TaxTMI 
TaxTMI 
2016 (1) TMI 113
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....e 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 Rs. 31,15,773 had correctly been computed. 2.3 That the Learned CIT....
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....taining 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. 9,37,33,600 besides stamp duty and registration expenses. The property was purchased with effect from 22.9.2005 when the assessee paid a sum of Rs. 6,12,98,805 and subs....
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....an 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 it was not an interest paid on the capital borrowed from the HDFC Bank . He submitted further that this amount also cannot be claimed as expenditure incurred for business purpos....
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.....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 the Assessing Officer that assessee is engaged in the work of real estates. In support, he referred page Nos. 374 to 282 of the paper book i.e copy of the assessment order for assessment year 2005-06. He pointed out further that in the ....
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....e 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 page No. 27. The Learned CIT(Appeals) has stated that receipt from real estates business cannot be considered as sufficient or adequate test to determine whether the business has been set up or has commenced. He has, however, noted that the assessee is holding 38.09 hectors of agricul....
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....,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 admitted that the funds have been admittedly utilized as working capital of the real estates business (Page No. 26 of the First Appellate Order), however, he has not allowed the same on his contradictory finding that the assessee has not set up and commenced the business of real estates. He submitted that the ass....
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.... 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 investment made in stock in trade. The Learned CIT(Appeals) has disallowed the claimed interest payment on the basis that the business for the purpose of which loan was raised and interest was paid was not commenced. We have decided this issue hereinabove in ground No. 3 that keeping in view the facts and circumstances of th....
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....s 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(3) of the Income-tax Act, 1961. It is a trite law that after the business has been set up, the expenditure incurred is an allowable deduction. The Assessing Officer has disallowed the claim on proportionate basis on an erroneous assumption that there is no income from business of real estates as such, only expenses to that extent there is business income which is allowable. He accord....
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..... 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 and placed reliance on the decision of Hon'ble Supreme Court in the case of State of Orissa vs. Maharaja Shri B.P. Singh Deo (1970) - 76 ITR 690 (S.C). 34. The Learned DR on the other hand placed reliance on the orders of the authorities below. 35. Considering the above submission, we find substance in the contention of the Learned AR that a disallowance of the claimed expenditure cannot be made on ....
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....ideration ) 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 have incurred. 43. The Learned AR on the other hand reiterated submissions made before the authorities below with this further contention that details of the expenses were made available before the Assessing Officer which were duly supported by bills. He pointed out that a copy of the said details has been made available at page No. 368 of the paper book. He submitted that the purpose of incurring the aforesaid expenditure was to pay consu....
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....t 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) of the Income-tax Act, and incorrectly been stated in the table at page 15 of his order u/s. 143(1) of the Income-tax Act, 1961. 5. That the Learned CIT(Appeals) has erred in his conclusion that, as two of the activities since were inoperative during the year, the assessee did not maintain in the business, more particularly after having held that, in respect of Real Estate business there was no change in the inventory and it remained stock-in-trade. The Learned CIT(Appeals....
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....rdance 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 maintenance of property and earning of interest income on the advances made. 48. During the year, assessee had offered income from sales of Rs. 19,917, rental income of Rs. 1,98,31,020 and other income of Rs. 84,31,874 which included the interest income of Rs. 83,65,124 and dividend income of Rs. 66,750. Against the aforesaid, the assessee had claimed expenditure of Rs. 2,77,77,591. The Assessing Officer framed the assessment under sec. 143(3) at the income of Rs. 1,51,50,290 as against the returned income at nil. The Assessin....
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....come 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 Industries Ltd. (2013) - 358 ITR 295 (S.C); iii) CIT vs. J.K. Charitable Trust - 308 ITR 161 (S.C). 53. Without prejudice to the above submissions, the Learned AR submitted that section 56 of the Income-tax Act, 1961, provides that income of every kind which is not to be excluded from the total income under the Act shall be chargeable to income-tax under the head "income from other sources", if it is not chargeable to income-tax under any of the heads specified in sec. 14, item A to E. He cited following decisions in support: i) SG Mercantile Corporation (P) L....
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....d 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 Revenue that facts of the case on the issues during the year are similar to that of earlier assessment years. Principles of maintenance of consistency in the approach of the revenue on an identical issue under similar facts and circumstances are well established proposition of law. In its recent decision, the Hon'ble Supreme Court in the case of CIT vs. Excel Industries Ltd. (supra) has been pleased to hold that Revenue cannot be allowed to flip flop on the issue and having accepted the order in preceding years, Revenue cannot be allowed to take a contrary view in subsequent assessment years. Furt....
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....he 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 in respect of the shares on which assessee has erred dividend income and since in the present case the assessee has earned dividend of Rs. 66,750 only, as such disallowance at page under sec. 14A read with Rule 8D can be made only in respect of such shares and such disallowance if at all has to be made to the extent of Rs. 8,497 only. In this regard, he placed reliance on the decision of Hon'ble Delhi High Court in the case of Joint Investment Pvt. Ltd. vs. CIT- ITA No. 117 of 2015 dated 25.2.2015. 61. The learned Senior DR on the contrary tried to justify the orders of the authorities below with this further submiss....