TaxTMI 
TaxTMI 
2016 (1) TMI 113
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....income under the head income from property. 2.1That the Learned CIT(Appeals) has failed to comprehend the rule laid down by the Apex Court in the case of M/s.Tin Box Co. Vs. CIT reported in 249 ITR 216, where in the Apex Court has held that where an opportunity is required to be provided by the Assessing Officer, such an, opportunity has to be provided by him alone and providing of an opportunity by the Learned CIT(Appeals) is not a substitute. 2.2 That the Learned CIT(Appeals) has further erred in failing to appreciate that, income from property had not been correctly computed by the Assessing Officer in accordance with law and as such there was no justification either on facts and on circumstances of the case to hold that, the claim of deduction of Rs. 1,12,479 was since made by the assessee at page 110 of the paper book, same cannot be allowed as a deduction. The findings are based on erroneous assumptions and without appreciation of facts that assessee had not made any such claim of Rs. 1,12,479 in the computation of income filed by the assessee. The addition has been sustained, despite the fact no such claim was made and the income computed by the assessee at....
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....llowed as a deduction and there can be no proportionate disallowance made on an assumed basis. 7. That the Learned CIT(Appeals) has further erred in sustaining the disallowance of Rs. 5,89,433, a sum disallowed by the Assessing Officer out of the travelling and conveyance on ad hoc basis, being 50% of the total expenditure incurred. He has failed to appreciate that there was no dispute that the expenditure has been incurred for the purposes and was allowable and no ad hoc disallowance could thus have been made." 2. Heard and considered the arguments advanced by the parties in view of orders of the authorities below, material available on record and the decisions relied upon. 3. Ground No.1 is general in nature, hence, does not need independent adjudication. 4. Ground Nos.2, 2.1, 2.2, 2.3 have not been pressed by the Learned AR during the course of hearing. The same are rejected as such. 5. Ground No. 2.4: The facts in brief are that the assessee engaged in the business of consultancy and real estates had purchased 8,927 sq. fts. of built up area on 3rd floor in a building by the name and style of Capital Fort situated at Munirka for a total consideration of Rs.....
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.... profit and loss account. 8. The Learned AR submitted further that Learned CIT(Appeals) in his order has also erred having only allowed a deduction of interest paid on a loan of Rs. 6.50 crores paid to HDFC Bank and erred in not allowing interest paid by the assessee to Lal Bhai Reality Finance Pvt. Ltd. by holding that the same represents late interest payment and not interest charges paid to HDFC Bank. He submitted that the Learned CIT(Appeals) has failed to appreciate that the assessee has paid the interest on the amount borrowed from HDFC Bank and has also paid interest on the unpaid amount to Lal Bhai Reality Finance Pvt. Ltd. till the same was paid on 10.2.2006. In this regard, he referred page No.. 364 of the paper book. He submitted that not only interest paid to HDFC Bank of Rs. 29,41,967 was allowable as deduction but also unpaid amount to Lal Bhai Reality Finance Pvt. Ltd. represented borrowed amount and as such interest paid on such borrowed amount is also eligible for deduction under sec. 24(b) of the Act. 9. The Learned Senior DR on the other hand placed reliance on the orders of the authorities below. He submitted that the claimed interest was not allowable as ....
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....n during the year under consideration given advances for purchase of flats/land, as would be evident from the following table: Date To whom paid Amount(Rs.) Purpose of payment 11.11.2005 Repayment to Sh. S.K. Jatia of amount received on 07.10.2005 in Kotak Bank. 90,00,000 Repayment of amount received earlier (page 158 of P.B.) 11.11.2005 Smart Tourism Pvt. Ltd. 50,00,000 As advance for acquisition of property (page 160 of P.B.) 20.11.2005 GE Capital Services. 4,00,00,000 Payment made towards land advance (pages 161 to 178 of P.B) 23.11.2005 GE Capital Services 1,50,00,000 Payment towards land advance (pages 161 to 178 of P.B) 27.11.2005 GE Capital Services 1,2,00,000 Payments made towards land advance (pages 161 to 178 of P.B) 13. The Learned CIT(Appeals) in fact has himself accepted that the funds have been admittedly utilized as working capital of the real estates business. The Learned AR referred page No. 26 of the First Appellate Order in this regard. He pointed out that even in the assessment order framed under sec. 143(3) of the Act for the assessment year 2005-06, it is an admitted fact by t....
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....se facts, we are of the view that the Learned CIT(Appeals) was not justified in arriving at a conclusion that the assessee company has not commenced the business of real estates. This conclusion of the Learned CIT(Appeals) is set aside with this finding that during the year the assessee had commenced the business of real estates. The ground No.3 is thus decided in favour of the assessee. 16. Ground No.4: This ground has been raised as an alternative and without prejudice to the above submissions that in view of finding of Learned CIT(Appeals) agitated above in ground No.3, the Learned CIT(Appeals) ought to have held that the land held and owned by the assessee in Village: Bhondsi measuring 38.09 hector is an agricultural land despite the fact that the same was shown in the balance sheet, under the head "stock in trade" of the value of Rs. 3,11,24,826. 17. The learned Senior DR, however, tried to justify the First Appellate Order that the assessee had not commenced the real estates business. 18. Having gone through the orders of the authorities below, we find that the Learned CIT(Appeals) has given his finding on the issue in para No. 7.14 of the First Appellate Order at pa....
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....paid to HDFC Bank and the bank charges of Rs. 39,37,932. The break-up of the charges is as under: SNo. Particulars Amount (Rs.) 1. Interest paid on HDFC loan Rs. 800 lacs. 26,86,143 2. Interest paid ICICI Home Loans 3,88,138 3. Bank Charges 8,63,651 Total 39,37,932 20. The figure stated in the ground of appeal is Rs. 41,70,626 which includes Rs. 2,21,879 separately challenged in ground No.2.4 above and Rs. 10,815 representing interest paid on car loan deleted by the Learned CIT(Appeals). 21. In respect of remaining amount, the Learned AR submitted that interest has been paid on money borrowed for the purpose of business and utilized in the business. Taking up interest of Rs. 26,86,143, he submitted that assessee had borrowed a sum of Rs. 8 crores from HDFC Bank for the purpose of business as would be clear from the details discussed earlier. The Learned AR submitted that the Learned CIT(Appeals) has failed to appreciate that assessee in the course of its business had borrowed funds for the purpose of its business and made advances towards acquisition of land and properties. In fact, the Learned CIT(Appeals) has himself....
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....contention that the Learned CIT(Appeals) has though noticed that the assessee has incurred expenditure of Rs. 8,63,582 as bank charges which is being claimed by it as business deduction, however, he has not specifically dealt with the same in his order. In fact, since he held that the amount of interest paid to HDFC Bank of Rs. 26,86,143 on loan of Rs. 8 crores and interest paid to ICICI Bank of Rs. 3,88,138 cannot be regarded as business expenditure, he sub-silentio upheld the disallowances made of the bank charges paid to the HDFC Bank. The Learned AR accordingly prayed that the amount of interest paid of Rs. 26,86,143, Rs. 3,88,138 and of Rs. 8,63,582 as bank charges aggregating to Rs. 39,31,938 be directed to be allowed. 23. The learned Senior DR on the other hand tried to justify the orders of the authorities below. 24. Considering the above submissions, we are of the view that when Learned CIT(Appeals) himself has admitted that funds have been utilized as working capital of the real estates business in his finding in para No. 7.13 at page No. 26 of the order, he was not justified in denying the claimed deduction of interest payments on the borrowed amounts for the inves....
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.... vs. Dalmia Cement (P) Ltd. iv ) 265 ITR 77 (Allahabad) - Abbas Wazir (P) Ltd. vs. CIT; 27. The Learned AR submitted further that the Learned CIT(Appeals) has upheld the disallowance based on factual misappropriation of facts. The assumption of Learned CIT(Appeals) that assessee had not incurred the expenditure for the purpose of its business is based on no material. He also failed to appreciate that in the preceding year, similar expenditure has been held fully allowable. He placed reliance on the following decisions: i) 56 ITR 27 - CIT vs. Indian Bank Ltd.; ii) 219 ITR 563 (S.C) - Waterfall Estates Ltd. vs. CIT; iii) 242 ITR 450 (S.C) - Rajasthan State Warehousing Corporation vs. CIT; iv ) 128 ITR 189 (P&H) - Punjab State Cooperative Supply & Marketing Federation Ltd. Vs. CIT. 28. The learned Senior DR on the other hand placed reliance on the orders of the authorities below. 29. Considering the above submission, we find that in the preceding years, similar expenditure has been allowed and out of these assessment years 2001-02 to 2005-06 in the assessment years 2001-02 and 2005-06 the assessments have been framed under sec. 143....
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.... 8.4 has summarily rejected the claim of deduction without any justification. He submitted that it is not a case where the Assessing Officer or Learned CIT(Appeals) has disputed either of incurring of expenditure or genuineness thereof. The only objection of the authorities below remained that no prudent businessman would have incurred expenses on travelling and conveyance to the tune of Rs. 11.78 lacs to earn receipts of Rs. 22.36 lacs since many other expenses overheads would also be there. Both the authorities have noted that fringe benefit tax has been paid on travelling and conveyance expenses. Thus, it is evident that aforesaid expenditure since have been incurred in the course of business on employees and for the purpose of business, no disallowance would have been sustained. He submitted that even otherwise ad hoc disallowances are not tenable in law and placed reliance on the following decisions: i) Goodyear India Ltd. vs. ITO - 73 ITD 189 (Del.); ii) Dinesh Mills Vs. CIT - 254 ITR 673 (Guj.); 33. The Learned AR submitted further that even otherwise, there is no basis to disallow 50% of the eligible business expenditure incurred by the assessee company....
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....been paid at the amounts borrowed for the purchase of property and was allowable under sec. 24(b) of the Act. The Learned CIT(Appeals) was thus right in allowing the same. 40. Considering the above submissions and following the decisions taken on an identical issue hereinabove while disposing of Ground No. 2.4 of the appeal preferred by the assessee, we hold that interest paid to HDFC Bank and on unpaid amount ( out of the sale consideration ) to Lal Bhai Reality Finance Pvt. Ltd. from whom the property was purchased, an interest on the unpaid amount was paid to them represented borrowed amount and as such it was eligible for deduction under sec. 24(b) of the Act. The Learned CIT(Appeals) was thus justified in allowing the claimed deduction of Rs. 27,20,088. The same is upheld. Ground No (i) is accordingly rejected. Ground No.(ii): 41. The Revenue has disputed the allowability of the claim of expenditure of Rs. 15,24,479 representing expenditure under the head "legal and professional charges". 42. In support of the ground, the learned Senior DR submitted that the assessee had incurred substantial expenses to earn almost similar receipts which no prudent businessman would h....
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....ppeals) has further failed to appreciate that, the assessee is engaged in the various business activities namely as a developer of real estate and dealer in real estate etc., and only one of it, was from income by way of interest. 3. That the Learned CIT(Appeals) has erroneously held, that merely because, in the instant year, that a part of the interest of Rs. 13,46,708 had been earned, by way of interest of fixed deposits, whereas, substantial part of interest i.e. of Rs. 70,18,416 had been earned by advancing funds to various companies to whom the amounts were advanced in the preceding year(s), the same is not sufficient to conclude, either in law or facts that the income derived by the assessee was not an income assessable under the head "business income". He has further failed to appreciate that the assessee has also advanced further amounts to such parties in addition to advances made in earlier years . 4. That the Learned CIT(Appeals) has further failed to comprehend the facts of the instant case in its proper and correct prospective. In fact, he has failed to comprehend that, assessment for the assessment years 2005-06 and 2006-07 were completed u/s. 143(3)....
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....ciating the amount disallowed by the Assessing Officer was in respect of an amount of dividend earned which aggregate to Rs. 66,750, whereas the disallowance made by the Assessing Officer far exceeded the amount and such expenditure as disallowed showed no nexus with the expenditure incurred and was nor in relation to the income derived from the dividend. 9. In any case and without prejudice the disallowance made could not have exceeded the sum of Rs. 8,497 which was calculated by the assessee in accordance with rules. 10. That the Learned CIT(Appeals) ought to have held that, no interest was leviable on the assessee u/s. 234B of the Income-tax Act, 1961 and as such interest levied of Rs. 15,61,030 ought to have been deleted." 47. In ground Nos. 1 to 7: We have discussed the facts of the case in brief while disposing the appeal for the assessment year 2006-07 hereinabove. The assessee company was incorporated on 28.2.1973. It is engaged in the business of development of real estates, sale and purchase of wood and related items. It is also engaged in the business of providing consultancy, earning service income by providing infra-structure facility for maintenan....
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....ssment years and the interest income earned in each of such assessment years had been offered as business income and same has also been accepted in all the preceding assessment years i.e. 2002-03 to 2007-08 and 2009-10. He pointed out that even in the assessment framed under sec. 143(3) of the Act for the assessment years 2005-06 and 2006-07, the interest income offered as business income has duly been accepted. Hence, even on the principles of consistency, aforesaid interest income as was offered by the assessee is liable to be taxed as business income and not as income from other sources. The authorities below have failed to appreciate that facts and circumstances of the present years are identical to the preceding assessment years and they have overlooked that it is not a case wherein all the preceding assessment years, the interest income was accepted as business income under sec. 143(1) of the Act. As such Revenue cannot take a stand that assessee is not engaged in advancing the money and earning interest as business income. In support, he placed reliance on the following decisions: i) CIT vs. Neo Poly Pack Pvt. Ltd. - 245 ITR 492 (Del.); ii) CIT vs. Excel In....
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....estricted to Rs. 1,79,09,346 and not at Rs. 2,09,62,446 as was made by the Assessing Officer. He submitted further that the Assessing Officer had proceeded to compute the income not from profit and loss account but from the computation of income, while making the disallowance to adopt the figure as per profit and loss account by disregarding the computation of income filed by the assessee. He, in fact, had not computed income from business on the ground that the assessee had not carried any business and thus he did not even allow the set off the unabsorbed loss as claimed by the assessee, submitted the Learned AR as an alternative plea. 57. The learned Senior DR on the other had relied upon the orders of the authorities below. He submitted that under the facts of the case, the authorities below have rightly treated the claimed interest income as income from other sources. He submitted further that principles of res-judicata is not applicable in the matters of income-tax. 58. Considering the above submission, we find that in the assessment years 2002-03 to 2007-08 and 2009-10, the interest income offered as business income has duly been accepted. It has not been denied by the ....
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....horities below in this regard direct the Assessing Officer to accept the claimed income in question as business income. Ground Nos. 1 to 7 involving the issues are thus allowed. 59. Issue No. (ii) - Ground Nos. 8 & 9: The Assessing Officer made disallowance of Rs. 1,36,798 under sec. 14A of the Act by invoking Rule 8D of the Income-tax Rules, 1962. The Learned CIT(Appeals) has remanded the issue to the file of the Assessing Officer to consider the issue afresh. 60. In support of the grounds, the Learned AR submitted that no expenses have been incurred by the assessee to earn the exempt income; and the Assessing Officer has not recorded any satisfaction vis-à-vis books of account of the assessee that any expenditure has been incurred by the assessee to earn the exempt income. In support, he placed reliance on the following decisions: i) CIT vs. Taikisha Engg. India Ltd. - ITA No. 114 of 2014 and 119 of 2014 dated 25.11.2014 (Delhi High Court); ii) HPP Energy (P) Ltd. vs. ACIT - ITA No. 4138/Del/2013 dated 20.3.2015. 60. Without prejudice to the above submissions, the Learned AR contended that disallowance under sec. 14A of the Act can be made only i....