HADDOCK PROPERITES P.LTD, MUMBAI v. DCIT 9(2), MUMBAI

ITA 3714/MUM/2010 | 2006-2007
Pronouncement Date: 07-09-2011 | Result: Partly Allowed

Appeal Details

RSA Number 371419914 RSA 2010
Assessee PAN AABCH5040D
Bench Mumbai
Appeal Number ITA 3714/MUM/2010
Duration Of Justice 1 year(s) 3 month(s) 27 day(s)
Appellant HADDOCK PROPERITES P.LTD, MUMBAI
Respondent DCIT 9(2), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 07-09-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted H
Tribunal Order Date 07-09-2011
Date Of Final Hearing 20-07-2011
Next Hearing Date 20-07-2011
Assessment Year 2006-2007
Appeal Filed On 10-05-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH MUMBAI BEFORE SHRI P.M. JAGTAP (AM) AND SHRI VIJAY PAL RA O (JM) ITA NOS. 3714/M/2010 ASSESSMENT YEAR:2006-2007 M/S HADDOCK PROPERTIES PVT. LTD. HDFC HOUSE CTS 154 & 155 OSHIWARA DISTRICT CENTRE GARDEN ROAD GORGAON ROAD MUMBAI 400 014. PAN: AABCH5040D THE DEPUTY COMMISSIONER OF INCOME TAX 9(2) AAYAKAR BHAVAN MUMBAI 400 020. (APPELLANT) (RESPONDENT) ITA NOS.4525/M/2010 ASSESSMENT YEAR: 2006-2007 THE DEPUTY COMMISSIONER OF INCOME TAS 9(2) AAYAKAR BHAVAN M.K. ROAD MUMBAI 400 020 M/S HADDOCK PROPERTIES PVT. LTD. HDFC HOUSE CTS 154 & 155 OSHIWARA DISTRICT CENTRE GARDEN ROAD GORGAON ROAD MUMBAI 400 014. PAN: AABCH5040D (APPELLANT) (RESPONDENT) ASSESSEE BY: REVENUE BY: SHRI NITESH JOSHI SHRI GOLI S. RAO DATE OF HEARING: DATE OF PRONOUNCEMENT: 21-07-2011 07-09-2011 O R D E R PER VIJAY PAL RAO (JM): THESE CROSS APPEALS ARE DIRECTED AGAINST THE ORDER DATED 22.03.2010 OF CIT (A) FOR THE ASSESSMENT YEAR 2006-07. ITA NOS: 3714 & 4525 M/S HADDOCK PROPERTIES P. LTD. 2 2. THE ASSESSEE HAS RAISED THE FOLLOWING EFFECTIVE GROUNDS IN THIS APPEAL. 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN UPHOLDING THE ACTION OF THE DEPUTY COMMISSIONER OF INCOME TAX (HEREINAFTER REFERRED AS THE ASSESSING OFFICER ) IN DISALLOWING LOAN PROCESSING CHARGES AMOUNTING TO RS . 70 00 000/- PAID TO HDFC PROPERTY FUND IN COMPUTING THE INCOME OF THE APPELLANT UNDER THE HEAD INCOME FROM HOUSE PROPERTY ON THE GROUND THAT SUCH PROCESSING CHARG ES CANNOT BE TREATED AS INTEREST UNDER SECTION 2(28A ) OF THE INCOME TAX ACT 1961 AND CONSEQUENTLY THE SAME CAN NOT BE ALLOWED AS DEDUCTION UNDER SECTION 24(B) OF THE ACT . 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ER RED IN UPHOLDING THE ACTION OF THE ASSESSING OFFICER IN NO T GRANTING CLAIM OF DEDUCTION IN RESPECT OF PROPERTY TAX AMOUN TING TO RS. 17 05 911/- (OUT OF TOTAL PROPERTY TAX AMOUNTIN G TO RS. 43 62 235/- CLAIM FOR RS. 26 56 324/- IS WITHDRAWN ) WHILE COMPUTING INCOME FROM HOUSE PROPERTY. 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN UPHOLDING THE ACTION OF THE ASSESSING OFFICER IN NO T CONSIDERING THE LOSS UNDER THE HEAD PROFIT OR GAIN S OF BUSINESS OR PROFESSION AND CONSEQUENTLY NOT ADJUST ING BUSINESS LOSS AMOUNTING TO RS. 4 48 453/- WHILE DET ERMINING THE TAXABLE INCOME OF THE APPELLANT. THE REVENUE HAS RAISED THE GROUND AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LD. CIT (A) ERRED IN RESTRICTING THE DISALLOWAN CE TO RS. 70 00 000/- AS AGAINST RS. 4 21 92 011/- U/S 24(B) OF THE INCOME TAX ACT 1961 AND NOT CONSIDERING THE VARIOU S SECTIONS INVOKED BY THE ASSESSING OFFICER THOUGH TH E ASSESSING OFFICER HAS CONCLUSIVELY PROVED THAT THE ASSESSEE HAS VIOLATED SEBI REGULATIONS AND MADE THE EXCESS I NTEREST PAYMENT TO REDUCE ITS TAX LIABILITY. 3. GROUND NO.1 OF ASSESSEES AS WELL AS THE REVENUE S APPEAL IS REGARDING INTEREST AND DEBENTURE ISSUE CHARGES / LOAN PROCESS ING CHARGES. THE ASSESSEE PURCHASED THE PROPERTIES IN QUESTION FROM HDFC LTD. FOR RS. 93 06 38 169/-. THE ASSESSEE TOOK LOAN OF RS. 76 96 64 271/- FROM HDFC LTD. TO PURCHASE THESE ITA NOS: 3714 & 4525 M/S HADDOCK PROPERTIES P. LTD. 3 PROPERTIES. SUBSEQUENTLY THE ASSESSEE ISSUED 8781 VARIABLE % SECURED REDEEMABLE OPTIONALLY CONVERTIBLE DEBENTURES OF RS. 1 00 000/- EACH TO HDFC PROPERTY FUND AND RECEIVED A TOTAL SUM OF RS. 87 81 00 000/-. THE ASSESSEE THEN REPAID THE LOAN OF HDFC LTD. ALONG WITH INTEREST OF RS. 2 89 83 177/-. THE ASSESSEE ALSO PAID INTEREST OF RS. 3 29 51 313/- ON DEBENTURES ISSUED TO HDFC PROPERTY FUND. APART FROM INTEREST THE ASSESSEE AL SO PAID RS. 70 00 000/- AS PROCESSING FEE TO HDFC PROPERTIES FUND IN CONNECTIO N WITH ISSUE OF DEBENTURES. THE ASSESSEE CLAIMED DEDUCTION U/S 24(B) FOR AGGREG ATE SUM OF RS. 6 89 34 490/-. THE ASSESSEE ALSO CLAIMED STATUTORY DEDUCTION U/S 2 4(A) OF THE INCOME TAX ACT 1961 FOR RS. 2 17 55 072/-. THE ASSESSEE ACCORDING LY COMPUTED THE INCOME FROM HOUSE PROPERTY AT LOSS OF RS. 1 81 72 657/-. THE AS SESSING OFFICER OBSERVED THAT THE HDFC PROPERTY FUND HAVING 100% STAKE IN THE ASS ESSEE COMPANY HAS VIOLATED REGULATIONS AS PER THE SEBI (VENTURE CAPITAL FUNDS) REGULATIONS 1996 BY INVESTING IN / PURCHASING THE PROPERTIES HELD BY HD FC LTD. WHICH HAS SPONSORED THE HDFC PROPERTY FUND. THE ASSESSING OFFICER REFE RRED SECTIONS 10(23 D) 10(23 F) 10(23FB) 92 92C AND 40A(2) AND HELD THAT THE PUBLIC FUNDS WERE DIRECTLY / INDIRECTLY INVESTED IN THE ASSOCIATE CONCERNS IN V IOLATION OF SEBI REGULATIONS AND MAKING INVESTMENT BY PAYING EXCESS CONSIDERATION OV ER THE MARKET VALUE OF THE PROPERTY. THE ASSESSING OFFICER THEREFORE WORKED OUT EXCESS INTEREST PAYABLE ON THE LOANS INCLUDING DEBENTURES AND DISALLOWED A SUM OF RS. 4 21 92 011/- OUT OF RS. 6 89 34 490/- CLAIMED BY THE ASSESSEE AS DEDUCT ION OF INTEREST U/S 24(B). ON APPEAL THE LEARNED CIT (A) ALLOWED THE INTEREST OF THE ASSESSEE U/S 24(B). HOWEVER HE CONFIRMED THE DISALLOWANCE OF RS. 70 00 000/- TOWARDS PROCESSING CHARGES. THE LEARNED CIT (A) HELD THAT THE PROCESS ING CHARGES PAID IN CONNECTION WITH ISSUE OF DEBENTURES DOES NOT FALL UNDER THE DE FINITION U/S 2(28A) OF THE INCOME TAX ACT. APART FROM THIS THE LEARNED CIT (A ) WAS ALSO OF THE VIEW THAT ITA NOS: 3714 & 4525 M/S HADDOCK PROPERTIES P. LTD. 4 WHEN THE DEBENTURE SUBSCRIPTION AGREEMENT IS SILENT ON PROCESSING CHARGES THEN IN THE ABSENCE OF ANY MATERIAL TO SHOW THAT THE ASSESS EE UNDER ANY OBLIGATION OR LIABILITY TO PAY SUCH PROCESSING CHARGES THE ASSES SEE HAD NO LIABILITY TO PAY SUCH INTEREST / CHARGES. THUS THE ASSESSEE AS WELL AS REVENUE CHALLENGED THE ORDER OF THE LEARNED CIT (A) BEFORE US. THE ASSESSEE IS AGG RIEVED BY THE DISALLOWANCE OF RS. 70 00 000/- PAID TO AS PROCESSING CHARGES OF DE BENTURE ISSUE WHEREAS THE REVENUE HAS CHALLENGED THE RELIEF GRANTED BY THE LE ARNED CIT (A) BY ALLOWING THE CLAIM OF INTEREST OF RS. 3 51 92 011/- U/S 24(B) OF INCOME TAX ACT. 4. BEFORE US THE LEARNED AR OF THE ASSESSEE HAS SUB MITTED THAT HDFC PROPERTY FUND WAS ESTABLISHED AS A TRUST UNDER THE INDIAN TR UST ACT 1882. THE TRUST DEED HAS BEEN REGISTERED UNDER THE REGISTRATION ACT 190 8. THE TRUST WAS SUBSEQUENTLY REGISTERED UNDER THE SECURITIES AND EXCHANGE BOARD OF INDIA (SEBI) AS A VENTURE CAPITAL FUND (VCF) REGULATIONS. HE HAS REFERRED T HE COPY OF SEBI APPROVAL. THE LEARNED AR FURTHER POINTED OUT THAT HDFC LTD. SETTL ED THE FUND WHICH WAS SET UP TO FLOAT SCHEMES THAT WOULD RAISE FUNDS FROM VARIOUS I NVESTORS. THUS HDFC LTD. AND THE FUND ARE TWO IDENTITIES. THE HDFC HAS MERELY A CTED AS A SETTLER OF THE FUND AND THEREFORE THERE IS NO CONTROL ON THE AFFAIRS O F THE TRUST (FUND). HE HAS FURTHER SUBMITTED THAT THE ASSESSING OFFICER WITHOU T ANY INVESTIGATION HAS DISALLOWED THE CLAIM OF THE INTEREST BY CONCLUDING THAT THE PURCHASE PRICE OF THE PROPERTIES ARE EXCESSIVE. WHEN THE HDFC LTD. AND F UND ARE TWO INDEPENDENT ENTITIES THERE IS NO QUESTION OF VIOLATION OF ANY SEBI REGULATIONS MOREOVER IF ANY VIOLATION UNDER THE SEBI ACT AND REGULATIONS THE S AME HAS TO BE DEALT WITH BY THE SEBI. THE ASSESSING OFFICER APPLIED THE PROVISION OF SEC. 50C OF THE INCOME TAX ACT FOR DETERMINING THE MARKET PRICE OF THE PROPERT IES IN QUESTION WHEREAS THE ASSESSEE PURCHASED THE PROPERTIES AT THE PREVAILING MARKET PRICE AFTER THE NEGOTIATIONS AND THROUGH DULY REGISTERED TRANSFER D EEDS. THE PRICE WAS AT ARMS ITA NOS: 3714 & 4525 M/S HADDOCK PROPERTIES P. LTD. 5 LENGTH AND THEREFORE THE ACTION OF THE ASSESSING O FFICER BY APPLYING THE VALUATION OF THE PROPERTY FOR THE PURPOSE OF STAMP DUTY IS IL LEGAL AND NOT WARRANTED. SINCE THERE IS NO PROVISION IN THE ACT FOR RESTRICTING TH E PURCHASE PRICE TO THE STAMP VALUATION THE PURCHASE PRICE IS SETTLED AS PER THE MARKET PRICE PREVAILING AND RECORDED IN THE PURCHASE AGREEMENT. THE LEARNED AR SUBMITTED THAT THE ACTION OF THE ASSESSING OFFICER IS AGAINST THE PROVISION OF T HE ACT FOR DISALLOWING THE PROPORTIONATE INTEREST. THE LOWER AUTHORITIES HAVE NOT DISPUTED THE INTEREST PAID BY THE ASSESSEE ON THE BARROWED FUND USED FOR ACQUI SITION OF THE PROPERTIES IN QUESTION. THEREFORE WHEN THE INTEREST WAS PAID ON THE FUND BARROWED FOR THE PURPOSE OF ACQUIRING THE PROPERTIES THE SAME IS AN ALLOWABLE EXPENDITURE U/S 24(B) OF THE INCOME TAX ACT. THE LEARNED AR HAS RELIED U PON THE ORDER OF THE COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF IT O VS. GRANDEUR PROPERTIES PVT. LTD. DATED 28 TH JANUARY 2011 IN ITA NO.2056/M/2010 AND SUBMITTED THAT ON THE IDENTICAL ISSUE THIS TRIBUNAL HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. 5. AS REGARDS THE DISALLOWANCE OF SERVICE CHARGES O F RS. 70 00 000/- IS CONCERNED THE LEARNED AR OF THE ASSESSEE HAS REFER RED SEC. 2(28A) OF THE INCOME TAX ACT AND SUBMITTED THAT THE DEFINITION OF INTERE ST IS VERY WIDE AND COVERS THE PAYMENT IN ANY MANNER IN RESPECT OF LOANS DEBTS D EPOSITS CLAIMS INCLUDING ANY SERVICE FEE OR OTHER CHARGES IN RESPECT OF SUCH LOA NS DEBTS DEPOSITS ETC. HE HAS ALSO REFERRED THE EXPLANATORY NOTE ON THE AMEND MENT OF DEFINITION OF INTEREST U/S 2(28A) REPORTED IN 105 OF ITR (STATUTE) PAGE 24 . THE LEARNED AR THUS CONTENDED THAT THE PROCESSING FEE FOR ISSUE OF DEBE NTURE COMES UNDER THE DEFINITION OF INTEREST. HE HAS RELIED UPON THE ORD ER OF PUNE BENCH OF THIS TRIBUNAL IN CASE OF CHINTAMANI HATCHARIES (P) LTD. 75 ITD 11 6. HE HAS ALSO RELIED UPON ON THE ORDER OF DELHI BENCHES OF THIS TRIBUNAL IN CASE OF GUJARAT GUARDIAN LTD. VS. JCIT 114 TTJ (DEL) 565. THE LEARNED AR HAS ALSO RE LIED UPON THE DECISION OF ITA NOS: 3714 & 4525 M/S HADDOCK PROPERTIES P. LTD. 6 HONBLE SUPREME COURT IN CASE OF INDIA CEMENTS LTD . VS. CIT 60 ITR 552. THE LEARNED AR THEN REFERRED THE DEFINITION OF DEBENTUR E U/S 2(12) OF THE COMPANIES ACT AND SUBMITTED THAT THE DEBENTURE IS AN INSTRUME NT ISSUED BY THE COMPANY FOR ACKNOWLEDGING THE INDEBTNESS. THE DEBENTURE CONSTIT UTES A CHARGE ON UNDERTAKING OF THE COMPANY THEREFORE THE DEBENTURE IS ONLY AN INSTRUMENT OF DEBT AND ANY EXPENDITURE INCURRED IN CONNECTION WITH DEBENTURE I S THE EXPENDITURE FOR BORROWING THE FUNDS. AS SUCH THE PROCESSING CHARG ES PAID BY THE ASSESSEE ARE FOR BORROWING THE FUNDS USED FOR PURCHASE OF THE PROPER TY. THE LEARNED AR HAS FURTHER SUBMITTED THAT EVEN WHEN THE LUMSUM PREMIUM PAID IN LIEU OF REDUCING THE RATE OF INTEREST AND FOR RESTRUCTURING OF THE LOAN FALLS UNDER THE DEFINITION OF INTEREST U/S 2(28A) OF THE INCOME TAX ACT AS HELD B Y THE HONBLE SUPREME COURT AS WELL AS THIS TRIBUNAL IN VARIOUS DECISIONS. 6. ON THE OTHER HAND THE LEARNED DR HAS SUBMITTED THAT SO FAR AS THE DISALLOWANCE OF INTEREST BY THE AO IS CONCERNED THE ASSESSING OFFICER HAS GIVEN A CONCLUSIVE FINDING ABOUT THE VIOLATION OF SEBI REGU LATIONS BY THE ASSESSEE AND THEREFORE THE ACTION OF THE ASSESSING OFFICER TO R EDUCE THE EXCESS PAYMENT OF INTEREST IS JUSTIFIED. HE HAS HEAVILY RELIED UPON THE ORDER OF THE ASSESSING OFFICER AS FAR AS THE DISALLOWANCE OF INTEREST IS CONCERNED . AS REGARDS SERVICE CHARGES OF RS. 70 00 000/- IS CONCERNED THE LEARNED DR HAS SU BMITTED THAT THESE ARE PROCESSING CHARGES FOR ISSUE OF DEBENTURES AND EVEN IF THE AMOUNT RECEIVED BY THE ASSESSEE AGAINST THE DEBENTURE IS USED FOR ACQUISIT ION OF THE PROPERTIES THAT WILL BE AN EXPENDITURE IN CAPITAL NATURE. HE HAS FURTHER S UBMITTED THAT THE EXPENDITURE OF ISSUE OF DEBENTURE IN ANY CASE IS RELATED WITH THE BUSINESS OF THE ASSESSEE AND WOULD NOT QUALIFY AS DEDUCTION U/S 24(B) OF THE INC OME TAX ACT. HE HAS SUPPORTED THE ORDER OF LD. CIT (A) QUA THE DISALLOW ANCE OF PROCESSING CHARGES. ITA NOS: 3714 & 4525 M/S HADDOCK PROPERTIES P. LTD. 7 7. WE SHAVE CONSIDERED THE RIVAL CONTENTIONS AS WEL L AS RELEVANT RECORD. AS THE FACTS EMERGED FROM THE IMPUGNED ORDER OF THE LD . CIT (A) INITIALLY THE ASSESSEE TOOK THE LOAN OF RS. 76 96 64 271/- FROM H DFC LTD. TO PURCHASE THE PROPERTIES IN QUESTION. SUBSEQUENTLY THE ASSESSEE ISSUED THE DEBENTURES TO PROPERTY FUND FOR SUM OF RS. 87 81 00 000/-. THE A SSESSING OFFICER HAS NOT DISPUTED THE PAYMENT OF INTEREST ON THE LOAN TAKEN FROM HDFC LTD. AS WELL AS ON DEBENTURE ISSUED TO THE HDFC PROPERTY FUND BEING T HE INTEREST ON FUND USED FOR ACQUISITION OF THE PROPERTY HOWEVER THE DISALLOWAN CE MADE BY THE ASSESSING OFFICER IS ONLY ON THE GROUND THAT THE ASSESSEE VIO LATED THE SEBI REGULATIONS AND THE PURCHASE PRICE IS INFLATED AS THE SAME WAS FOUN D MORE THAN THE VALUE AS PER THE STAMP DUTY AUTHORITY. AT THE THRESHOLD THE AC TION OF THE ASSESSING OFFICER IS NOT IN ACCORDANCE WITH THE PROVISIONS OF THE ACT. THE PROVISION OF SEC. 50C IS APPLICABLE ONLY IN THE CASES OF CAPITAL GAIN AND FU LL VALUE OF THE CONSIDERATION IS DEEMED AS THE VALUE ADOPTED OR ASSESSED BY THE STAM P VALUATION AUTHORITY IN THE CASES WHERE THE CONSIDERATION RECEIVED OR ACCRUING ON TRANSFER OF A CAPITAL ASSET IS LESS THAN THE VALUE OF STAMP DUTY. THEREFORE THE SAID DEEMING PROVISION OF SEC. 50C IS APPLICABLE ONLY FOR THE PURPOSE OF COMPUTATI ON OF CAPITAL GAIN AND IN THE CASES WHERE THE CONSIDERATION RECEIVED IS FOUND LES S THAN THE VALUE ADOPTED BY THE STAMP VALUATION AUTHORITY. THE SCOPE OF THE DEEMIN G PROVISION CANNOT BE EXTENDED OTHER THAN THE PURPOSE OF COMPUTATION OF C APITAL GAIN AND PARTICULARLY IN RESPECT OF CONSIDERATION RECEIVED ON TRANSFER OF CA PITAL ASSET. THEREFORE THE ACTION OF THE ASSESSING OFFICER IN ADOPTING THE MAR KET VALUE OF THE PROPERTIES IN QUESTION BY APPLYING THE DEEMING PROVISION IS HIGHL Y MISCONCEIVED AND UNWARRANTED. THE ASSESSING OFFICER HAS NOT CONDUCT ED ANY ENQUIRY OR INVESTIGATION TO FIND OUT THE ACTUAL PREVAILING MAR KET PRICE OF THE PROPERTIES IN QUESTION. ACCORDINGLY WE HOLD THAT THE ACTION OF THE ASSESSING OFFICER IS CONTRARY ITA NOS: 3714 & 4525 M/S HADDOCK PROPERTIES P. LTD. 8 TO THE PROVISIONS OF LAW AND HENCE WE DO NOT FIND ANY ERROR OR ILLEGALITY IN THE ORDER OF THE LD. CIT (A) SO FAR AS THE ISSUE OF ALL OWING THE INTEREST U/S 24(B) OF THE INCOME TAX ACT. 8. HOWEVER IT IS PERTINENT TO NOTE THAT THE FUNDS RAISED BY THE ASSESSEE THROUGH ISSUE OF DEBENTURE WERE NOT FULLY UTILIZED FOR REPAYMENT OF THE LOAN TAKEN FOR ACQUISITION OF THE PROPERTY. THEREFORE THE EN TIRE INTEREST PAID ON DEBENTURE CANNOT BE ATTRIBUTED TOWARDS THE FUNDS USED FOR ACQ UISITION OF THE PROPERTIES IN QUESTION AND CONSEQUENTLY ONLY PROPORTIONATE AMOUNT OF INTEREST ON DEBENTURE WOULD QUALITY FOR DEDUCTION U/S 24(B). 9. AS REGARDS THE PROCESSING CHARGES OF RS. 70 00 0 00/- FOR ISSUE OF DEBENTURE IS CONCERNED THIS ISSUE CAN BE VIEWED FROM THE ANG LE THAT WHEN THE ASSESSEE RECEIVED THE FUND RAISED THROUGH THE DEBENTURE ONLY AFTER ADJUSTMENT OF RS. 70 00 000/- BEING PROCESSING CHARGES THEN THE AFFEC T OF THE PROCESSING CHARGES WOULD BE REDUCTION OF THE AMOUNT RECEIVED AGAINST T HE ISSUE OF DEBENTURE. THEREFORE THESE PROCESSING CHARGES IN OUR VIEW ARE NOT PAID FOR OBTAINING FUNDS OR LOAN AMOUNT. FURTHER THE DEBENTURE ISSUED BY THE A SSESSEE CANNOT BE EQUATED WITH THE DIRECT LOAN FOR ACQUIRING THE PROPERTY IN QUESTION BUT THE FUNDS RAISED THROUGH THE DEBENTURES WERE PARTLY APPLIED FOR REPA YMENT OF LOAN TAKEN FOR ACQUISITION OF THE PROPERTY. 10. AS REGARDS THE DECISIONS RELIED UPON BY THE LEA RNED AR ON THE POINT THAT ANY CHARGES IN RESPECT OF MONEY BARROWED BY THE ASSESSE E WOULD FALL IN THE DEFINITION OF INTEREST. IT IS PERTINENT TO NOTE THAT IN ALL T HOSE CASES THE CHARGES WERE EITHER PAID FOR TAKING LOAN FOR ACQUIRING THE PROPERTIES O R FOR RESTRUCTURING OF LOAN WITH THE OBJECT TO TAKE SOME ADVANTAGE OF INTEREST LIABI LITY OR SOME FINANCIAL LEVERAGE. THEREFORE THE FACTS OF THE CASE IN HAND ARE DISTIN GUISHABLE BECAUSE THE PROCESSING CHARGES WERE NOT PAID FOR OBTAINING LOAN OR RESTRUC TURING OF LOAN BUT FOR ISSUE OF ITA NOS: 3714 & 4525 M/S HADDOCK PROPERTIES P. LTD. 9 DEBENTURE AND ONLY THE PART OF THE FUNDS RECEIVED W ERE UTILIZED FOR REPAYMENT OF THE LOAN. ACCORDINGLY WE ARE OF THE VIEW THAT THE PROCESSING CHARGES FOR ISSUE OF DEBENTURE CANNOT BE TREATED AS INTEREST PAID ON DEB ENTURE AND CONSEQUENTLY CANNOT BE ALLOWED AS A DEDUCTION U/S 24(B). 11. AS A RESULT WE REJECT THE GROUND RAISED BY THE ASSESSEE AND ALLOW IN PART AS RAISED BY THE REVENUE ON THIS ISSUE. 12. GROUND NO.2 IN ASSESSEES APPEAL REGARDING DISA LLOWANCE OF DEDUCTION IN RESPECT OF PROPERTY TAX OF RS. 17 05 911/-. THE AS SESSEE CLAIMED DEDUCTION U/S 23 FOR PROPERTY TAX AMOUNT TO RS. 43 62 235/-. THE ASSESSING OFFICER ASKED THE ASSESSEE TO SUBSTANTIATE THE CLAIM UPON WHICH THE A SSESSEE WITHDREW THE CLAIM OF THE DEDUCTION TO THE EXTENT OF RS. 26 56 324/-. TH US THE EFFECTIVE CLAIM OF THE ASSESSEE REGARDING PROPERTY TAX WAS ONLY FOR A SUM OF RS. 17 05 911/-. THE ASSESSING OFFICER DISALLOWED THE CLAIM OF THE ASSES SEE IN THE ABSENCE OF ANY PROOF FOR PAYMENT. ON APPEAL THE LD. CIT (A) CONFIRMED T HE DISALLOWANCE BY OBSERVING THAT THE ASSESSEE HAS NOT SUBSTANTIATED HIS CLAIM A ND LIABILITY AS WELL AS ACTUAL PAYMENT OF THIS TAX. BEFORE US THE LEARNED COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE ASSESSEE PAID THE PROPERTY TAX RS. 13 19 5 88/- WHEREAS BALANCE AMOUNT OF RS. 3 86 323/- WAS PAID BY HDFC ON BEHALF OF THE ASSESSEE AND THE ASSESSEE HAS REPAID THE AMOUNT TO THE HDFC. HE HAS REFERRED THE DETAILS OF THE PAYMENT MADE BY THE ASSESSEE AS WELL AS BY THE HDFC AT PAGE NOS. 135 137 138 & 156 OF THE PAPER BOOK. HE HAS ALSO REFERRED THE DETAILS A ND STATEMENT OF ACCOUNTS WHEREBY THE ASSESSEE HAS REPAID THE AMOUNT TO HDFC. ON THE OTHER HAND THE LEARNED DR HAS RELIED UPON THE ORDER OF THE LOWER A UTHORITIES AND SUBMITTED THAT WHEN THE ASSESSEE FAILED TO PROVE THE ACTUAL PAYMEN T OF THE PROPERTY TAX THEN THE DEDUCTION U/S 23 CANNOT BE ALLOWED. ITA NOS: 3714 & 4525 M/S HADDOCK PROPERTIES P. LTD. 10 13. WE HAVE CONSIDERED THE RIVAL CONTENTION AND PER USED THE RELEVANT MATERIAL ON RECORD. AT PAGE NO. 135 OF THE PAPER BOOK THE A SSESSEE HAS GIVEN THE DETAILS OF PAYMENT OF PROPERTY TAX OF RS. 13 19 588/- WHERE AS AT PAGE NO.137 THE DEMAND NOTICE OF THE PUNE MUNICIPAL CORPORATION AND AT PAGE NO. 138 THE PAYMENT MADE BY THE ASSESSEE TO THE PUNE MUNICIPAL CORPORATION VIDE CHEQUE NO.842384 DATED 16 TH FEBRUARY 2006. SIMILARLY AT PAGE NO.155 THE REC EIPT OF PAYMENT OF TAX TO AP INDUSTRIAL INFRASTRUCTURE CORP ORATION IS FILED THE SAID PAYMENT WAS MADE BY HDFC BANK WHICH HAS BEEN REIMBU RSED BY THE ASSESSEE AS THE SAME IS DULY REFLECTED IN THE BANK ACCOUNT VIDE ENTRY DATED 16.11.2005. THE ASSESSING OFFICER AS WELL AS THE LD. CIT (A) DID NO T GO TO EXAMINE THE DETAILS AND EVIDENCE FILED BY THE ASSESSEE IN SUPPORT OF THE CL AIM. IT IS PRIMA FACIE EVIDENT FROM THE EVIDENCE FILED BY THE ASSESSEE THAT PRIMA FACIE THE ASSESSEE HAS PRODUCED THE RELEVANT RECORD IN SUPPORT OF THE CLAI M. SINCE THE AUTHORITIES BELOW HAVE NOT EXAMINED THE DETAILS AND EVIDENCE PROPERLY WE SET ASIDE THE ISSUE TO THE RECORD OF THE ASSESSING OFFICER TO DECIDE THE SAME AFRESH AS PER LAW AFTER VERIFICATION AND EXAMINATION OF THE RELEVANT MATERI AL AND EVIDENCE. NEEDLESS TO SAY THAT THE ASSESSEE BE GIVEN AN APPROPRIATE OPPOR TUNITY OF HEARING BEFORE PASSING THE FRESH ORDER. 14. GROUND NO.3 IN ASSESSEES APPEAL IS REGARDING D ISALLOWANCE OF BUSINESS LOSS. THE ASSESSEE HAS CLAIMED BUSINESS LOSS OF RS.4 48 4 53/-. THE ASSESSING OFFICER DISALLOWED THE CLAIM WITHOUT ANY DISCUSSION ON THE ISSUE. ON APPEAL THE LD. CIT (A) RECORDED THAT THE ASSESSEE DID NOT ADVANCE ANY ARGUMENT IN SUPPORT OF THE CLAIM FURTHER THE LD. CIT (A) WAS OF THE VIEW THAT WHEN THE ASSESSEE HAS NOT BEEN CARRYING ON ANY BUSINESS THESE EXPENSES CANNOT BE CLAIMED AS BUSINESS EXPENSES. ITA NOS: 3714 & 4525 M/S HADDOCK PROPERTIES P. LTD. 11 15. BEFORE US THE LEARNED AR OF THE ASSESSEE HAS SU BMITTED THAT THE ASSESSEE INCURRED THE EXPENSES ON PRINTING & STATIONARY TRA VELING & CONVEYANCE MISCELLANEOUS ITEMS AND PROFESSIONAL FEES. IT IS S UBMITTED THAT THESE EXPENSES ARE NECESSARY FOR MAINTAINING THE STATUS OF THE COM PANY AND THEREFORE THESE ARE ALLOWABLE AS BUSINESS EXPENDITURE. SINCE THERE IS NO BUSINESS INCOME THEREFORE THE SAID AMOUNT SHALL BE ALLOWED AS BUSINESS LOSS. HE HAS RELIED UPON THE DECISION OF HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT V S. GANGA PROPERTIES LTD. 199 ITR 94. ON THE OTHER HAND THE LEARNED DR HAS RELIED UP ON THE ORDERS OF THE LOWER AUTHORITIES AND SUBMITTED THAT WHEN THE ASSESSEE HA S NOT CARRIED OUT ANY BUSINESS DURING THE PERIOD UNDER CONSIDERATION THEN THE CLAI M OF THE ASSESSEE AS A BUSINESS LOSS NOT ALLOWABLE. HE HAS FURTHER CONTENTED THAT AGAINST THE INCOME FROM HOUSE PROPERTY WHATEVER EXPENDITURE IS ALLOWABLE HAS BEEN PRESCRIBED U/S 23 & 24 OF THE INCOME TAX ACT AND THEREFORE THERE IS NO SCOPE OF ANY OTHER EXPENDITURE TO BE ALLOWED. 16. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND RE LEVANT RECORD. IT IS NOT DISPUTED THAT THE EXPENDITURE CLAIMED BY THE ASSESS EE HAS BEEN INCURRED FOR MAINTAINING THE STATUS OF THE COMPANY AND FOR DISCH ARGING THE STATUTORY OBLIGATION BY THE COMPANY. THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. GANGA PROPERTIES LTD (SUPRA) HAS HELD IN THE SIMILAR FACT S AND CIRCUMSTANCES AS UNDER: IN OUT VIEW A LIMITED COMPANY EVEN IF IT DOES NOT CARRY ON BUSINESS BUT IT DERIVES INCOME FROM OTHER SOURCES HAS TO M AINTAIN ITS ESTABLISHMENT FOR COMPLYING WITH STATUTORY OBLIGATI ONS SO LONG IT IS IN OPERATION AND ITS NAME IS NOT STRUCK OFF THE REGIST ER OR UNLESS THE COMPANY IS DISSOLVED WHICH MEANS CESSATION OF ALL C ORPORATE ACTIVITIES OF THE COMPANY FOR ALL PRACTICAL PURPOSES. SO LONG AS IT IS IN OPERATION IT HAS TO MAINTAIN ITS STATUS AS A COMPA NY AND IT HAS TO DISCHARGE CERTAIN LEGAL OBLIGATIONS AND FOR THAT P URPOSE IT IS NECESSARY TO APPOINT CLERICAL STAFF AND SECRETARY O R ACCOUNTANT AND INCUR INCIDENTAL EXPENSES. IN THIS BACKGROUND THE CONCLUSION OF THE TRIBUNAL THAT THE EXPENSES INCURRED WERE WHOLLY AND EXCLUSIVELY FOR THE ACTIVITIES TO EARN INCOME IS PRE-EMINENTLY A RE ASONABLE CONCLUSION. WE HAVE CONSIDERED A SIMILAR CASE IN I NCOME TAX REFERENCE NO.360 OF 1979 (CIT V. NEW SAVAN SUGAR AN D GUR REFINING ITA NOS: 3714 & 4525 M/S HADDOCK PROPERTIES P. LTD. 12 CO. LTD. (1990) 185 ITR 564 (CAL) WHERE THE JUDGME NT WAS DELIVERED ON APRIL 18 1989. 17. THE LOWER AUTHORITIES HAVE NOT CONSIDERED THE C LAIM OF BUSINESS LOSS ON THE GROUND THAT THE ASSESSEE HAS NOT BEEN CARRYING ON A NY BUSINESS. THUS THE CLAIM WAS NOT AT ALL VERIFIED AND EXAMINED BY THE LOWER A UTHORITIES ON MERITS. HOWEVER IN VIEW OF THE DECISION OF HONBLE CALCUTTA HIGH CO URT (SUPRA) WE DIRECT THE ASSESSING OFFICER TO EXAMINE AND ADJUDICATE THE CLA IM OF THE ASSESSEE AFRESH. 18. IN THE RESULT THE APPEALS OF THE ASSESSEE AS WE LL AS OF REVENUE ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. THE ORDER WAS PRONOUNCED IN OPEN COURT ON 7 TH SEPTEMBER 2011 SD/- SD/- (P.M. JAGTAP) (VIJAY PAL RAO) ACCOUNTANT MEMBER JUDICIAL MEMBER DATE : 07-09-2011 AT :MUMBAI OKK COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) MUMBAI CONCERNED 4. THE CIT MUMBAI CITY CONCERNED 5. THE DR H BENCH ITAT MUMBAI // TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT MUMBAI BENCHES MUMBAI