Tower Promoters Private Limited,, Noida v. ACIT,, New Delhi

ITA 2194/DEL/2009 | 2005-2006
Pronouncement Date: 07-01-2011 | Result: Partly Allowed

Appeal Details

RSA Number 219420114 RSA 2009
Assessee PAN AAACT3495K
Bench Delhi
Appeal Number ITA 2194/DEL/2009
Duration Of Justice 1 year(s) 7 month(s) 15 day(s)
Appellant Tower Promoters Private Limited,, Noida
Respondent ACIT,, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 07-01-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted H
Tribunal Order Date 07-01-2011
Date Of Final Hearing 29-09-2010
Next Hearing Date 29-09-2010
Assessment Year 2005-2006
Appeal Filed On 22-05-2009
Judgment Text
I.T.A. NO.2561 2194 3937 /DEL/2009 1/11 IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL NEW DELHI BENCH H NEW DELHI BENCH H NEW DELHI BENCH H NEW DELHI BENCH H BEFORE SHRI A. D. JAIN JUDICIAL MEMBER AND SHRI K. D. RANJAN ACCOUTANT MEMBER ITA NO. 2561 /DEL/2009 (ASSESSMENT YEAR 2005-06) DCIT CIRCLE 16(1) VS. M/S. TOWER PROMOTERS P. LT D. NEW DELHI 11-2 HAUZ KHAS VILALGE NEW DELHI-1210 096 I.T.A. NO. 2194 & 3937/DEL/2009 (ASSESSMENT YEAR 2005-06 & 2006-07) M/S. TOWER PROMOTERS P.LTD. VS. DCIT CIRCLE 16( 1) 11-2 HAUZ KHAS VILLAGE NEW DELHI NEW DELHI. (APPELLANTS) (RESPONDENTS) PAN / GIR NO. AAACT3495K APPELLANT BY: SMT. REENA S PURI CIT DR RESPONDENT BY: SHRI AJAY VOHRA ADV SHRI GAURAV JAIN FCA ORDER ORDER ORDER ORDER PER K. D. RANJAN AM: PER K. D. RANJAN AM: PER K. D. RANJAN AM: PER K. D. RANJAN AM: 1. THESE APPEALS BY THE ASSESSEE AND THE REVENUE FO R THE ASSESSMENT YEARS 2005-06 & 2006-07 ARISE OUT OF SEP ARATE ORDERS OF LD. CIT(A) XIX NEW DELHI. THESE APPEALS WERE H EARD TOGETHER AND FOR THE SAKE OF CONVENIENCE ARE BEING DISPOSED OF BY THIS CONSOLIDATED ORDER. 2. FIRST WE TAKE UP REVENUES APPEAL FOR THE ASSES SMENT YEAR 2005-06. THE GROUNDS OF APPEAL ARE REPRODUCED AS U NDER: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN ADMITTING FRESH EVIDENCE UNDER RULE 46A OF INCOME TAX RULES 1961 ESPECIALLY WHEN THE ASSES SEE DID NOT FILE THE SAME DELIBERATELY BEFORE THE A.O. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN DELETING AN ADDITION OF ` 8 87 50 000/- MADE U/S 68 ON ACCOUNT OF SHARE APPLICATION MONEY I GNORING THE FACTS THAT THE ASSESSEE DID NOT DISCHARGE ITS O NUS TO PROVE I.T.A. NO.2561 2194 3937 /DEL/2009 2/11 GENUINENESS OF TRANSACTION IDENTITY AND CREDITWORT HINESS OF THE PARTIES. 3. THE ONLY ISSUE FOR CONSIDERATION RELATES TO DELE TING THE ADDITION OF ` 8 87 50 000/- MADE U/S 68 ON ACCOUNT OF SHARE APPLICATION MONEY. THE FACTS OF THE CASE STATED IN BRIEF ARE THAT THE ASSESSEE DURING THE RELEVANT PREVIOUS YEAR RECEIVED AN AMOUNT OF ` 8 87 50 000/- AS SHARE APPLICATION MONEY FROM ITS H OLDING COMPANY M/S. JUBILANT CAPITAL PVT. LTD. THE A.O. MADE ADDI TION ON THE GROUND THAT ASSESSEE REFUSED TO FILE THE COPY OF INCOME TA X RETURN OF THE SHARE APPLICANT I.E. M/S. JUBILANT CAPITAL PVT. LTD . HE ALSO OBSERVED THAT M/S. JUBILANT CAPITAL PVT. LTD. BEING THE HOLD ING COMPANY OF THE ASSESSEE HOLDING 99% OF THE SHARE CAPITAL COULD HA VE VERY EASILY OBTAINED THE REQUIRED DOCUMENTARY EVIDENCE UNLESS T HERE WAS SOMETHING TO HIDE. ACCORDING TO THE A.O. THE ASSE SSEE HAD NOT DISCHARGED THIS MANDATORY ONUS CAST UPON THE ASSESS EE BY WAY OF PROVING THE IDENTITY CAPACITY OF THE CREDITORS AND GENUINENESS OF TRANSACTIONS. 4. BEFORE LD. CIT(A) THE ASSESSEE FIELD COPY OF IN COME TAX RETURN OF M/S. JUBILANT CAPITAL PVT. LTD. FOR THE ASSESSME NT YEAR 2004-05 COPY OF ASSESSMENT ORDER U/S 143(3) FOR THE ASSESSM ENT YEAR 2005- 06 COPY OF FORM NO.2 FILED BEFORE THE REGISTRAR OF COMPANIES FOR ALLOTMENT OF SHARES. THE ADDITIONAL EVIDENCE FILED UNDER RULE 46A OF I T RULES WAS FORWARDED TO THE A.O. AND THE REMA ND REPORT WAS OBTAINED. BEFORE THE LD. CIT(A) IT WAS SUBMITTED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE FURN ISHED COPIES OF APPLICATION FOR SHARE ALLOTMENT CONFIRMATION OF AC COUNTS DETAILS OF CHEQUES PAN ETC AND COPY OF THE BALANCE SHEET OF M /S. JUBILANT CAPITAL PVT. LTD. THE ASSESSEE RELYING ON THE DECI SION OF HON'BLE SUPREME COURT IN THE CASE OF CIT VS LOVELY EXPORTS PVT. LTD. 216 CTR 195 SUBMITTED THAT IN CASE OF SHARE APPLICATION THE ASSESSEE HAD TO PROVE THE IDENTITY OF SHARE APPLICANT. SINC E THE IDENTITY OF THE ASSESSEE IS PROVED NO ADDITION CAN BE MADE IN THE HANDS OF THE ASSESSEE. ACCORDINGLY IT WAS PLEADED THAT M/S . JUBILANT CAPITAL PVT. LTD. BEING A HOLDING COMPANY HAD APPLIED FOR ALLOTMENT OF I.T.A. NO.2561 2194 3937 /DEL/2009 3/11 SHARES. THE PROOF OF IDENTITY HAS BEEN FURNISHED. THEREFORE IN VIEW OF THE DECISION OF HON'BLE SUPREME COURT IN THE CAS E OF LOVELY EXPORTS PVT. LTD. (SUPRA) ADDITION U/S 68 OF THE AC T WAS NOT WARRANTED. LD. CIT(A) CONSIDERED THE SUBMISSIONS M ADE BY THE ASSESSEE. HE NOTED THAT THE ASSESSEE HAD FILED CON FIRMATION LETTER WHICH CONTAINED THE ADDRESS PAN AND OTHER DETAILS. THE A.O. HAD NOT VERIFIED THESE DETAILS EITHER IN TERMS OF INQUI RIES OR VERIFICATION OF INCOME TAX RECORDS. THESE FACTS WERE NOT CONTRO VERTED BY THE A.O. THUS THE ASSESSEE HAD DISCHARGED ITS BURDEN OF PROVING BASIC DETAILS WHICH WERE REQUIRED FOR VERIFICATION TO FUL FILL THE CONDITIONS I.E. THE IDENTITY OF THE CREDITOR CREDITWORTHINESS OF CREDITOR AND GENUINENESS OF TRANSACTION AS LAID DOWN BY HIGHER J UDICIAL AUTHORITIES. LD. CIT(A) RELIED ON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF LOVELY EXPORTS PVT. LTD. (SUPR A) WHEREIN IT HAS BEEN HELD THAT IF SHARE APPLICATION MONEY IS RECEIV ED BY THE ASSESSEE FOR THE ALLEGED SHAREHOLDER WHOSE NAMES AR E GIVEN TO THE A.O. THEN THE DEPARTMENT IS FREE TO PROCEED TO REOP EN THEIR ASSESSMENT IN ACCORDANCE WITH LAW AND HENCE NO ADD ITION CAN BE MADE. LD. CIT(A) ON THE BASIS OF FACTS AVAILABLE O N RECORD CONCLUDED THAT THE ASSESSEE HAD PROVIDED NECESSARY DETAILS INCLUDING THE WARD/CIRCLE WHERE THE SHARE APPLICANT WAS ASSESSED TO INCOME TAX AND HAD DISCHARGED ITS ONUS CASTE ON IT. THE SHARES WERE ALLOTTED AND DETAILS WERE MADE AVAILABLE TO TH E A.O. NO INQUIRY WAS MADE BY THE A.O. BY ISSUE OF NOTICE U/S 133(6) OF THE ACT. THEREFORE THE A.O. HAD NOT BROUGHT ANYTHING ON RECORD TO DISPUTE THE FACTS/DETAILS FURNISHED BY THE ASSESSEE . HE THEREFORE HELD THAT THE SHARE APPLICATION MONEY DEPOSITED BY M/S. JUBILANT CAPITAL PVT. LTD. WAS GENUINE. HE ACCORDINGLY DELE TED THE ADDITION. 5. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. FROM THE ORDER OF LD . CIT(A) IT IS CLEAR THAT M/S. JUBILANT CAPITAL PVT. LTD. IS THE HOLDING COMPANY. M/S. JUBILANT CAPITAL PVT. LTD. IS ASSESSED TO TAX AND H AS FIELD CONFIRMATION IN RESPECT OF SHARE APPLICATION MONEY DEPOSITED WITH THE ASSESSEE. SHARES HAD BEEN ALLOTTED. THE A.O. HAD NOT BROUGHT I.T.A. NO.2561 2194 3937 /DEL/2009 4/11 ANY MATERIAL ON RECORD TO PROVE THAT THE MONEY DEPO SITED HAD COME FROM THE COFFERS OF THE ASSESSEE. IN THE ABSE NCE OF ANY SUCH MATERIAL BEING BROUGHT ON RECORD IN OUR CONSIDERED OPINION ADDITION CANNOT BE MADE IN THE HANDS OF THE ASSESSE E. ACCORDINGLY WE DO NOT FIND ANY INFIRMITY IN THE ORDER PASSED BY LD. CIT(A) DELETING THE ADDITION. OUR VIEW IS SUPPORTED BY TH E DECISION OF HON'BLE SUPREME COURT IN THE CASE OF LOVELY EXPORTS PVT. LTD. (SUPRA). 6. IN THE RESULT THE APPEAL FILED BY THE REVENUE I S DISMISSED. 7. NOW WE TAKE UP ASSESSEES APPEALS FOR THE ASSES SMENT YEARS 2005-06 AND 2006-07. THE FIRST ISSUE FOR CON SIDERATION WHICH IS COMMON IN ASSESSMENT YEAR 2005-06 AND 2006-07 RE LATES TO CONFIRMATION OF ADDITION ON ACCOUNT OF DISALLOWANCE MADE TOWARD CLAIM OF INTEREST. THE FACTS OF THE CASE STATED IN BRIEF ARE THAT THE A.O. WHILE EXAMINING THE CASE FOR ASSESSMENT YEAR 2 005-06 NOTED THAT ASSESSEE WHILE COMPUTING TOTAL INCOME HAD CLA IMED INTEREST OF ` 1 89 26 015/- AS DEDUCTION ON ACCOUNT OF BORROWED CAPITAL U/S 36(1)(III) AS PER SEPARATE NOTE. THIS AMOUNT WAS N OT ROUTED THROUGH P & L ACCOUNT OF THE ASSESSEE. FOR THE ASS ESSMENT YEAR 2006-07 AN AMOUNT OF ` 1 50 52 121/- WAS CLAIMED A S DEDUCTION U/S 36(1)(III) OF THE ACT. ON EXAMINATION OF FACTS THE A.O. FOUND THAT THE ASSESSEE HAD RECEIVED LOAN OF ` 18 CRORES FROM HDFC LTD. BY MORTGAGE OF IMMOVABLE PROPERTY AS COLLATERAL SEC URITY. THE A.O. CONDUCTED INQUIRY FROM HDFC BANK AND FOUND THAT THE ASSESSEE HAD TAKEN A LOAN OF ` 25 CRORES FROM HDFC IN SEP 20 03 FOR PURCHASE OF 78750 SQ. FT LAND AT PLOT NO.19 FRIENDS COLONY NEW DELHI FOR THE CONSTRUCTION OF RESIDENTIAL UNIT ON THE SAID PL OT AND ALSO ON PLOT NO.2 AMRITA SHERGIL MARG NEW DELHI. THE SAID LOAN WAS SUBSEQUENTLY INCREASED TO ` 30 CRORES IN NOV. 2003 AND THEREAFTER TO 31 CRORES IN JUNE 2003 ON THE REQUEST MADE BY TH E ASSESSEE. THE A.O. BASED ON THE INQUIRIES MADE OBSERVED THAT THE LOANS WERE OBTAINED FOR THE CONSTRUCTION OF RESIDENTIAL PROPER TY AGAINST THE PERSONAL SECURITY OFFERED BY SHRI S S BHARATIA H S BHARATIA AND KAVITA BHARATIA WHO ENJOYED CONTROL OVER THE AFFAIR S OF THE ASSESSEE I.T.A. NO.2561 2194 3937 /DEL/2009 5/11 COMPANY INCLUDING OTHER GROUP COMPANIES. THE A.O. FURTHER NOTED THAT CONSTRUCTION OF RESIDENTIAL UNITS WAS FOR DIRE CTORS OF THE GROUP COMPANIES FOR WHICH LOAN WAS AVAILED BY THE ASSESSE E. THE PROPER SURETY WERE OFFERED BY BOTH THE DIRECTORS TO HDFC L TD. FOR AVAILING THE LOAN. NO COMMERCIAL ACTIVITY COULD BE CARRIED ON FROM BOTH THE PREMISES UNDER THE RELEVANT BYLAWS OF MCD. MAINTAI NING OFFICES ON THESE PREMISES WAS ONE OF THE DECLARED OBJECTS OF T HE LOAN APPLICATION. THE LOAN APPLICATION ON BEHALF OF THE ASSESSEE WAS SIGNED BY SHRI MUKESH GUPTA WHO WAS DIRECTOR IN JAY TEE PVT. LTD. I.E. THE COMPANY WHICH HAD LEASED OUT ONE OF THE PR OPERTY TO THE ASSESSEE FOR CONSTRUCTION OF RESIDENTIAL UNITS FOR PERSONAL USAGE OF THEIR DIRECTORS. FROM THESE FACTS THE A.O. CAME T O THE CONCLUSION THAT THE LOAN WAS OBTAINED FOR THE CONSTRUCTION OF RESIDENTIAL HOUSES FOR DIRECTORS OF THE GROUP COMPANIES. EVEN THE PERSONS WHO SIGNED THE LOAN APPLICATIONS WERE NOT EMPLOYEES OF THE ASSESSEE COMPANY. THEREFORE IT WAS CLEAR THAT ENTIRE EXERC ISE WAS DONE TO CONSTRUCT THE RESIDENTIAL HOUSES FOR DIRECTORS OF T HE GROUP COMPANIES AT THE COST AND EXPENSES OF THE ASSESSEE. THE A.O. THEREFORE WAS OF THE VIEW THAT THE EXPENDITURE INC URRED BY WAY OF INTEREST WAS NOT FOR THE PURPOSE OF BUSINESS. HE A CCORDINGLY DISALLOWED THE CLAIM OF THE ASSESSEE. 8. BEFORE LD. CIT(A) IT WAS SUBMITTED THAT ADVERSE INFERENCE WAS DRAWN BY THE A.O. SIMPLY ON THE SURMISES AND CO NJECTURES. THE A.O. HAD GROSSLY ERRED IN LIFTING THE CORPORATE VEIL TO DISREGARD THE CORPORATE EXISTENCE OF THE ASSESSEE ON THE GROU ND THAT THE LOAN WAS OBTAINED TO PURCHASE/CONSTRUCT THE PROPERTY FOR THE DIRECTORS OF THE GROUP COMPANIES. IT WAS SUBMITTED THAT THE ASS ESSEE ENTERED INTO LEASE AGREEMENT WITH M/S. JUBILANT ORGANOSIS L TD. (JOL) AND M/S. JUBILANT ENPRO LTD. FOR CONSTRUCTION OF PROPER TY FOR RESIDENTIAL PURPOSES OF PROMOTER DIRECTORS. JOL IS A PUBLIC LI MITED COMPANY AND NOT CLOSELY HELD BY BHARATIAS. IT WAS ALSO SUB MITTED THAT THE ASSESSEE WAS RECEIVING LEASE RENTALS FROM JOL AND J EL IN CONSIDERATION OF THE PROPERTY GIVEN ON LEASE WHICH WOULD FORM PART OF TAXABLE INCOME. IT WOULD BE APPRECIATED THAT FUN DS HAD BEEN I.T.A. NO.2561 2194 3937 /DEL/2009 6/11 ADVANCED BY HDFC TO THE ASSESSEE ON THE STRENGTH/SE CURITY OF CONFIRMATION FORM JOL & JEL TO THE EFFECT THAT THE LEASE RENTALS WOULD BE PAID TO THE ASSESSEE. THEREFORE THERE WA S NO ATTEMPT ON THE PART OF THE ASSESSEE TO EVADE ANY TAX ON ACCOUN T OF IMPUGNED TRANSACTION OF LEASE OF PROPERTIES CONSTRUCTED/PURC HASED THROUGH INTEREST BEARING BORROWED FUNDS. IT WAS THEREFORE SUBMITTED THAT IT WAS NOT PROPER ON THE PART OF THE A.O. TO IGNORE THE DISTINCT LEGAL ENTITY OF THE COMPANY TO TREAT THE TRANSACTION ENTE RED WITH OTHER COMPANY AS A NULLITY MERELY BECAUSE COMPANIES ARE R ELATED IN SOME MANNER. THE INTEREST EXPENDITURE INCURRED BY THE ASSESSEE UNDER THE LOAN AGREEMENT EXECUTED BY THE ASSESSEE I N RESPECT OF AMOUNT DISBURSED BY THE BANK AND UTILIZED FOR THE P URPOSE OF ITS BUSINESS WOULD THEREFORE ALLOWABLE AS DEDUCTION U/S 36(1)(III) OF THE ACT. IT WAS ALSO SUBMITTED THAT DENIAL OF DEDUCTIO N OF INTEREST EXPENDITURE BY THE A.O. ON THE GROUND THAT BUSINESS WAS NOT SET UP DURING THE YEAR WAS NOT JUSTIFIED. 9. LD. CIT(A) EXAMINED THE CONTENTION OF THE ASSESS EE. HE NOTED THAT THE TRANSACTIONS WERE BETWEEN THE RELATE D COMPANIES. THE SEQUENCE OF EVENTS UNDISPUTEDLY PROVE THAT THE LOAN WAS TAKEN ONLY TO CONSTRUCT HOUSE PROPERTY FOR RESIDENTIAL PU RPOSES OF THE DIRECTORS AND THEREFORE THE OBSERVATION BY THE A.O . MADE IN THE ASSESSMENT ORDER WAS JUSTIFIED. HE UPHELD THE STAN D OF THE A.O. THAT THE BUSINESS OF THE ASSESSEE HAD NOT COMMENCED THE EXPENDITURE WAS NOT ALLOWABLE AS BUSINESS INCOME. 10. BEFORE LD. CIT(A) IT WAS ALSO SUBMITTED THAT W .E.F. 01.04.2004 THE LAW HAS BEEN AMENDED AND THE EXPEND ITURE INCURRED IN CONNECTION WITH ACQUISITION OF THE ASSE T TILL THE DATE THE SAME IS PUT TO USE WILL NOT BE ALLOWED AS DEDUCTION . THEREFORE IT WAS SUBMITTED THAT A DIRECTION SHOULD BE ISSUED TO THE A.O. TO CONSIDER THE DEDUCTIBILITY OF SUCH ACCUMULATED INTE REST IN ACCORDANCE WITH THE ACT IN THE YEAR IN WHICH PROPER TIES ARE COMPLETED AND PUT TO USE. LD. CIT(A) REJECTED THE REQUEST OF THE ASSESSEE ON THE GROUND THAT IT WAS PREMATURE TO ADJ UDICATE THE I.T.A. NO.2561 2194 3937 /DEL/2009 7/11 ISSUE AT THIS STAGE AS TO WHETHER THE RENTAL RECEIP T RECEIVABLE ON LEASING OUT OF THE SAID PROPERTY WOULD BE ASSESSABL E UNDER THE HEAD INCOME FROM HOUSE PROPERTY OR PROFITS AND G AINS OF BUSINESS AND PROFESSION. HE ACCORDINGLY UPHELD THE ORDER OF THE A.O. 11. BEFORE US LD. A.R. OF THE ASSESSEE SUBMITTED T HAT IN COMPUTATION OF TOTAL INCOME THE AMOUNT WAS CLAIMED AS BUSINESS EXPENDITURE U/S 36(1)(III). HOWEVER IT WAS SUBMITT ED BY HIM THAT IF THE CLAIM OF THE ASSESSEE IS NOT ALLOWED U/S 36(1)( III) A DIRECTION SHOULD BE GIVEN TO THE A.O. TO ALLOW THE CLAIM AGAI NST THE INCOME OF PROPERTY IN THE YEAR IN WHICH THE PROPERTY IS COMPL ETED AND PUT TO USE. ON THE OTHER HAND LD. CIT (DR) SUBMITTED THA T THE ASSESSEE HAS NOT COMMENCED ITS BUSINESS AND THEREFORE THE C LAIM OF INTEREST IS NOT ALLOWABLE U/S 36(1)(III) OF THE ACT. MOREOV ER THE EXPENDITURE HAS BEEN INCURRED ON CONSTRUCTION OF THE PROPERTY A ND THEREFORE AS PER AMENDED LAW DEDUCTION CANNOT BE ALLOWED. SHE FURTHER SUBMITTED THAT ASSESSEE IS SEEKING ADVANCE RULING O N THE ISSUE AS TO WHETHER THE LEASE RENTALS WILL BE ASSESSABLE AS BUSINESS INCOME OR INCOME FROM HOUSE PROPERTY. IT WOULD DEPEND UPO N THE FACT WHEN THE RETURN OF INCOME WOULD BE FILED. THEREFOR E NO DIRECTION IN THE NATURE OF ADVANCE RULING CAN BE GIVEN BY THE TR IBUNAL. 12. WE HAVE HEARD BOTH THE PARTIES AND HAVE GONE TH ROUGH THE MATERIAL AVAILABLE ON RECORD. FROM THE FACTS STATE D ABOVE IT IS EVIDENT THAT THE ASSESSEE HAS ENTERED INTO AGREEMEN T TO CONSTRUCT BUILDING FOR THE RESIDENTIAL PURPOSES FOR THE DIREC TORS OF THE GROUP COMPANIES. THE A.O. HAD GIVEN A FINDING THAT ASSES SEE HAD NOT COMMENCED ITS BUSINESS. THE EXPENDITURE BY WAY OF INTEREST CLAIMED IN COMPUTATION OF INCOME CANNOT BE ALLOWED AS DEDUCTION U/S 36(1)(III) AS THE BUSINESS HAS NOT COMMENCED. AS REGARDS THE REQUEST OF THE ASSESSEE THAT DIRECTION SHOULD BE IS SUED TO ALLOW THE DEDUCTION OF ACCUMULATED INTEREST IN THE YEAR IN WH ICH PROPERTY IS PUT TO USE. WE ARE IN AGREEMENT WITH THE ARGUMENTS OF LD. CIT DR THAT IT IS PREMATURE TO GIVE SUCH DIRECTION WHEN IT IS NOT KNOWN I.T.A. NO.2561 2194 3937 /DEL/2009 8/11 WHETHER THE INCOME FROM THE PROPERTY WILL BE ASSESS ABLE AS INCOME FROM HOUSE PROPERTY OR AS BUSINESS INCOME. WE THE REFORE DECLINE TO AGREE WITH THE REQUEST OF THE ASSESSEE TO ISSUE SUCH DIRECTION. ACCORDINGLY WE DO NOT FIND ANY INFIRMITY IN THE OR DER PASSED BY THE LD. CIT(A) IN RESPECT OF INTEREST CLAIMED BY THE AS SESSEE WHILE COMPUTING THE TOTAL INCOME IN RESPECT OF BOTH THE Y EARS. 13. THE NEXT ISSUE FOR CONSIDERATION IN THE ASSESSE ES APPEAL FOR THE ASSESSMENT YEAR 2005-06 RELATES TO CONFIRMATION OF ADDITION OF ` 1 72 13 142/- U/S 40(A)(IA) OF THE ACT. THE FACT S OF THE CASE RELATING TO THIS GROUND ARE THAT THE ASSESSEE ENTER ED INTO WORK CONTRACT WITH AHLUWALIA CONTRACTORS INDIA LTD. FOR THE CONSTRUCTION OF ITS RESIDENTIAL PREMISES AT AMRITA SHERGIL MARG AND ALSO AT NEW FRIENDS COLONY NEW DELHI. IN PURSUANCE TO THESE C ONTRACTS THE ASSESSEE RECEIVED TWO BILLS FORM THE CONTRACTORS FO R ` 73 09 292/- DATED 23.02.2005 AND ` 99 04 120/- DATED 30.03.2005 . THE A.O. NOTED THAT AS PER THE PROVISIONS OF SECTION 194C T HE ASSESSEE WAS LIABLE TO DEDUCTION OF INCOME TAX AT SOURCE FROM TH ESE PAYMENTS. SINCE NO DEDUCTION OF TAX AT SOURCE WAS MADE THE A .O. DISALLOWED THE AMOUNT U/S 40(A)(IA) OF THE ACT. 14. BEFORE LD. CIT(A) IT WAS SUBMITTED THAT LIABIL ITY ON ACCOUNT OF BILLS FROM AHLUWALIA CONTRACTORS PVT. LTD. WAS NOT RECOGNIZED NOR ANY CREDIT WAS MADE IN ITS BOOKS AND THEREFORE TH ERE WAS NO OBLIGATION ON THE PART OF THE ASSESSEE TO DEDUCT TA X AT SOURCE U/S 194C OF THE ACT. HENCE NO DISALLOWANCE CAN BE MADE . LD. CIT(A) AFTER GOING THROUGH THE WRITTEN SUBMISSIONS AND COP Y OF CERTIFICATION LETTER DATED 15.07.2005 ISSUED BY NOZ ERWADIA ASSOCIATES OBSERVED THAT CONTENTION OF THE ASSESSEE THAT NO ENTRY WAS PASSED WITH REGARD TO THE BILLS WAS NOT RELEVAN T AS IT IS A SETTLED LAW THAT ENTRIES IN THE BOOKS OF ACCOUNTS A RE NOT RELEVANT. THE ASSESSEE ON THE ONE HAND WITH REGARD TO INTERES T EXPENDITURE HAD CLAIMED DEDUCTION WITHOUT MAKING ENTRY IN THE P & L ACCOUNT BUT WHEN ISSUE COMES UP FOR MAKING TDS U/S 194C TH E ASSESSEE I.T.A. NO.2561 2194 3937 /DEL/2009 9/11 HAD TAKEN A DIFFERENT STAND. THEREFORE THE A.O. H AD RIGHTLY INVOKED THE PROVISIONS OF SECTION 40(A)(IA) AND HAD MADE DI SALLOWANCE CORRECTLY. 15. BEFORE US LD. A.R. OF THE ASSESSEE SUBMITTED T HAT BILLS SUBMITTED BY THE CONTRACTOR WERE NOT CERTIFIED BY T HE ACCOUNTANT UP TO 31.03.2005. THE ASSESSEE HAD NEITHER CREDITED T HE ACCOUNTS OF THE CONTRACTOR NOR PAID ANY AMOUNT. THE ASSESSEE H AD NOT CLAIMED ANY DEDUCTION AND THEREFORE PROVISIONS OF SECTION 40(A)(IA) ARE NOT APPLICABLE. ON THE OTHER HAND LD. SR. DR SUPPORTE D THE ORDER OF LD. CIT(A). 16. WE HAVE HEARD BOTH THE PARTIES AND HAVE GONE TH ROUGH THE MATERIAL AVAILABLE ON RECORD. THERE IS NO DISPUTE ABOUT THE FACT THAT ASSESSEE RECEIVED BILLS FORM THE CONTRACTOR BU T THE SAME HAD NOT BEEN CLAIMED AS DEDUCTION IN THE PROFIT & LOSS ACCOUNT. U/S 40(A)(IA) IN CASE OF ANY ASSESSEE ANY INTEREST CO MMISSION OR BROKERAGE RENT ROYALTY FEE FOR PROFESSIONAL SERV ICES OR FEE FOR TECHNICAL SERVICES PAYABLE TO RESIDENT THE AMOUNT PAYABLE TO A CONTRACTOR OR SUB-CONTRACTOR BEING RESIDENT FOR CAR RYING OUT ANY WORK INCLUDING SUPPLY OF LABOUR FOR CARRYING OUT AN Y WORK ON WHICH TAX IS DEDUCTIBLE AT SOURCE AND SUCH TAX HAS NOT BE EN DEDUCTED OR AFTER DEDUCTION HAS NOT BEEN PAID ON OR BEFORE THE DUE DATE SPECIFIED U/S 139(1) SHALL NOT BE ALLOWED AS DEDUC TION IN COMPUTATION OF INCOME CHARGEABLE UNDER THE HEAD PR OFITS & GAINS OF BUSINESS & PROFESSION. IN THE INSTANT CASE TH E ASSESSEE HAD NOT CLAIMED DEDUCTION IN RESPECT OF AMOUNT OF BILLS SUB MITTED BY THE CONTRACTOR NOR ANY CREDIT HAS BEEN ALLOWED TO THE C ONTRACTOR. THEREFORE IN THE ABSENCE OF ANY CLAIM MADE FOR DEDU CTION PROVISIONS OF SECTION 40(A)(IA) CANNOT BE INVOKED. ACCORDINGLY IN OUR CONSIDERED OPINION LD. CIT(A) IS NOT JUSTIFIED IN UPHOLDING THE DISALLOWANCE MADE BY THE A.O. WE THEREFORE DIRECT THE A.O. TO DELETE THE ADDITION OF ` 1 72 30 142/- MADE U/S 40( A)(IA) OF THE ACT. I.T.A. NO.2561 2194 3937 /DEL/2009 10/11 IN THE RESULT APPEAL FILED BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2005-06 IS PARTLY ALLOWED. 17. NOW COMING TO THE SECOND ISSUE IN THE APPEAL F ILED BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2006-07 WHICH REL ATES TO CONFIRMATION OF ADDITION ON ACCOUNT OF INTEREST INC OME OF ` 38 640/- EARNED ON FDRS TREATING THE SAME AS INCOME FROM OTH ER SOURCES. THE A.O. WHILE COMPLETING THE ASSESSMENT U/S 143(3) CAME TO THE CONCLUSION THAT THE ASSESSEE HAD EARNED INCOME FROM FIXED DEPOSITS AND THEREFORE THE INCOME DECLARED BY THE ASSESSEE AT ` 38 640/- WAS ASSESSABLE UNDER THE HEAD INCOME FROM OTHER SOURCES. BEFORE LD. CIT(A) IT WAS SUBMITTED THA T THE A.O. HAD TREATED THE INTEREST INCOME OF ` 38 640/- RECEIVED ON FDR AS INCOME FROM OTHER SOURCES. LD. CIT(A) CONSIDERING VARIOUS DECISIONS HELD THAT THE ASSESSEE HAD DEPLOYED THE FUNDS NOT IMMEDIATELY REQUIRED FOR CONSTRUCTION ACTIVITIES I N FIXED DEPOSITS IN THE BANK AND EARNED INTEREST OF ` 38 640/- AND THE IMMEDIATE SOURCE OF INTEREST INCOME IS FD. HE PLACED RELIANC E ON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF CIT VS DR. V P GOPINATHAN 248 ITR 449 WHEREIN IT HAD BEEN HELD THAT INTEREST EARNED ON FIXED DEPOSITS WOULD NOT BE TAXED UNDER THE HEAD INCOME FROM OTHER SOURCES. HER ACCORDINGLY UPHELD THE STAND OF THE A.O. 18. BEFORE US LD. A.R. SUBMITTED THAT THE ASSESSEE HAD CLAIMED THE INTEREST INCOME ON FDR AS BUSINESS INCOME. ON THE OTHER HAND LD. CIT DR SUPPORTED THE ORDER OF LD. CIT(A). 19. WE HAVE HEARD BOTH THE PARTIES AND HAVE GONE TH ROUGH THE MATERIAL AVAILABLE ON RECORD. FROM THE FACTS STATE D ABOVE IT IS EVIDENT THAT THE ASSESSEE HAD TEMPORARILY DEPLOYED THE FUNDS NOT IMMEDIATELY REQUIRED FOR CONSTRUCTION ACTIVITIES IN THE FIXED DEPOSITS WITH THE BANK. THE IMMEDIATE SOURCE OF IN TEREST INCOME IS THE FIXED DEPOSITS. BEFORE US LD. A.R. COULD NOT P RODUCE ANY EVIDENCE TO SUPPORT HIS STAND THAT INTEREST EARNED ON FDR WAS IN THE NATURE OF BUSINESS INCOME. ACCORDINGLY IN OUR CONSIDERED I.T.A. NO.2561 2194 3937 /DEL/2009 11/11 OPINION THE INTEREST INCOME FROM FDR IS TO BE ASSE SSED UNDER THE HEAD INCOME FROM OTHER SOURCES. ACCORDINGLY WE DO NOT FIND ANY INFIRMITY IN THE ORDER PASSED BY LD. CIT(A) CONFIRM ING THE STAND OF THE A.O. 20. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2006-07 IS DISMISSED. 21. TO SUM UP THE REVENUES APPEAL FOR THE ASSESSM ENT YEAR 2005-06 AND ASSESSEES APPEAL FOR THE ASSESSMENT YE AR 2006-07 ARE DISMISSED AND THE ASSESSEES APPEALS FOR THE AS SESSMENT YEAR 2005-06 IS PARTLY ALLOWED. 22. THIS DECISION WAS PRONOUNCED IN THE OPEN COURT ON 7 TH JAN. 2011. SD./- SD./- ( A. D. JAIN) (K. D. RANJAN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 7 TH JAN. 2011 SP. COPY FORWARDED TO 1. APPELLANT 2. RESPONDENT 3. CIT TRUE COPY: BY ORDER 4. CIT(A) 5. DR DY. REGISTRAR ITAT NEW DELHI