M/s. Vasavi Jyothi Constructions, CHENNAI V. DCIT, CHENNAI

ITSSA 10/CHNY/2011

• Counselvise Citation: [2012] 124 COUNSELVISE.COM (IT) 7544 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 23 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 11-05-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 02-05-2012
• Assessment Year: misc
• Appeal Filed On: 18-04-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: DR S MOHARANA IRS
• Assessee Lawyers: G BASKAR
• Keywords: Block assessment

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI BEFORE DR. O.K.NARAYANAN, VICE-PRESIDENT AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER I.T(SS).A. NO.9/MDS/2011 BLOCK PERIOD : 1.4.1996 TO 15.11.2002 THE ASSISTANT COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-II(4), CHENNAI. VS. M/S. VASAVI JYOTHI CONSTRUCTIONS, NO.46, SINGARACHARI STREET, TRIPLICANE, CHENNAI 600 005. PAN AACFV 8072 H (APPELLANT) (RESPONDENT) I.T(SS).A. NO.10/MDS/2011 BLOCK PERIOD : 1.4.1996 TO 15.11.2002 M/S. VASAVI JYOTHI CONSTRUCTIONS, CHENNAI-600 005. VS. THE DEPUTY COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-II(4), CHENNAI. (APPELLANT) (RESPONDENT) DEPARTMENT BY : DR. S.MO HARANA, IRS, CIT ASSESSEE BY : SHRI G. BASKAR, ADVOCATE DATE OF HEARING : 2 ND MAY, 2012 DATE OF PRONOUNCEMENT : 11 TH MAY, 2012 IT(SS)A 9 & 10 /11 :- 2 -: O R D E R PER DR. O.K.NARAYANAN, VICE PRESIDENT THESE CROSS APPEALS ARE FILED BY THE REVENUE AND T HE ASSESSEE. THESE ARE BLOCK ASSESSMENT APPEALS. T HEY ARE DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF I NCOME-TAX (APPEALS)-II AT CHENNAI DATED 20.12.2010. THEY ARI SE OUT OF THE BLOCK ASSESSMENT COMPLETED UNDER SEC.158BC READ WIT H SEC.158BD OF THE INCOME-TAX ACT, 1961. 2. IN THE APPEAL FILED BY THE REVENUE, THE FIRST G ROUND IS THAT THE COMMISSIONER OF INCOME-TAX(APPEALS) HAS ERRED I N DELETING THE ADDITION MADE BY THE ASSESSING OFFICER TOWARDS LOAN AMOUNTING TO ` 31,50,000/-. WHEN WE HAVE GONE THROUGH THE FACTS OF THE CASE PLACED BEFORE THE ASSESSING OFFIC ER, IT IS SEEN THAT THE ASSESSEE HAD UTILIZED THE AMOUNT OF ` 31,50,000/- TO ACQUIRE THE LAND FOR THE PURPOSE OF CONSTRUCTION. THE ASSESSEE HAD SHOWN SPECIFICALLY IT AS COST OF LAND PURCHASED . BUT WHILE CONSIDERING THE VARIOUS ITEMS FOR MAKING ADDITIONS IN THE BLOCK IT(SS)A 9 & 10 /11 :- 3 -: ASSESSMENT, THE ASSESSING OFFICER TREATED THE AMOUN T AS LOAN AND NOWHERE CONSIDERED THE CORRESPONDING APPLICATIO N OF THE LOAN FUND. THE ASSESSING OFFICER WENT AFTER THE MISNOME R AND HELD THAT THE ASSESSEE HAD IN FACT REPAID THAT LOAN AND THEREFORE, REPAYMENT CANNOT BE CONSIDERED AS COST OF CONSTRUCT ION ENTITLED FOR DEDUCTION IN COMPUTING THE INCOME OF THE ASSESS EE. THIS IS A TECHNICAL MISTAKE COMMITTED BY THE ASSESSING AUTHOR ITY. EVEN THOUGH THE FUNDS WERE OBTAINED BY WAY OF LOAN, THOS E FUNDS WERE UTILIZED FOR PURCHASING THE LAND. THE AMOUNT HAS B EEN UTILISED FOR ACQUIRING THE LAND AND THEREBY INCURRED FOR THE PUR POSE OF CONSTRUCTION. THEREFORE, THAT AMOUNT CANNOT BE DIS ALLOWED BY TREATING IT AS REPAYMENT OF LOAN. THE COMMISSIONER OF INCOME- TAX(APPEALS) HAS RIGHTLY ALLOWED THE DEDUCTION AS P RAYED FOR BY THE ASSESSEE. THIS ISSUE IS DECIDED IN FAVOUR OF T HE ASSESSEE. 3. THE SECOND GROUND RAISED BY THE REVENUE IS THAT THE COMMISSIONER OF INCOME-TAX(APPEALS) HAS ERRED IN GR ANTING RELIEF OF ` 27,82,600/- TOWARDS INTEREST WHILE ARRIVING AT THE PROFIT FROM MTH ROAD PROJECT. IT(SS)A 9 & 10 /11 :- 4 -: 4. THIS IS AGAIN THE RESULT OF A MISCONCEPTION PRES UMED BY THE ASSESSING AUTHORITY. THE AMOUNT OF ` 27,82,600/- HAS BEEN SHOWN BY THE ASSESSEE IN ITS ACCOUNTS AS FUTURE I NTEREST. THE ASSESSING OFFICER ADOPTED THE LITERAL MEANING OF TH E EXPRESSION FUTURE INTEREST AS INTEREST TO BE PAID IN FUTURE. CONSEQUENTLY, HE HELD THAT THE INTEREST HAS NOTHING TO DO WITH THE C OMPUTATION OF INCOME FOR THE IMPUGNED BLOCK PERIOD. THE REASONIN G IS THAT THE INTEREST IS ONLY FOR FUTURE AND NOT AN EXPENDITURE ATTRIBUTABLE TO THE BLOCK PERIOD. BUT THE FACT IS THAT THE AMOUNT OF ` 27,82,600/- WAS INTEREST PAYABLE, WHEREAS THE ASSESSING AUTHORITY COMPUTED THE SAME AS INCOME OF THE ASSESSEE FROM MTH ROAD PROJEC T. THE ASSESSEE HAD NOT REALIZED THE ENTIRE SALE VALUE FRO M THE ALLOTTEES OF THE FLATS. THE ACTUAL PROFIT OF THE ASSESSEE WO ULD BE REALIZED ONLY AFTER THE RECEIPT OF PURCHASE CONSIDERATION FR OM THE OWNERS OF THE FLATS. THE ASSESSEE HAD TO PAY INTEREST ON THE AMOUNT BORROWED ALREADY AND UTILIZED FOR THE CONSTRUCTION OF THE PROJECT. THE INTEREST AMOUNT HAS ALREADY BEEN INCURRED AS CO ST OF THE PROJECT. THE ONLY POINT IS THAT THE INTEREST HAS T O BE PAID AS PER THE AGREEMENT AND NOT PAID WITHIN THE TIME OF BLOCK PERIOD. BUT THE LIABILITY TO PAY THE INTEREST HAS ALREADY BEEN ATTACHED ON THE IT(SS)A 9 & 10 /11 :- 5 -: ASSESSEE AND THEREFORE, IT HAS BECOME NECESSARILY A PART OF THE COST OF THE PROJECT BY TREATING INTEREST PAYABLE AS FUTURE INTEREST. THE ASSESSING OFFICER DISALLOWED THE SA ME. THE COMMISSIONER OF INCOME-TAX(APPEALS) HAS RIGHTLY DEL ETED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER . 5. THE ASSESSEE IS ADVISED TO USE WIDELY EXPRESSED TERMINOLOGY WHILE PREPARING THE ACCOUNTS. THE CORR ECT EXPRESSION SHOULD BE INTEREST PAYABLE. BUT WHILE CHANGING T HE STANDARD TERMINOLOGY OF INTEREST PAYABLE TO FUTURE INTEREST , THE ASSESSEE HAS CREATED ALL THE CONFUSIONS. 6. THE APPEAL FILED BY THE REVENUE IS LIABLE TO BE DISMISSED. 7. IN THE APPEAL FILED BY THE ASSESSEE, THE FIRST G ROUND RAISED IS THAT THE COMMISSIONER OF INCOME-TAX(APPEALS) HAS ER RED IN CONFIRMING THE DISALLOWANCE OF INTEREST TO THE EXTE NT OF ` 7,60,500/- HOLDING THAT IT IS NOT AN EXPENDITURE OF THE SAID P ROJECT. THE SECOND GROUND RAISED BY THE ASSESSEE IS THAT THE CO MMISSIONER OF INCOME-TAX(APPEALS) HAS ERRED IN CONCLUDING THAT A SUM OF ` 15 LAKHS IS THE COMMISSION RECEIVED BY THE ASSESSEE I N CONNECTION IT(SS)A 9 & 10 /11 :- 6 -: WITH THE SALE OF LAND TO M/S. C.G. CONSTRUCTIONS. I T IS THE ARGUMENT OF THE ASSESSEE THAT THE COMMISSIONER OF INCOME-TAX (APPEALS) OUGHT TO HAVE SEEN THAT A SUM OF ` 15 LAKHS HAD ALREADY BEEN OFFERED BY SRI P. BADRINATH IN HIS INDIVIDUAL ASSES SMENT. 8. ON GOING THROUGH THE ORDER OF THE COMMISSIONER O F INCOME- TAX(APPEALS), WE FIND THAT THE COMMISSIONER OF INCO ME- TAX(APPEALS) HAS CONSIDERED THE ABOVE ISSUES IN A V ERY DETAILED MANNER IN THE LIGHT OF MATERIALS AVAILABLE ON RECOR D AND IN THE LIGHT OF VARIOUS SUBMISSIONS AND EXPLANATIONS MADE BY THE ASSESSEE. THE ASSESSEE HAS NOT BEEN SUCCESSFUL IN MEETING THE OBJECTIONS RAISED BY THE ASSESSING AUTHORITY IN THIS REGARD. THEREFORE, WE ARE NOT INCLINED TO ACCEPT THE ARGUMENT OF THE ASSE SSEE ON THE ABOVE TWO ISSUES. 9. THE THIRD GROUND RAISED BY THE ASSESSEE IS THAT THE COMMISSIONER OF INCOME-TAX(APPEALS) HAS ERRED IN CO NFIRMING THE LEVY OF INTEREST UNDER SEC.158BFA(1), WHICH IS TO B E REJECTED AS INTEREST IS COMPENSATORY IN NATURE. IT(SS)A 9 & 10 /11 :- 7 -: 10. IN RESULT, THE APPEALS FILED BY THE REVENUE AND THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED ON FRIDAY, THE 11 TH OF MAY, 2012 AT CHENNAI. SD/- SD/- (CHALLA NAGENDRA PRASAD) JUDICIAL MEMBER (DR. O.K.NARAYANAN) VICE-PRESIDENT CHENNAI, DATED THE 11 TH MAY, 2012 MPO* COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR