M/s City Enterprises Pvt. Ltd., Chandigarh V. DCIT, Chandigarh

ITA 954/CHANDI/2010

• Counselvise Citation: 95421514 RSA 2010
• Duration Of Justice: 1 year(s) 3 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-09-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 07-09-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 18-06-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: JAI SHREE SHARMA
• Assessee Lawyers: VINEET KRISHAN
• Keywords: Depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL: CHANDIGARH BE NCH B BEFORE MS SUSHMA CHOWLA, JM AND SHRI MEHAR SINGH, AM ITA NO. 954/CHANDI/2010 ASSESSMENT YEAR 2006-07 M/S CITY ENTERPRISES P LTD V. D.C.I.T. C-1(1), C HANDIGARH SCO 10A, SECTOR 7A CHANDIGARH PAN: AABCC 5228 L (APPELLANT) (RESPOND ENT) APPELLANT BY : SHRI VINEET KRISHAN RESPONDENT BY: SMT. JAISHREE SHARMA DATE OF HEARING: 7.9.2011 DATE OF PRONOUNCEMENT: 19.9.2011 ORDER PER MEHAR SINGH, AM THE PRESENT APPEAL FILED BY THE ASSESSEE FOR ASSES SMENT YEAR 2006-07, IS DIRECTED AGAINST THE ORDER OF LD. CIT(A), CHANDIGARH DATED 1.2.2010 U/S 250(6) OF THE INCOME-TAX ACT (IN SHORT THE ACT). 2. THE ASSESSEE HAS TAKEN THE FOLLOWING GROUNDS OF APPEAL: 1 THAT THE ORDER PASSED U/S 250(6) BY THE LD. CIT( A), CHANDIGARH IN APPEAL NO. 215/P/08-09 DATED 1.2.2010 IS CONTRARY TO LAW A ND FACTS OF THE CASE. 2 THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A), CHANDIGARH GRAVELY ERRED IN UPHOLDING THE ORDER OF THE AO UNDE R WHICH HE ALLOWED THE INTEREST OF RS. 16,32,794/- AS AGAINST THE CLAIM OF RS. 31,8 6,207/-. 3 THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) GRAVELY ERRED IN UPHOLDING THE ORDER OF THE AO UNDER WHICH THE IN TEREST OF RS. 3,27,633/-. 4 THAT THE LD. CIT(A), CHANDIGARH GRAVELY ERRED IN UPHOLDING THE ORDER OF THE AO UNDER WHICH THE INTEREST ON UNSECURED LOANS OF R S. 4,09,473/- WAS DISALLOWED. 5 THAT THE LD. CIT(A), CHANDIGARH GRAVELY ERRED IN UPHOLDING THE INCOME OF THE APPELLANT AT RS. 13,05,436/- AS AGAINST DECLARI NG THE NIL INCOME. ITA NO. 954/CHANDI/2010 CITY ENTERPRISES P LTD V. DCIT 2 6. THAT THE APPELLANT CRAVES TO ADD, AMEND OR ALTE R ANY GROUND OF APPEAL BEFORE OR AT THE TIME OF HEARING OF APPEAL. 7 ANY OTHER GROUND THAT MAY BE TAKEN UP AT THE TIM E OF HEARING WITH THE PERMISSION OF THE HON'BLE INCOME TAX APPELLATE TRIB UNAL, CHANDIGARH. 3. THE BRIEF FACTS OF THE CASE AS CULLED OUT FROM T HE RELEVANT RECORD ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME DECLARING NIL I NCOME THROUGH E-FILING. IN THE COURSE OF APPELLATE PROCEEDINGS, IT WAS FOUND BY THE AO THAT THE ASSESSEE DERIVED INCOME FROM HOUSE PROPERTY AS WELL AS INCOME FROM BUSINESS AND PROFESSION. THE AO NOTICED THAT UNDER THE HEAD INCOME FROM HOUSE PROPERTY THE ASS ESSEE DISCLOSED RENTAL INCOME AMOUNTING TO RS. 37,92,324/- FROM SCO NO. 139-140, SECTOR 9C, CHANDIGARH. AGAINST SUCH INCOME THE ASSESSEE CLAIMED DEDUCTION U/S 24(A ) OF THE ACT AT RS. 11,37,697/- AND AMOUNT OF RS. 31,86,297/- AS INTEREST ON BORROWINGS . THE AO HAS FURNISHED THE BREAK UP OF INTEREST ON BORROWED CAPITAL AS FOLLOWS:- A INTEREST ON ICICI RS. 24,49,191 B INTEREST ON UNSECURED LOAN RS. 4,09,473 B INTEREST ON EQUATED INSTALLMENTS RS. 3,27,633 THE AO SOUGHT EXPLANATION FOR THE CLAIM OF DEDUCTIO N IN RESPECT OF INTEREST CLAIMED BY THE ASSESSEE. ON APPRECIATION OF THE SUBMISSIONS F ILED BY THE ASSESSEE THE AO OBSERVED THAT AN AMOUNT OF RS. 2.00 CR. OUT OF RS. 3.00 CR. OF LOAN WAS UTILIZED FOR REPAYMENT OF LOAN AND HENCE ONLY 2/3 RD OF THE TOTAL INTEREST IS ALLOWABLE DEDUCTION AGAIN ST SUCH HOUSE PROPERTY INCOME. THE AO WORKED OUT SUCH ALLOWANCE AT RS. 16,32,794/-. THE AO ALSO DISALLOWED THE INTEREST OF EQUATED INSTALLMENTS OF RS. 3,27,633/-. THE LD. CIT(A) UPHELD SUCH ADDITION MADE BY THE AO. 4. IN THE COURSE OF PRESENT APPELLATE PROCEEDINGS T HE LD. AR FOR THE ASSESSEE STATED THAT GROUNDS NO. 1,5,6 & 7 ARE GENERAL. IN VIEW OF SUCH STATED POSITION AND PERUSAL OF SUCH GROUNDS, WE ARE OF THE OPINION THAT NO SEPARATE ADJ UDICATION IS NECESSARY IN RESPECT OF SUCH GROUNDS OF APPEAL RAISED BY THE ASSESSEE. ITA NO. 954/CHANDI/2010 CITY ENTERPRISES P LTD V. DCIT 3 5. IN GROUND NO. 2, THE LD. AR FOR THE ASSESSEE C ONTENDED THAT THE DISALLOWANCES OF RS. 16,32,794/- OUT OF INTEREST CLAIMED AT RS. 31,8 6,207/- IS NOT JUSTIFIED. HE WAS OF THE OPINION THAT THE BORROWED FUNDS WERE USED FOR THE P URCHASE OF PROPERTY. THE LD. AR FOR THE ASSESSEE REFERRED TO PAGE 7 OF THE PAPER BOOK E VIDENCING CLAIM MADE BY IT FOR THE INVESTMENT MADE BY THE SAID PROPERTY. IT WAS ALSO POINTED OUT THAT INCOME FROM HOUSE PROPERTY HAS BEEN DISCLOSED AT A NEGATIVE FIGURE. THE LD AR FOR THE ASSESSEE ALSO REFERRED TO PAGE 6 OF THE ASSESSMENT ORDER. 6. THE DR SUPPORTED THE ORDER OF THE AO AND THE L D. CIT(A) AND STATED THAT THE ASSESSEE IS A BUILDER AND THE DISALLOWANCES OF IMPU GNED GROUND IS JUSTIFIED. 7. THE FINDINGS OF THE LD. CIT(A) ARE RECORDED IN P ARA 10 OF APPELLATE ORDER AND THE SAME ARE REPRODUCED HEREUNDER:- 10 I HAVE CONSIDERED THE RIVAL SUBMISSIONS AND THE JUDICIAL PRONOUNCEMENTS. I AM OF THE VIEW THAT THE AO HAS RIGHTLY ALLOWED ONLY RS. 16,32,794/- OUT OF THE TOTAL CLAIM OF RS. 24,49,191/- IN VIEW OF THE FACT THAT O NLY RS. 2.00 CR. OUT OF THE LOAN OF RS. 3.00 CR. WAS UTILIZED FOR THE PURPOSE OF PURCHA SE/CONSTRUCTION OF HOUSE PROPERTY (REPAYMENT OF LOAN). 8. WE HAVE CAREFULLY PERUSED THE FACTS OF THE CASE, RIVAL SUBMISSIONS, RELEVANT RECORD AND PAPER BOOK FIELD BY THE ASSESSEE. IT IS EVIDEN T FROM CAREFUL PERUSAL OF THE ASSESSMENT ORDER THAT THE AO HAS CLEARLY MADE OUT A CASE FOR T HE IMPUGNED DISALLOWANCES OF THE INTEREST. THE AO HAS BI-FURCATED THE QUANTUM OF LO AN RAISED BY THE ASSESSEE HAVING REGARD TO THE SUBMISSIONS FILED BY THE ASSESSEE IN THE MAT TER. IT IS FURTHER SEEN THAT A FAIR AND OBJECTIVE FORMULA HAS BEEN ADOPTED FOR SUCH DISALLO WANCES. CONSEQUENTLY, WE DO NOT FIND ANY INFIRMITY IN THE IMPUGNED DISALLOWANCES OF INTE REST AND AFFIRMATIONS OF THE SAME BY THE LD. CIT(A). IS UPHELD. THIS GROUND OF ASSESSE E IS DISMISSED. 9. IN GROUND NO. 3, THE AO DISALLOWED THE EQUATED I NSTALLMENTS AND LOAN OF RS. 327,633/- AS NOT ALLOWABLE DEDUCTION. THE AO WAS OF THE OPINION THAT THE ASSESSEE HAS CLAIMED DEPRECIATION ON THE IMPUGNED ASSET AND HENC E SUCH INTEREST IS NOT ALLOWABLE. THE LD. CIT(A) UPHELD SUCH FINDINGS. ITA NO. 954/CHANDI/2010 CITY ENTERPRISES P LTD V. DCIT 4 10. A PERUSAL OF THE ASSESSMENT ORDER AND SUBMISSIO NS MADE BY THE LD AR FOR THE ASSESSEE CLEARLY REVEALS THAT NO SUCH DEPRECIATION HAS BEEN CLAIMED BY THE ASSESSEE DURING THE PERIOD UNDER REFERENCE. THEREFORE, VERY FOUNDA TION OF INFERENCE DRAWN BY THE AO BECOMES NON-EST. IN VIEW OF SUCH FACTUAL FINDINGS T HE CLAIM OF THE ASSESSEE IS JUSTIFIED. ACCORDINGLY, THE ASSESSEE-APPELLANT SUCCEEDS IN RES PECT OF THIS GROUND OF APPEAL. 11. IN GROUND NO. 4, THE AO DISALLOWED AN AMOUNT O F RS. 4,09,473/-, AFTER MAKING A REFERENCE TO THE BALANCE SHEET. THE ASSESSEE MADE A CLAIM IN RESPECT OF INTEREST PAID ON UNSECURED LOANS FROM SMT. SUSHMA GROVER AND SHRI KA RAN GROVER, TO THE TUNE OF RS. 21,77,400/-. 12. THE LD. AR FOR THE ASSESSEE POINTED OUT THAT NEW LOANS RAISED WAS ALSO USED IN RESPECT OF SAID PROPER. THE LD. AR FOR THE ASSE SSEE SUPPORTED THE FINDINGS OF THE LOWER AUTHORITIES. 13. ON A CAREFUL PERUSAL OF THE FACT SITUATION OF T HE CASE AND THE RIVAL SUBMISSIONS REVEALS THAT NEW LOANS RAISED BY THE ASSESSEE WERE USED FOR THE PURPOSE OF SAID PROPERTY. THEREFORE, IT IS LOGICAL TO RESTORE THE ISSUE TO TH E FILE OF AO FOR ALLOWING INTEREST TO THE ASSESSEE BY FOLLOWING THE FORMULA ADOPTED BY THE AS SESSEE, IN RESPECT OF DISALLOWANCES OF INTEREST PAID TO ICICI BANK. ACCORDINGLY THE ISSUE IS RESTORED TO THE FILE OF AO, FOR THE PURPOSE OF FRESH ADJUDICATION, BY AFFORDING OPPORTU NITY TO THE ASSESSEE AND IN ACCORDANCE WITH LAW. 14. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON 19 .9.2011 SD/- SD/- (SUSHMA CHOWLA) (MEHAR SINGH) JUDICIAL MEMBER ACCOUNANT MEMBER CHANDIGARH, THE 19.9.2011 SURESH COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT/THE CIT(A)/THE DR ITA NO. 954/CHANDI/2010 CITY ENTERPRISES P LTD V. DCIT 5