SHREE KISMAT STONE SUPPLYING CO, v. ITO WD 21(3)(2),

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH J BEFORE SHRI R.S. SYAL (AM) & N.V. VASUDEVAN (JM) M.A. NO. 64/MUM/2010 ARISING OUT OF I.T.A.NO. 221/MUM/2008 (ASSESSMENT YEAR : 2003-04 ) SHREE KISMAT STONE SUPPLYING CO. 2 VASANT INDUSTRIAL ESTATE SAKI VIHAR SAKINAKA ANDHERI EAST MUMBAI-40 0072. VS. ITO WARD 21(3)(2) MUMBAI. APPELLANT RESPONDENT PAN/GIR NO. : AACFS4121J ASSESSEE BY : DR. P. DANIEL DEPARTMENT BY : SHRI L.K. AGRAWAL ORDER PER N.V. VASUDEVAN JM :- THIS MISCELLANEOUS APPLICATION IS FILED BY THE ASS ESSEE PRAYING THAT THE ORDER DATED 19.8.2009 PASSED ON THE ABOVE APPEAL BE RECALLED AND HEARD AFRESH OR IN THE ALTERNATIVE AMEND PARAGR APH 5 & 5.1 OF THE ORDER OF THE TRIBUNAL AND CONSEQUENTLY ALLOW THE AP PEAL OF THE ASSESSEE. 2. THE ISSUE THAT AROSE FOR CONSIDERATION IN THE AB OVE APPEAL BY THE ASSESSEE WAS AS TO WHETHER THE DISALLOWANCE OF INTE REST AMOUNTING TO RS. 1 56 076/-CONFIRMED BY LEARNED CIT(A) WAS PROPER. 3. FACTS WERE THAT THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF SUPPLY OF STONES METAL AND OTHER BUILDING MATERIAL . IN COURSE OF BUSINESS IT SUPPLIED CERTAIN MATERIAL TO M/S. LOK GROUP. IN RESPECT OF OUTSTANDING BALANCE DUE FROM M/S.LOK GROUP AFTER P ROLONGED LITIGATION THE ASSESSEE IN PARTIAL DISCHARGE OF AMOUNT PAYABLE BY LOK GROUP ADJUSTED THE VALUE OF ONE FLAT WHICH WAS DEVELOPED BY LOK GROUP. SHREE KISMAT STONE SUPPLYING CO. 2 ACCORDING TO THE REVENUE AUTHORITIES BORROWED AMOUN TS WERE UTILIZED FOR THE PURCHASE OF FLAT AND SINCE THE ASSESSEE WAS N OT IN THE BUSINESS OF PURCHASE AND SALE OF FLATS PROPORTIONATE INTEREST PAID ON BORROWED CAPITAL WAS DISALLOWED. THE SAID DISALLOWANCE WAS CONFIRMED BY THE TRIBUNAL. 3. IN THIS MISCELLANEOUS APPLICATION THE ASSESSEE HAS POINTED OUT THAT THE FACTS WITH REGARD TO SUPPLY OF MATERIALS AND AD JUSTMENTS OF OUTSTANDING IN THE FORM OF ALLOTMENT OF ONE FLAT HA VE NOT BEEN CONSIDERED BY THE TRIBUNAL DESPITE EVIDENCE IN THIS REGARD HA VING BEEN FILED BY THE ASSESSEE IN THE PAPER BOOK. IT HAS FURTHER BEEN SU BMITTED THAT THE HON'BLE SUPREME COURT IN THE CASE OF DCIT VS. CORE HEALTH CARE LTD. 298 ITR 194(SC) HAS HELD THAT INTEREST ON BORROWED CAPITAL WHETHER THE BORROWING IS FOR REVENUE OR CAPITAL HAS TO BE ALLOW ED AS A DEDUCTION. HENCE IT HAS BEEN PRAYED THAT THE TRIBUNAL DID NOT CONSIDER THE MATERIAL AVAILABLE ON RECORD AND HAS CONFIRMED THE ORDER OF LEARNED CIT(A) GIVING RISE TO THE MISTAKE APPARENT ON THE FACE OF THE REC ORD. 4. LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE STAND OF THE ASSESSEE AS REFLECTED IN THE MISCELLANEOUS APPLICAT ION. LEARNED DR RELIED ON THE ORDER OF THE TRIBUNAL. 5. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERU SING THE ORDER OF THE TRIBUNAL WE FIND THAT NONE OF THE ASPECTS OR E VIDENCE WITH REGARDS TO SUPPLY OF MATERIAL BY THE ASSESSEE AND ADJUSTMENT O F OUTSTANDING BY ALLOTMENT OF FLAT HAVE BEEN DISCUSSED OR CONSIDERE D. WE ALSO FIND THAT THE PAPER BOOK FILED IN THE APPELLATE PROCEEDINGS C ONTAINED ALL THE EVIDENCE IN SUPPORT OF THE ASSESSEES CASE AND NON E OF THOSE DOCUMENTS HAVE BEEN CONSIDERED OR DISCUSSED IN THE ORDER OF T HE TRIBUNAL. IN FACT THE FINDINGS GIVEN BY THE CIT(A) ITSELF WAS THAT TH E ASSESSEE MADE SUPPLIES TO M/S.LOK GROUP AND IN RESPECT OF OUT-STA NDINGS IN RESPECT OF SUCH SUPPLIES SETTLEMENT WAS MADE IN KIND BY ALLOT TING A FLAT TO THE SHREE KISMAT STONE SUPPLYING CO. 3 ASSESSEE. THE CIT(A) HAS FURTHER HELD THAT ONCE AC COUNTS ARE SETTLED IN KIND INITIAL INTENTION WAS IMMATERIAL. THEREAFTER HE HAS CONCLUDED THAT BORROWED FUNDS WERE THEREFORE USED FOR PURCHASE OF FLATS. EVEN IF ON THIS FINDINGS OF THE CIT(A) IF THE RATIO LAID DOWN BY T HE HONBLE SUPREME COURT IN THE CASE OF CORE HEALTH CARE LTD. (SUPRA) IS APPLIED THEN THE CLAIM OF THE ASSESSEE DESERVES TO BE ACCEPTED. NEV ERTHELESS THIS ISSUE WAS NEVER EXAMINED. W E ARE THEREFORE OF THE VIEW THAT THERE IS AN APPARENT ERROR IN THE ORDER OF THE TRIBUNAL IN AS M UCH AS EVIDENCE ON RECORD HAVE NOT BEEN CONSIDERED BY THE TRIBUNAL. IN THE INTEREST OF JUSTICE WE RECALL THE ORDER OF THE TRIBUNAL DATED 19.8.2009 AND DIRECT THAT THE APPEAL BE LISTED FOR HEARING AFRESH. 6. IN THE RESULT MISCELLANEOUS APPLICATION IS ALLO WED. ORDER HAS BEEN PRONOUNCED ON 30 TH DAY OF APRIL 2010. SD/- (R.S. SYAL) ACCOUNTANT MEMBER SD/- (N.V. VASUDEVAN) JUDICIAL MEMBER DATED : 30 TH APRIL 2010 COPY TO : 1. THE ASSESSEE 2. THE RESPONDENT 3. THE CIT(A)-CONCERNED. 4. THE CIT CONCERNED. 5. THE DR CONCERNED MUMBAI 6. GUARD FILE BY ORDER TRUE COPY ASSTT. REGISTRAR ITAT MUMBAI PS