2016 (11) TMI 1664 - HC - Income Tax

High Court affirms Tribunal's interest deduction decision for real estate business. Interpretation favoring assessee upheld.

The High Court upheld the Tribunal's decision to allow the interest deduction claimed by the assessee for advances to sister concerns in a real estate ... Deduction of the interest on the loan taken which is utilised for giving advances to the sister concerns - Tribunal holding that the interest deduction claimed by the assessee is an allowable deduction - HELD THAT:- CIT (Appeals) was satisfied about the activity of the assessee as of construction of one building after another and acquiring of property rights in Diamond District and Platinum City - two sister concerns. If such was the finding that the activity of the assessee was also of acquiring property rights in M/s. Diamond District and M/s. Platinum City, any advance given by the assessee to M/s. Diamond District and M/s. Platinum City is to be treated for acquiring property rights and once it is treated as for acquiring property rights may be of a sister concern, it would be an allowable deduction under section 36 of the Income-tax Act, since it is for the business activity. The attempt on the part of the Revenue to contend that the finding arrived at by the Tribunal is perverse by misconstruing the order of Commissioner of Income-tax (Appeals) cannot be countenanced for three fold reasons as the Department itself before the Tribunal did not dispute the aforesaid finding of fact recorded by the Commissioner of Income-tax (Appeals) - it is not only at one place the aforesaid finding of fact is recorded but subsequently as observed earlier at two places similar factum is also recorded and when such finding of fact was not disputed and was also reiterated by the Commissioner (Appeals) and the said reiteration was also not disputed and the Tribunal has relied upon the same and has proceeded as an undisputed fact, such a view on the part of the Tribunal cannot be said to be perverse view. When one talks about perversity, the test would be that no reasonable person would take such view. But if the view taken by the Tribunal is a possible reasonable view, such view cannot be said to be perverse. If the perversity is tested from the material on record, then also, we cannot accept the contention that the finding of fact so recorded by the Tribunal is perverse or without there being any material on record. No perversity in the finding of the Tribunal in allowing the appeal of the assessee so far as the deduction of the interest on the loan taken which is utilised for giving advances to the sister concerns - Decided in favour of assessee. Issues:1. Interpretation of interest deduction claimed by the assessee without utilizing the loan amount in business activity.Analysis:The case involved a dispute regarding the deduction of interest claimed by the assessee for the assessment year 1999-2000. The assessee, engaged in real estate business, claimed a deduction of interest paid to banks from which loans were taken. The Assessing Officer disallowed the interest over the loan amount utilized for advances to sister concerns, Diamond District and Platinum City. The Commissioner (Appeals) upheld this disallowance due to lack of proof of utilization for business purposes. However, the Tribunal found that the payments to sister concerns were for acquiring property rights, a part of the assessee's business. The Tribunal held that interest should be allowed under section 36 of the Income-tax Act. The Revenue contended that the Tribunal's finding was perverse, but the Tribunal's decision was based on undisputed facts and Commissioner's findings. The High Court upheld the Tribunal's decision, stating that no perversity was found in allowing the interest deduction for advances to sister concerns.The Revenue argued that the Tribunal's finding was based on a misinterpretation of the Commissioner's order and that the interest claim should have been disallowed due to lack of proof. However, the High Court noted that the Commissioner was satisfied with the assessee's business activities, including acquiring property rights in sister concerns. As the Department did not dispute these findings, the Court found no perversity in the Tribunal's decision to allow the interest deduction. The Court emphasized that if two views are possible, the interpretation should favor the assessee, especially in limited judicial review on questions of law and perversity in findings of fact. Therefore, the Court rejected the Revenue's contentions and upheld the Tribunal's decision to allow the interest deduction.In conclusion, the High Court dismissed the Revenue's appeal, stating that the Tribunal's decision to allow the interest deduction for advances to sister concerns was not perverse. Despite condoning the long delay in the appeal process, the Court found the main appeal meritless and hence dismissed it.