Sri Ganni Bhaskara Rao., Rajahmundry v. The ACIT, Circle-1,, Rajahmundry

ITA 25/VIZ/2007 | 2003-2004
Pronouncement Date: 06-01-2010 | Result: Dismissed

Appeal Details

RSA Number 2525314 RSA 2007
Assessee PAN ABQPG1229E
Bench Visakhapatnam
Appeal Number ITA 25/VIZ/2007
Duration Of Justice 2 year(s) 11 month(s) 7 day(s)
Appellant Sri Ganni Bhaskara Rao., Rajahmundry
Respondent The ACIT, Circle-1,, Rajahmundry
Appeal Type Income Tax Appeal
Pronouncement Date 06-01-2010
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted DB
Tribunal Order Date 06-01-2010
Assessment Year 2003-2004
Appeal Filed On 29-01-2007
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV JUDICIAL MEMBER AND SHRI BR BASKARAN ACCOUNTANT MEMBER ITA NO.25/VIZAG/2007 ASSESSMENT YEAR : 2003-04 DR. GANNI BHASKARA RAO RAJAHMUNDRY ACIT CIRCLE-1 RAJAHMUNDRY (APPELLANT) VS. (RESPONDENT) PAN NO.ABQPG 1229E APPELLANT BY: SHRI C. SUBRAHMANYAM CA RESPONDENT BY: SHRI G.S.S. GOPINATH DR ORDER PER SHRI S.K. YADAV JUDICIAL MEMBER:- THE APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 21.11.2006 PASSED BY LD. CIT(A) RAJAHMUNDRY AND IT RELATES TO THE ASSESSMENT YEAR 2003-04. 2. THE ASSESSEE IS IN APPEAL BEFORE US ASSAILING TH E DECISION OF LD. CIT(A) IN NOT GRANTING RELIEF IN RESPECT OF THE FOLLOWING TWO ADDITIONS. A) INTEREST ON BORROWINGS - RS.5 0 5 644/- B) AGRICULTURAL INCOME TREATED AS NON-AGRICULTURAL INCOME RS.59 550/- 3. THE FACTS OF THE CASE ARE STATED IN BRIEF. THE ASSESSEE IS A MEDICAL PRACTITIONER AND FILED HIS RETURN OF INCOME FOR ASS ESSMENT YEAR 2003-04 DISCLOSING A TOTAL INCOME OF RS.26 630/- AND AGRICU LTURAL INCOME OF RS.5 25 540/-. DURING THE SCRUTINY PROCEEDINGS TH E A.O. NOTICED THAT THE ASSESSEE HAS CLAIMED FOLLOWING INTEREST PAYMENTS AS EXPENDITURE. INTEREST PAID TO UCO BANK - RS.3 59 317/- INTEREST PAID TO MR. Y. RAJA RAO - RS.1 46 327/- TOTAL: - RS.5 05 644/- 2 THE ASSESSEE HAD BORROWED A SUM OF ABOUT RS.20 LAKH S FROM UCO BANK AND UTILIZED THE SUM TO INVEST IN A CHARITABLE SOCIETY NAMED M/S. G.S.L. EDUCATIONAL SOCIETY WHICH WAS FOUNDED BY THE ASSES SEE. IT WAS STATED THAT THE AMOUNT SO GIVEN BY THE ASSESSEE WAS UTILIZED BY THAT EDUCATIONAL SOCIETY TO ACQUIRE FIXED ASSETS FOR SETTING UP A MEDICAL CO LLEGE AND HOSPITAL. SINCE THE LOAN TAKEN FROM UCO BANK WAS GIVEN AS ADVANCE T O THE SOCIETY THE A.O. FELT THAT THE INTEREST EXPENDITURE CLAIMED BY THE A SSESSEE DOES NOT HAVE ANY NEXUS WITH THE MEDICAL PROFESSION CARRIED ON BY HIM AND ACCORDINGLY DISALLOWED THE SAME. WITH REGARD TO THE INTEREST O F RS.1 46 327/- PAID TO MR. Y. RAJA RAO THE ASSESSEE COULD NOT FURNISH THE DET AILS CALLED FOR BY THE ASSESSING OFFICER. ACCORDINGLY THE SAME WAS ALSO ADDED TO THE TOTAL INCOME. 3.1 THE ASSESSEE CLAIMED TO HAVE LEASED OUT AGR ICULTURAL LANDS AND RECEIVED AGRICULTURAL INCOME. IN THIS CONNECTION THE ASSESSING OFFICER ISSUED SUMMONS TO SOME OF THE LESSEES WHO WERE ALLEGED TO HAVE CARRIED OUT THE AGRICULTURAL OPERATIONS ON BEHALF OF THE ASSESSEE. IN RESPECT OF LEASE RENT CLAIMED TO HAVE BEEN RECEIVED FROM SHRI R. JANARDHA NA RAO RS.3 550/- AND G. SADIKA RS.10 000/- THE ASSESSEE COULD NOT FURNI SH ANY DETAILS. FURTHER IT WAS NOTICED THAT A SUM OF RS.46 000/- HAS BEEN RECE IVED FROM THE LAND UTILIZED AS FISH PONDS. IN VIEW OF THE ABOVE THE ASSESSING OFFICER TREATED THE SUM OF RS.59 550/- AS NON-AGRICULTURAL INCOME AND A DDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. THE ASSESSEE COULD N OT SUCCEED ON THE ABOVE SAID ISSUES IN THE APPEAL FILED BEFORE LD. CIT(A). HENCE THE ASSESSEE IS IN APPEAL BEFORE US. 4. WE HAVE HEARD THE PARTIES AND CAREFULLY PERUSED THE RECORD. WITH REGARD TO THE INTEREST CLAIMED THE LD. A.R. SUBMIT TED THAT BY DEVELOPING THE EDUCATIONAL SOCIETY THE ASSESSEE COULD DEVELOP HIS CONTACTS AND THUS ENHANCE HIS INDIVIDUAL ABILITY IN TREATING THE PATIENTS AND ALSO HIS PROFESSION. ACCORDINGLY LD AR CONTENDED THAT THERE IS A NEXUS B ETWEEN THE IMPUGNED INTEREST PAYMENT AND HIS MEDICAL PROFESSION. THE L D. A.R. IN THIS CONNECTION PLACED HIS RELIANCE ON THE DECISION OF HON'BLE SUPR EME COURT IN THE CASE OF S.A. BUILDERS LIMITED VS. CIT REPORTED IN 288 ITR 1 . ON THE OTHER HAND LD DR CONTENDED THAT THERE IS NO NEXUS BETWEEN THE IMP UGNED INTEREST PAYMENT 3 AND THE MEDICAL PROFESSIONAL ACTIVITY CARRIED ON BY THE ASSESSEE. FURTHER LD DR CONTENDED THAT THE INTEREST IS NOT ALLOWABLE FOR THE REASON THAT THE SAID LOAN WAS NOT UTILIZED BY THE ASSESSEE FOR HIS MEDIC AL PROFESSION. THUS THE UNDISPUTED FACT IS THAT THE LOAN OBTAINED FROM UCO BANK WAS NOT UTILIZED FOR THE PURPOSE OF THE MEDICAL PROFESSION CARRIED ON BY THE ASSESSEE. HENCE THE QUESTION THAT ARISES FOR CONSIDERATION IS WHETHER THERE IS ANY COMMERCIAL EXPEDIENCY IN MAKING INTEREST FREE LOAN TO THE EDUC ATIONAL TRUST CREATED BY THE ASSESSEE?. FROM THE FACTS OF THE CASE WE UNDE RSTAND THAT THE VERY PURPOSE OF AVAILING LOAN FROM UCO BANK WAS TO ADVAN CE THE LOAN PROCEEDS TO THE EDUCATIONAL SOCIETY. THUS THE ULTIMATE PURPOSE IS ONLY TO ACQUIRE FIXED ASSETS FOR THE PURPOSE OF EDUCATIONAL TRUST. WE AR E UNABLE TO APPRECIATE THE STORY OF CREATING A CIRCUITOUS AND VERY THIN WAY OF ESTABLISHING THE COMMERCIAL EXPEDIENCY. IN THIS CONNECTION THE FOLLOWING OBSE RVATIONS OF LD. CIT(A) ARE MORE RELEVANT: IN THIS VIEW OF THE MATTER THE ONE AND ONLY INTE NTION THAT IS APPARENT IS THAT THE APPELLANT HAS IN A SYSTEMATIC AND CALCULATED MANNER DIVERTED HIS BORROWED FUNDS FOR USE BY A TH IRD PARTY WITHOUT ANY CONSIDERATION AND BY DOING SO HE HAS ILLEGITIMATELY AND MALAFIDELY CLAIMED INTEREST EXPENDITURE ON LOAN WHICH HAS NOT BEEN UTILIZED IN HIS OWN MEDICAL PROFESSION. CONSE QUENTLY THE APPELLANT HAS REDUCED HIS TAXABLE INCOME AND ALSO U NDERPAID THE TAXES THAT HE OUGHT TO HAVE PAID FULLY TO THE EXCHE QUER. AS CORRECTLY OBSERVED BY THE ASSESSING OFFICER THERE IS NO NEXUS WHATSOEVER BETWEEN THE INTEREST EXPENDITURE AND HIS PROFESSION AS A MEDICAL PRACTITIONER ON ACCOUNT OF THE FACT THAT THE LOAN HAS BEEN UTILIZED BY SOME THIRD PARTY AND HENCE SUCH INTER EST EXPENDITURE HAS BEEN RIGHTLY DISALLOWED. IN THE CASE OF S.A. BUILDERS SUPRA THE HON'BLE AP EX COURT HAS GIVEN IMPORTANCE TO THE FACT OF COMMERCIAL EXPEDIENCY. SINCE THERE IS NO NEXUS BETWEEN THE INTEREST EXPENDITURE AND MEDICAL PROFES SION CARRIED ON BY THE ASSESSEE IN VIEW OF DIVERSION OF LOAN TO THE EDUCAT IONAL TRUST WE DO NOT FIND ANY INFIRMITY IN THE DECISION OF LD. CIT(A) IN CONF IRMING THE DISALLOWANCE OF INTEREST PAID TO UCO BANK. WITH REGARD TO THE INTE REST EXPENDITURE OF RS.1 46 327/- PAID TO MR. Y. RAJA RAO IT IS UNDIS PUTED FACT THAT THE ASSESSEE COULD NOT FURNISH THE DETAILS CALLED FOR BY THE AO. THE PROPOSITION IS WELL SETTLED THAT IT IS THE RESPONSIBILITY OF THE ASSESS EE TO PROVE THE EXPENDITURE CLAIMED BY HIM. SINCE THE ASSESSEE HAS FAILED TO S UBSTANTIATE HIS CLAIM FOR THE INTEREST CLAIM OF RS.1 46 327/- THE TAX AUTHOR ITIES DID NOT HAVE ANY OTHER 4 OPTION BUT TO DISALLOW THE SAID CLAIM. HENCE WE UPHOLD THE DECISION OF LD. CIT(A) IN DISALLOWING THE SAME. 5. NEXT ISSUE RELATES TO THE ADDITION OF PART O F AGRICULTURAL INCOME AS NON- AGRICULTURAL INCOME. AS PER SECTION 2(1A) OF THE A CT ANY RENT OR REVENUE DERIVED FROM LAND WHICH IS SITUATED IN INDIA AND IS USED FOR AGRICULTURAL PURPOSES IS TREATED AS AGRICULTURAL INCOME. I.E. T HE RENT SHOULD BE DERIVED FROM LAND WHICH IS USED FOR AGRICULTURAL PURPOSES. HENCE THE USAGE OF LAND FOR AGRICULTURAL PURPOSES IS THE PRIMARY CONDI TION IN ORDER TO CLAIM THE LEASE RENT AS AGRICULTURAL INCOME. IN THE INSTANT CASE THERE IS NO DISPUTE WITH REGARD TO THE FACT THAT A SUM OF RS.46 000/- HAS BE EN RECEIVED IN RESPECT OF LAND WHICH IS USED AS FISH PONDS. LD. A.R. CONTEND ED THAT THE ASSESSEE INTENDED THAT THE SAID LAND SHOULD BE USED BY THE L ESSEE FOR AGRICULTURAL PURPOSES ONLY BUT THE LESSEE OF THE LAND HAS UTILI ZED THE SAME AS FISH POND AGAINST THE INTENTION OF THE ASSESSEE. AS STATED E ARLIER USAGE OF LAND FOR AGRICULTURAL PURPOSES IS THE PRIMARY CONDITION AND HENCE THE INTENTION IS NOT RELEVANT U/S (2)(1A) OF THE ACT. HENE THE DECISIO N OF HON'BLE MADRAS HIGH COURT IN THE CASE OF M.S. SRINIVASA NAICKER VS. ITO REPORTED IN 292 ITR 481 ON WHICH THE A.R. PLACED HIS RELIANCE DOES NOT APP LY TO THE FACTS OF THE CASE. WITH RESPECT TO THE OTHER TWO RECEIPTS OF RS.3 550/ - AND RS.10 000/- THE ASSESSEE HAS FAILED TO PROVIDE ELEMENTARY INFORMATI ON AND DOCUMENTARY CONFIRMATIONS CALLED FOR BY THE ASSESSING OFFICER T O PROVE THAT THEY FALL WITHIN THE DEFINITION OF AGRICULTURAL INCOME. IN THESE CI RCUMSTANCES THE LD. CIT(A) HAS RIGHTLY CONFIRMED THE ADDITION OF RS.59 550/- A S NON-AGRICULTURAL INCOME AND ACCORDINGLY WE UPHOLD THE SAME. 8. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 6.1.2010 SD/- SD/- (BR BASKARAN) (SUNIL KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER VG/SPS VISAKHAPATNAM DATED 6 TH JANUARY 2010 5 COPY TO 1 SHRI GANNI BHASKARA RAO D.NO.19-5-21/6 NEAR KAM BALA TANK RAJAHMUNDRY 2 THE ACIT CIRCLE-1 RAJAHMUNDRY 3 THE CIT RAJAHMUNDRY 4 THE CIT(A) RAJAHMUNDRY 5 THE DR ITAT VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM