAL GAINS UNDER SECTION 48 OF THE ACT ARE ALTOGETHER COVERED BY D IFFERENT HEADS OF INCOME I.E., INCOME FROM HOUSE PROPERTY AND CAPITAL GAI NS. FURTHER, A PERUSAL OF BOTH THE PROVISIONS MAKES IT UNAMBIGUOUS THAT NONE OF THEM EXCLUDES OPERATIVE OF THE OTHER. IN OTHER WORDS, A DEDUCTION UNDER SECTION 24(B) IS CLAIMED WHEN CONCERNED ASSESSEE DECLARES INCOME FRO M HOUSE PROPERTY, WHEREAS, THE COST OF THE SAME ASSET IS TAKEN INTO C ONSIDERATION WHEN IT IS SOLD AND CAPITAL GAINS ARE COMPUTED UNDER SECTION 4 8. WE DO NOT HAVE EVEN I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.943 943943 943/M/ /M/ /M/ /M/12 1212 12 6 A SLIGHTEST DOUBT THAT THE INTEREST IN QUESTION IS INDEED AN EXPENDITURE IN ACQUIRING THE ASSET. SINCE BOTH PROVISIONS ARE ALTO GETHER DIFFERENT, THE ASSESSEE IN THE INSTANT CASE IS CERTAINLY ENTITLED TO INCLUDE THE INTEREST AMOUNT AT THE TIME OF COMPUTING CAPITAL GAINS UNDER SECTION 48 OF THE ACT. THEREFORE, THE CIT(A) HAS RIGHTLY ACCEPTED THE ASSE SSEES CONTENTION AND DELETED THE ADDITION MADE BY THE ASSESSING OFFICER. HENCE, QUA THIS GROUND, WE UPHOLD THE ORDER OF THE CIT(A). 9. COMING TO THE OTHER ISSUE INVOLVED I.E. ADDITIO N REGARDING INCOME FROM THE HEAD OTHER SOURCES. WE FIND THAT THE ASSESSIN G OFFICER HAD TURNED DOWN ASSESSEES PLEA BY HOLDING THAT THE ASSESSEES ALLEGED LOAN TRANSACTION TO THE CONCERNED DEBTOR NAMELY SHRI S.A . KRISHNAKANTH COULD NOT BE CALLED A BUSINESS ACTIVITY EVEN IF IT HAD CULM INATED IN SOME INTEREST WHICH ACCRUED TO THE ASSESSEE. NOT ONLY THIS, THE A SSESSING AUTHORITY ALSO REJECTED ASSESSEES EXPLANATION TENDERED ON FACTS A S WELL. HOWEVER, THE CIT(A) HAS FOUND MERITS IN ASSESSEES ARGUMENT AND HELD THAT THE MATERIAL ON RECORD DULY PROVED THE TRANSACTIONS SINCE THE DE TAILS OF LOAN CREDITORS, WHO HAD LENT MONEY TO THE ASSESSEE STOOD PROVED AS WELL AS THERE WAS EVIDENCE THAT THE ASSESSEE HAD ALSO PAID INTEREST T O THEM IN RETURN. FURTHER, IT IS ALSO EVIDENT THAT THE CIT(A) HAS NOWHERE DEAL T WITH THE LEGAL ASPECT OF THE ISSUE I.E., WHETHER THE ASSESSEE WHO, CALLED HI MSELF TO BE A SALARIED EMPLOYEE COULD RAISE A PLEA HIS LOAN TRANSACTION CO ULD BE CALLED AS A BUSINESS ACTIVITY OR NOT EVEN AFTER THE SAME HAD LED TO ACCRUAL OF INTEREST AS I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.943 943943 943/M/ /M/ /M/ /M/12 1212 12 7 HELD BY THE ASSESSING AUTHORITY. THIS VITAL ASPECT, IN OUR OPINION HAS ESCAPED THE CONSIDERATION OF THE CIT(A). FACED WITH THIS SI TUATION, WE DEEM IT APPROPRIATE THAT THE CIT(A) SHALL REDECIDE THIS LEG AL ASPECT IN ACCORDANCE WITH LAW AFTER AFFORDING ADEQUATE OPPORTUNITY OF HE ARING TO THE ASSESSEE. ACCORDINGLY, WE UPHOLD THE CIT(A)S ORDER IN DELETI NG THE ADDITION OF ` .4,82,042/- (SUPRA). REGARDING OTHER ISSUE INVOLVED I.E. ADDITION OF ` .9,94,542/-, WE RESTORE IT BACK TO THE FILE OF THE CIT(A). 10. IN THE LIGHT OF THE ABOVE DISCUSSION, THE REVE NUES APPEAL IS PARTLY ACCEPTED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED ON WEDNESDAY, THE 31 ST OF OCTOBER, 2012 AT CHENNAI. SD/- SD/- (DR. O.K. NARAYANAN) VICE-PRESIDENT (S.S. GODARA) JUDICIAL MEMBER CHENNAI, DATED, THE 31.10.2012 VM/- TO: THE ASSESSEE//A.O./CIT(A)/CIT/D.R.