ITO 9(1)(1), MUMBAI v. ACUTE REALITY P. LTD, MUMBAI

ITA 8141/MUM/2011 | 2008-2009
Pronouncement Date: 29-04-2015 | Result: Allowed

Appeal Details

RSA Number 814119914 RSA 2011
Assessee PAN AAFCA1070Q
Bench Mumbai
Appeal Number ITA 8141/MUM/2011
Duration Of Justice 3 year(s) 4 month(s) 24 day(s)
Appellant ITO 9(1)(1), MUMBAI
Respondent ACUTE REALITY P. LTD, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 29-04-2015
Appeal Filed By Department
Order Result Allowed
Bench Allotted A
Tribunal Order Date 29-04-2015
Date Of Final Hearing 23-02-2015
Next Hearing Date 23-02-2015
Assessment Year 2008-2009
Appeal Filed On 05-12-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH MUMBAI BEFORE SHRI SANJAY ARORA A M AND SHRI AMIT SHUKLA J M ./ I.T.A. NO. 8141/MUM/2011 ( / ASSESSMENT YEAR: 2008 - 09 ) ITO - 9(1)(1) ROOM NO. 226 AAYAKAR BHAVAN MUMBAI - 400 020 / VS. ACUTE REALTY PVT. LTD. KNOWLEDGE HOUSE OFF. JOGESHWARI VIKHROLI LINK ROAD SHYAM NAGAR JOGESHWARI (E) MUMBAI - 400 060 ./ ./ PAN/GIR NO. AAFCA 1070 Q ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI ASGHAR ZAIN / RESPONDENT BY : SHRI VIPUL JOSHI / DATE OF HEAR ING : 24.02.2015 / DATE OF PRONOUNCEMENT : 29 .04.2015 / O R D E R PER SANJAY ARORA A. M.: THIS IS AN A PPEAL BY THE REVENUE DIRECTED AGAINST THE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS) - 19 MUMBAI (CIT(A) FOR SHORT) DA TED 03.10.2011 PARTLY ALLOWING THE A SSESSEES APPEAL CONTESTING ITS ASSESSMENT U/S.143(3) OF THE INCOME TAX ACT 1961 (THE ACT HEREINAFTER) FOR THE ASSESSMENT YEAR (A.Y.) 2008 - 09 VIDE ORDER DATED 13.12.2010. 2. THE APPEAL RAISES A SINGLE ISSUE I.E. THE MAINTAINABILITY IN LAW OF THE ASSESSEES CLAIM FOR INTEREST ON CAPITAL BORROWED U/S.24(B) OF THE ACT IN THE FACTS AND CIRCUMSTANCES OF THE CASE. THE BACKGROUND FACTS OF THE CASE ARE THAT THE CLAIM INTER ALIA OF INTEREST 2 ITA NO. 8141/MUM/2011 (A.Y. 2008 - 09) ITO VS. ACUTE REALTY PVT. LTD. 2 EXPENDITURE AT RS.31 69 845/ - IN THE COMPUTATION OF ITS BUSINESS INCOME U/S.28 THE SOURCE OF WHICH WAS DESCRIBED AS B USINESS CENTRE SERVICE CHARGES WAS SUBJECT TO EXAMINATION IN THE ASSESSMENT PROCEEDINGS. IN THE VIEW OF THE ASSESSING OFFICER (A.O.) HOWEVER THE SAID RECEIPT ONL Y REPRESENTED RENT IN RESPECT OF PROPERTY LET OUT TO M/S. P ANTALOON RETAIL (INDIA) LTD. (PRIL) AND ACCORDINGLY WAS CHARGEABLE TO TAX U/S.22 AS INCOME FROM HOUSE PROPERTY. THE SAME FOUND CONFIRMATION WITH THE LD. CIT(A) IN APPEAL SO THAT THIS ASPECT I S NO LONGER IN DISPUTE WHICH IS THUS CONFINE D TO THE ALLOWANCE OF THE SAID INTEREST IN COMPUTING THE INCOME UNDER CHAPTER IV - C I.E. UNDER THE HEAD INCOME FROM HOUSE PROPERTY. THE A.O. DISALLOWED THE CLAIM FOR WANT OF SATISFACTION OF THE CONDITION U/S. 24(B) IN ASMUCH AS PROVISO THERETO CLEARLY STATES OF SUCH A CLAIM BEING NECESSARILY B AC KED BY A CERTIFICATE (FROM THE PERSON TO WHOM THE INTEREST IS PAYABLE) SPECIFYING THE AMOUNT OF INTEREST PAYABLE BY THE ASSESSEE FOR THE PURPOSE S OF ACQUISITION OR CONSTR UCTION OF HOUSE PROPERTY. THE INTEREST CERTIFICATE FROM ING VYASA BANK AS FU RNISHE D BY THE ASSESSEE HOWEVER SPECIFIED THE INTEREST FOR THE RELEVANT PREVIOUS YEAR AT RS.43 40 640/ - (PB II/PG. 16). FURTHER IT D ID NOT AS REQUIRED STATE THE PURPOSE FOR WHICH THE LOAN IS GRANTED. THE SECURED LOAN (DATED AUGUST 5 2005) HOWEVER CLEARLY STATED THAT THE LOAN WAS SANCTIONED ON THE SECURITY OF THE RENT RECEIVABLE FROM PRIL AND EQUITABLE MORTGAGE OF THE PROPERTY D R EAM COMPLEX CITY C ENTRE DU RGAPUR (PB II/PG .10). THE LOAN AS APPARENT FROM THE COPY OF THE ACCOUNT WITH HDFC BANK WAS IMMEDIATELY UTILIZED IN PAYING OF THE UNSECURED LOANS. THE B OARD CIRCULAR (NO . 28 DATED 20.08.1969) CLARIFYING THAT WHERE THE SECOND LOAN SUBSTITUTES THE FIRST LOAN INTEREST THE REOF WOULD BE DEDUCTIBLE U/S. 24 SHALL THEREFORE APPLY. THE ASSESSEES CLAIM WAS PRIMA FACIE VALID. SO HOWEVER THE A.O. SH ALL VERIFY THE QUANTUM OF THE DEDUCTION AS THERE WAS SOME DISCREPANCY IN THE FIGURE OF INTEREST. AGGRIEVED THE REVENUE IS IN APPEA L RAISING THE FOLLOWING GROUNDS: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN ADMITTING ADDITIONAL EVIDENCE WITHOUT REMANDING THE MATTER TO THE ASSESSING OFFICER THEREBY VIOLATING THE CONDITIONS OF RULE 46 A OF THE I. T. RULES. 3 ITA NO. 8141/MUM/2011 (A.Y. 2008 - 09) ITO VS. ACUTE REALTY PVT. LTD. 3 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN ALLOWING THE INTEREST U/S.24(B) OF THE ACT THOUGH THE CERTIFICATE PRODUCED WAS UNDATED AND ALSO MENTIONED A WRONG FIGURE OF INTEREST PAYABL E. 3. WE HAVE HEARD THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THE ASSESSEES PRINCIPAL CASE BEFORE US WAS THAT INTEREST CLAIMED CANNOT BE DENIED MERELY FOR THE REASON THAT THE CAPITAL BORROWED ON WHICH INTEREST STANDS PAID AND CLAIMED HAS NOT BEEN DIRECTLY UTILIZED FOR ACQUISITION OR CONS TRUCTION OF THE HOUSE PROPERTY BUT FOR REPAYMENT OF LOAN / S TAKEN FOR THAT PURPOSE EARLIER WHICH ASPECT HAS IN FACT BEEN CLARIFIED BY THE BOARD S CIRCULAR DATED 20.08.1969 SUPRA ITSELF. THE A.O. HOWEVER NOW HERE STATES SO. T HIS ASPECT OF THE MATTER HAS BEEN RAISED FOR THE FIRST TIME ONLY BEFORE THE LD. CIT(A) PERHAPS IN MEETING THE A.O.S OBJECTION QUA THE DEFICIENCY /S IN THE INTEREST CERTIFICATE. CLEARLY THE STATED DEFICIENCY WOULD NOT ARISE WHERE THE CAPI TAL BORROWED HAS IN FACT BEEN UTILIZED FOR REPAYING THE UNSECURED LOAN / S TAKEN EARLIER AND WHICH HAD BEEN APPLIED FOR ACQUISITION OR CONSTRUCTION OF THE RELEVANT HOUSE PROPERTY. RATHER WE FURTHER OBSERVE THE IMPUGNED ORDER TO BE SILENT ON THE LA T TER ASP ECT EQUALLY VITAL TO THE ASSESSEES CLAIM CONFINING ITSELF ONLY TO THE UTILIZATION OF THE TERM LOAN FROM ING VYASA BANK . THE LD. AUTHORIZED REPRESENTATIVE (AR) CONCEDED TO THE DISCREPANCY IN THE INTEREST CLAIM ON WHICH ASPECT WE OBSERVE THE LD. CIT(A) T O HAVE DIRECTED VERIFICATION BY THE A.O. SO THAT FIGURATIVELY SPEAKING THE REVENUE OUGHT NOT TO HAVE ANY GRIEVANCE. HERE AGAIN THOUGH WHAT WOULD BE RELEVANT IS AS TO HOW THE INTEREST CLAIMED AT RS.31.70 LACS (AND TOWARD WHICH THE ASSESSEE HAS FURNI SHED COPY OF THE TERM LOAN ACCOUNT WITH THE LENDER BANK PB - II / PG S . 19 - 21 ) AS WELL AS COPY OF INT ER E ST ACCOUNT IN ITS BOOKS (PB - I / PG. 20) HAS BEEN CERTIFIED BY THE BANK AT RS.43.41 LACS . EVEN AS OBSERVED BY THE A.O. HOW COULD WE WONDER AND AS ALSO RE MAR KED DURING HEARING THE INTEREST WORK TO EVEN THAT SUM (I.E. RS.31.70 LACS) GIVEN THE INTEREST RATE OF 8% P.A. ON THE PRINCIPAL LOAN OF RS.300 LAC S SO THAT IT COULD NOT EXCEED R S.24 LACS P.A. ? F URTHER THERE IS STIPULATION AS TO REPAYMENT WHICH IS FROM THE MONTHLY RENT RECEIVABLE COMMENCING 30 DAYS FROM THE 4 ITA NO. 8141/MUM/2011 (A.Y. 2008 - 09) ITO VS. ACUTE REALTY PVT. LTD. 4 DIS BU R S EMENT OF THE LOAN (PB - II / PG. 6) WHICH AS IT APPEARS IS ON 22.09.2006 THROUGH CREDIT TO THE ASSESSEES ACCOUNT WITH HDFC ACCOUNT (PB - I / PG. 30) AND THEREFORE THE INTEREST FOR F.Y. 2007 - 08 OUGHT TO BE EVEN LOWER THAN RS.24 LACS I.E. ON THE TOTAL LOAN OF RS.300 LACS. RATHER THE SWITCHOVER OF THE LENDER WOULD ONLY BE ON THE RELENDING BANK (ING VYASA) EXTENDING THE LOAN ON MORE FAVORABLE TERMS. FURTHER STILL ONLY THE INTEREST RELATABLE TO THE PROPERTY LET TO P RIL COULD BE CLAIMED AS DEDUCTION U/S. 24 (B). TRUE THE INTEREST IS DEDUCTIBLE ALSO AGAINST HOUSE PROPERTY WHICH HAS SINCE BEEN COMPLETED THOUGH NOT LET . HOWEVER IN THAT CASE THE VALUE OF SUCH PROPERTY WOULD ALSO HAVE TO BE TAKEN INT O ACCOUNT. WE DO NOT CONSIDER THIS ASPECT AS EXCEEDING THE SCOPE OF THE APPEAL IN - AS - MUCH AS THE ASSESSEES CLAIM IS FOR A HIGHER AMOUNT WHICH MAY REQUIRE VISITING ALL REL EVANT ASPECT S . IN FACT WE OBSERVE THE ASSESSEES CLAIM OF RS.31.70 LACS BOOKED PER 13 ENT RIES TO BE THUS IN EXCESS OF THE 12 MONTH PERIOD CORRESPONDING TO THE RELEVANT PREVIOUS YEAR BEING F . Y . 2007 - 08 (PB II / PG. 22). THE CHARGE ON 09.04.2007; INTER E ST BEING CHARGED ON THE 9 TH OF EVERY MONTH IS OSTENSIBLY FOR THE MONTH ENDING 09.04.20 07 EVEN AS THE ASSESSEE PROVIDES FOR INTEREST FOR THE MONTH OF MARCH 2008 (OR PART THEREOF) ON ACCRUAL BASIS I.E. SUBSEQUENT TO THE LAST CHARGE FOR THE YEAR DATED 09.03.2008 BY THE BANK SO THAT ITS CLAIM MAY ALSO REQUIRE MODIFICATION . THE A.O. SHALL A DJUDICATE ON THESE AS ALSO OTHER REL ATED ASPECTS WHERE RAISED BY THE ASSESSEE AND DECIDE THE ASSESSEES CLAIM IN ACCORDANCE WITH LAW ISSUING DEFINITE FINDINGS OF FACT AND AFTER ALLOWING REASONABLE OPPORTUNITY TO THE ASSESSEE TO STATE ITS CASE. WE DECI DE ACCORDINGLY. 4. IN THE RESULT THE R EVENUE S APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON APRIL 29 201 5 S D/ - SD/ - ( AMIT SHUKLA ) (S ANJAY ARORA) / J UDICIAL MEMBER / A CCOUNTANT MEMBER MUMBAI ; DATED : 29 . 0 4 .201 5 . . ./ ROSHANI SR. PS 5 ITA NO. 8141/MUM/2011 (A.Y. 2008 - 09) ITO VS. ACUTE REALTY PVT. LTD. 5 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. / DR ITAT MUMBAI 6. / GUARD F ILE / BY ORDER / (DY./ASSTT. REGISTRAR) / ITAT MUMBAI