Des Raj Goel & Sons, Jagadhari v. DCIT, Yamunanagar

ITA 1167/CHANDI/2011 | 2007-2008
Pronouncement Date: 15-02-2012 | Result: Partly Allowed

Appeal Details

RSA Number 116721514 RSA 2011
Assessee PAN ITACT1961I
Bench Chandigarh
Appeal Number ITA 1167/CHANDI/2011
Duration Of Justice 2 month(s) 10 day(s)
Appellant Des Raj Goel & Sons, Jagadhari
Respondent DCIT, Yamunanagar
Appeal Type Income Tax Appeal
Pronouncement Date 15-02-2012
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted B
Tribunal Order Date 15-02-2012
Date Of Final Hearing 23-01-2012
Next Hearing Date 23-01-2012
Assessment Year 2007-2008
Appeal Filed On 05-12-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH B CHANDIGARH BEFORE SHRI H.L.KARWA VICE PRESIDENT AND SHRI MEHAR SINGH ACCOUNTANT MEMBER ITA NO.1167/CHD/2011 ASSESSMENT YEAR: 2007-08 SHRI DES RAJ GOEL & SONS V DCIT CIRCLE JARODA GATE YAMUNA NAGAR. JAGADHRI. PAN: ABIPG-5842P (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI ASHWANI GOEL RESPONDENT BY : SMT. JAISHREE SHARMA DATE OF HEARING : 25.01.2012 DATE OF PRONOUNCEMENT : 15.2.2012 ORDER PER MEHAR SINGH AM THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF CIT(A) PASSED U/S 250(6) OF TH E INCOME-TAX ACT 1961 (IN SHORT 'THE ACT') DATED 21.09.2011 RELATING TO ASSESSMENT YEAR 2007-08. 2. IN THIS APPEAL THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THAT THE LD. CIT(A) HAS ERRED IN LAW AS WELL AS ON THE FACTS WHILE DISMISSING THE APPEAL. 2. THAT THE LD. CIT(A) HAS ERRED IN LAW AS WELL AS ON FACTS WHILE DISALLOWING RS.9 16 300/- ON ACCOUNT OF INTEREST PAID TO PARTNER. 3. THAT THE LD. CIT(A) HAS ERRED IN LAW AS WELL AS ON FACTS WHILE DISALLOWING RS.60 000/- ON ACCOUNT OF GROUND RENT. 2 4. THAT THE LD. CIT(A) HAS ERRED IN LAW AS WELL AS ON FACTS WHILE DISALLOWING RS.314719/- ON ACCOUNT OF INTEREST PAID TO OTHERS. 5. IN VIEW OF THE FACTS STATED ABOVE THE IMPUGNED ADDITION DESERVES TO BE QUASHED IN TOTAL AND THE APPELLANT PRAYS THAT HIS APPEAL MAY PLEASE BE ACCEPTED AND THE ADDITION BE DELETED. 6. THAT THE APPELLANT RESERVES HIS RIGHTS TO MAKE ANY ADDITION OR MODIFICATION IN THE GROUNDS OF APPEAL AT THE TIME OF HEARING. 3. GROUND NO.1 IS GENERAL IN NATURE HENCE NEEDS N O ADJUDICATION. 4. IN GROUND NO.2 THE ASSESSEE CONTENDED THAT CIT(A) ERRED IN LAW AND ON FACTS IN UPHOLDING THE A CTION OF THE AO IN DISALLOWANCE OF RS.9 16 300/- ON ACCOU NT OF INTEREST PAID TO PARTNERS. SUBMISSION OF THE ASSESSEE IN THE MATTER IS REPRODUCED HEREUNDER : THE LD. CIT(A) PANCHKULA HAS FAILED TO APPRECIATE THAT THE APPELLANT HAD BUSINESS TURNOVER OF RS.9418918/-. HENCE DEDUCTIONS IN RESPECT OF INTEREST PAID TO UNSECURED LOAN AND INTEREST PAID T O PARTNERS IS AN ALLOWABLE EXPENSE UNDER THE HEAD BUSINESS AND PROFESSION. IN PARA 2(I) OF THE ASSESSMENT ORDER THE LD. AO DI D NOT APPRECIATE THE FACT THAT THE TRANSACTIONS MADE BY THE APPELLANT IN COMMODITY MARKET WAS A BUSINESS AND THE LD. AO WENT ON TO ASSESS SUCH INCOME AS INCOME FROM OTHER SOURCE. IN THE CASE OF CIT V PRABHUDAYAL (1971) 82 ITR 804 (S.C) THE HON'BLE SUPREME COURT HELD THAT EVEN A SINGLE AND ISOLATED TRANSACTION CAN BE HELD TO BE CAPABLE OF FOLLOWING WITHIN THE DEFINITION OF BUSINESS. IN 3 ANOTHER CASE RAJPUTANA TEXTILES (AGENCIES) LTD. V CIT (1961) 42 ITR 743 (S.C) THE HON'BLE SUPREME COURT HELD THAT WHERE FROM THE VERY BEGINNING PURCHASE OF SHARE IS MADE WITH THE INTENTION OF SELLING THEM AT A PROFIT IT IS AN ADVENTURE IN THE NATURE OF TRADE. IN VIEW OF THE ABOVE PRONOUNCEMENT THE ASSESSEE'S TRANSACTION IN COMMODITY MARKET FALLS WITHIN THE MEANING OF BUSINESS AND THE SAME SHOULD HAVE BEEN ASSESSED UNDER THE HEAD BUSINESS INCOME. IN VIEW OF THE ABOVE DISCUSSION ALL THE DISALLOWANCES MADE DESERVED TO BE QUASHED IN TOTAL AND IT IS PRAYED TO YOUR HONOURS TO PLEASE DELETE THESE DISALLOWANCES. NOT IN PREJUDICE TO WHAT HAS BEEN SUBMITTED IN THE EARLIER PARAGRAPH IT IS FURTHER SUBMITTED AS BELOW : (I) THE LD. CIT(A) CONFIRMED DISALLOWANCE OF RS.916300/- ON ACCOUNT OF INTEREST PAID TO PARTNERS . SECTION 40(B) WAS INTRODUCED IN THE FINANCE ACT 1992 AND CLARIFICATIONS OVER THE VARIOUS PROVISIONS OF THE FINANCE ACT 1992 AND CLARIFICATIONS OVER THE VARIOUS PROVISIONS OF THE FINANCE ACT 1992 WAS MADE BY THE CBDT VIDE ITS CIRCULAR NO.636 PARA 48.3 (COPY OF RELEVANT PORTION IS ATTACHED) WHICH CLEARLY CLARIFIES THAT SALARY INTEREST BONUS COMMISSION OR REMUNERATION DUE TO OR RECEIVED BY A PARTNER SHALL BE REDUCED FROM THE GROSS TOTAL INCOME I.E. AFTER ADDING INCOMES FROM ALL THE FIVE HEADS OF INCOME. HENCE IT IS AMPLY CLEAR THAT INCOME MAY ARISE FROM ANY HEAD OF INCOME TO A FIRM INTEREST SALARY ETC. TO THE PARTN ERS SHALL CERTAINLY BE REDUCED. IN VIEW OF THE ABOVE I T IS PRAYED TO YOUR HONOURS TO PLEASE DELETE THIS DISALLOWANCE. 4 5. LD. 'DR' PLACED RELIANCE ON THE ORDER OF THE LOW ER AUTHORITIES. 6. WE HAVE CAREFULLY PERUSED THE FACTS OF THE CASE RIVAL SUBMISSIONS AND RELEVANT RECORD. THE MAIN CONTENTION OF THE ASSESSEE IS THAT THE LOWER AUTHOR ITIES HAD IGNORED THE FACTUM THAT ASSESSEE WAS CARRYING O N BUSINESS OF PURCHASE AND SALE OF SHARES. THIS FACT HAS BEEN MENTIONED BY THE AO IN HIS ORDER DATED 18.12.2009 IN PARA 2.1. 7. WE HAVE CAREFULLY PERUSED THE FINDINGS OF THE LD . CIT(A) AND FOUND THAT THE CIT(A) HAD MADE A MENTION OF PURCHASE AND SALE OF SHARE TRANSACTIONS IN PARA 4.3 OF THE ORDER PASSED BY HER. HOWEVER THE MAIN ISSUE RAISED BY THE APPELLANT IS WHETHER SUCH TRANSACTION S FALL IN THE REALM OF BUSINESS ACTIVITIES OF THE ASS ESSEE NEEDS DETAILED AND SPEAKING ORDER WITH A VIEW TO DISLODGE THE CLAIM OF THE ASSESSEE IN RESPECT OF T HE IMPUGNED INTEREST PAID TO PARTNERS. THE ASSESSEE BEFORE THE BENCH CONTENDED THAT SUCH PURCHASE AND SALE OF TRANSACTIONS PERTAIN TO HIS BUSINESS ACTIV ITIES AND INCOME GENERATED FROM SUCH ACTIVITIES SQUARELY FALLS U/S 28 OF THE ACT. THEREFORE IN THE INTERES T OF JUSTICE AS ALSO FOR THE JUDICIOUS DISPOSAL OF THE ISSUE IN QUESTION REGARDING EXISTENCE OF BUSINESS INCOME FROM SUCH SHARE TRANSACTIONS AS ALSO THE CLAIM MAD E BY THE ASSESSEE IN RESPECT OF INTEREST OF RS.9 16 3 00/- PAID TO THE PARTNERS NEEDS DETAILED EXAMINATION AN D 5 SPEAKING ORDER ON SUCH ISSUES. IN VIEW OF THIS W E DEEM IT FIT TO RESTORE THIS ISSUE TO THE FILE OF TH E CIT(A) FOR THE PURPOSE OF FRESH ADJUDICATION IN ACCORDANCE WITH LAW AND AFTER PROVIDING REASONABLE OPPORTUNITY TO THE ASSESSEE. THE ASSESSEE IS FURTHER DIRECTED TO RENDE R NECESSARY COOPERATION IN THE MATTER FOR PROPER DIS POSAL OF THE ASSESSEE. 8. IN GROUND NO.3 THE ASSESSEE CONTENDED THAT CIT(A) ERRED IN LAW AS WELL AS ON FACTS WHILE DISALLOWING RS.60 000/- ON ACCOUNT OF GROUND RENT. THE ASSESSEE HAD SHOWN INCOME FROM HOUSE PROPERTY AT RS.21 54 000/- AFTER CLAIMING MUNICIPAL TAX AMOUNTI NG TO RS.9 23 400/- FROM THE GROSS RENTAL RECEIPTS. TH E AO SPECIFICALLY RECORDED THE FINDINGS THAT DEDUCTION I N RESPECT OF INCOME FROM HOUSE PROPERTY IS PROVIDED U/S 24 OF THE ACT. AS PER AO PROVISIONS OF SECTION 22 TO 27 OF THE ACT ARE RELEVANT FOR THE PURPOSE OF COMPUTAT ION OF INCOME U/S 22 OF THE ACT. CONSEQUENTLY SUCH DEDUCTION IN RESPECT OF GROUND RENT AMOUNTING TO RS.60 000/- WAS DISALLOWED BY THE AO. LD. CIT(A) UPHELD THE FINDING OF THE AO AS PER PARA 5.3 OF TH E ORDER WHICH IS REPRODUCED HEREUNDER : 5.3 THE APPELLANTS CLAIM FOR RENT PAID AT RS.60 000/- IN RESPECT OF LAND ON WHICH GODOWN WAS CONSTRUCTED IS NOT PERMISSIBLE IN VIEW OF THE FACT THAT THE APPELLANT ALREADY BEEN GRANTED 30% DEDUCTION U/S 24(A) OF THE IT ACT 1961 IN RESPECT O F MUNICIPAL TAXES ETC. THERE IS NO PROVISION OF ALLOWANCE ON ACCOUNT OF GROUND RENT U/S 22-27 OF 6 THE IT ACT. STATUTORY DEDUCTION @ 30% HAS ALREADY BEEN ALLOWED TO THE APPELLANT. THEREFORE THE DEDUCTION OF RS.60 000/- ON ACCOUNT OF RENT IS DISALLOWED. AS A RESULT THIS GROUND OF APPEAL IS DISMISSED. 9. WE HAVE CAREFULLY PERUSED THE FACT-SITUATION OF THE CASE RIVAL SUBMISSIONS AND WE ARE IN COMPLETE AGREEMENT WITH THE AO AND THE LD. CIT(A) THAT ASSES SEE IS NOT ELIGIBLE FOR DEDUCTION IN RESPECT OF GROUND RENT AS CLAIMED IN GROUND NO.3 BY THE ASSESSEE. THE DEDUCTION IN RESPECT OF INCOME ASSESSED U/S 22 OF T HE ACT ARE SPECIFICALLY PROVIDED U/S 24 OF THE ACT. THEREFORE THE ASSESSEE IS NOT ELIGIBLE FOR SUCH DEDUCTION AND HENCE THIS GROUND IS DISMISSED. 10. IN GROUND NO.4 THE ASSESSEE APPELLANT CONTENDE D THAT CIT(A) ERRED IN LAW AS WELL AS ON FACTS WHILE DISALLOWING INTEREST OF RS.3 14 719/- ON ACCOUNT O F INTEREST PAID TO OTHERS. THE FINDINGS OF THE AO A S CONTAINED IN PARA 2.5 OF THE ORDER ARE REPRODUCED HEREUNDER : 2.5 REGARDING THE INTEREST TO OTHERS CLAIMED AT RS.5 90 971/- THIS INTEREST PERTAINS TO INCOME FROM HOUSE PROPERTY. THE ASSESSEE HAS CLAIMED IT ON THE ACCUMULATED BALANCES WHEREAS THE INTEREST ON BORROWED CAPITAL IS ADMISSIBLE ONLY TO THE EXTEN T OF INTEREST ON THE BORROWED CAPITAL. FURTHER A PERUSAL OF THESE COPIES OF ACCOUNTS OF THE CREDITO RS INDICATES THAT THE ASSESSEE IS NOT REPAYING THE LOA N AND IT IS GOING ON ADDING THE INTEREST ACCRUE ANNUALLY TO ITS OUTSTANDING BALANCE OF LOAN AMOUNT AND CLAIMING DEDUCTION U/S 24(B) OF THE ACT ON THE 7 SO BROUGHT FORWARD BALANCES EVERY YEAR. IN THIS WAY THE ASSESSEE HAS CLAIMED DEDUCTION ON PRINCIPAL AMOUNT OF LOAN AND ALSO ON UNPAID INTEREST ADDED TO THE PRINCIPAL AMOUNT OVER THE YEARS. THE DEDUCTION U/S 24 OF THE INCOME-TAX ACT IS ALLOWABLE ONLY IN RESPECT OF THE INTEREST PAYABL E ON THE BORROWED CAPITAL AND NOT IN RESPECT OF THE INTEREST ACCRUED ON THE BORROWED CAPITAL. SUCH BORROWED CAPITAL WAS WORKED OUT WHILE PASSING THE ORDER U/S 154 IN RESPECT OF THE PRECEDING ASSESSMENT YEAR 2006-07 WHICH HAS ALSO BEEN UPHELD BY THE LD CIT(A). ACCORDINGLY THE INTEREST ON THE BORROWED CAPITAL IS WORKED OUT AS FOLLOWS : NAME OF CREDITOR AMOUNT OF INTEREST WORKED OUT @ 12% OF LOAN (RS.) THE ORIGINAL LOAN AMOUNT ELIGIBLE FOR DEDUCTION --------------------- ------------- ---------- ----------------------------- SMT.RACHNA 1072100/- 128652/- GOEL SMT.ANJALI GOEL 200000/- 24000/- SAB & CO. 600000/- 72000/- SMT.PUSHPA DEVI 430000/- 51600/- MEMORIAL CHARITABLE TRUST TOTAL 276252/- INTEREST CLAIMED 590971/- EXCESS TO BE 314719/- DISALLOWED ACCORDINGLY AN ADDITION OF RS.3 14 719/- IS MADE ON THIS ACCOUNT TO THE ASSESSEE'S TOTAL INCOME. 11. THE FINDINGS OF THE LD. CIT(A) UPHOLDING THE A CTION OF THE AO AFTER MAKING A REFERENCE TO PROVISIONS O F SECTION 24(B) ARE LEGALLY AND FACTUALLY TENABLE. T HE FINDINGS OF THE CIT(A) ARE IN CONSONANCE WITH THE PROVISIONS OF SECTION 24(B) OF THE ACT. FURTHER T HE ASSESSEE HAD FAILED TO ESTABLISH HIS CLAIM IN RESP ECT OF SUCH DEDUCTION IN THE COURSE OF ASSESSMENT 8 PROCEEDINGS AND APPELLATE PROCEEDINGS BEFORE THE CIT(A) BY WAY OF PRODUCING COGENT AND CREDIBLE EVIDENCE. ACCORDINGLY FINDINGS OF THE LD. CIT(A) ARE UPHELD AND THIS GROUND OF APPEAL IS DISMISSED. 12. GROUND NOS. 5 & 6 ARE GENERAL AND NATURE AND NEED NO ADJUDICATION. 13. IN THE RESULT APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 15 TH FEB. 2012. SD/- SD/- (H.L.KARWA) (MEHAR SINGH) VICE PRESIDENT ACCOUNTANT MEMBER DATED: 15 TH FEB. 2012. POONAM COPY TO: THE APPELLANT THE RESPONDENT THE CIT(A) CIT DR ASSISTANT REGISTRAR ITAT CHANDIGARH