Income Tax Appellate Tribunal - Chandigarh
Sh. Vinay Singal, Ludhiana vs Acit, Ludhiana on 29 March, 2019
आयकर अपील य अ धकरण,च डीगढ़ यायपीठ "बी ", च डीगढ़
IN THE INCOME TAX APPELLATE TRIBUNAL,
CHANDIGARH BENCH 'B' , CHANDIGARH
ी संजय गग , याय क सद य एवं ीमती अ नपण
ू ा ग&ु ता, लेखा सद य
BEFORE: SHRI SANJAY GARG, JUDICIAL MEMBER
AND SMT.ANNAPURNA GUPTA, ACCOUNTANT MEMBER
आयकर अपील सं./ ITA No.261/Chd/2015
नधा रण वष / Assessment Year : 2011-12
आयकर अपील सं./ ITA No.22/Chd/2017
नधा रण वष / Assessment Year : 2012-13
Sh.Rajeev Singal बनाम The A.C.I.T.,
C/o JVR Forgings Ltd., Circle-V,
Indl. Area-C, Sua Road, Ludhiana.
Ludhiana.
थायी लेखा सं./PAN NO: A R S P S 8 3 0 1 D
आयकर अपील सं./ ITA No.262/Chd/2015
नधा रण वष / Assessment Year : 2011-12
&
आयकर अपील सं./ ITA No.23/Chd/2017
नधा रण वष / Assessment Year : 2012-13
Sh.Vinay Singal बनाम The A.C.I.T.,
C/o Eastment Impex, Circle-V,
Indl. Area-C, Sua Road, Ludhiana.
Dhandari Kalan,
Ludhiana.
थायी लेखा सं./PAN NO: A D V P S 8 3 5 6 H
नधा रती क ओर से/Assessee by : Shri Ashwani Kumar, CA
राज व क ओर से/ Revenue by : Shri Ram Mohan, CIT DR
सन
ु वाई क तार"ख/Date of Hearing : 28.01.2019
उदघोषणा क तार"ख/Date of Pronouncement: 29 .03.2019
आदे श/ORDER
PER BENCH:
The capti on ed appeal s have b een preferred b y t wo di fferent assessees agai nst separate orders dated 20.1.2015, 11.11,2016, 20.1.2015, and 11.11 .2016 of the Com mi ssi oner 2 ITA No.261/Chd/2015 A.Y.2011-12 ITA No.22/Chd/2017 A.Y.2012-13 ITA No.262/Chd/2015 A.Y.2011-12 ITA No.23/Chd/2017 A.Y.2012-13 of I ncome Ta x ( A ppeal s) -2, Ludhi ana [ herei nafter referred to as CI T( A) ] , passed u/s 250(6) of the I ncome Ta x Act,1961( herei nafter referred to as "Act") The assessment years i nvol ved in al l the appeals are A.Y 2011-12 and A.Y 2012-13.
I t was common ground bet ween both the parti es that the i ssue i nvol ve d i n al l the appe al s i s i denti cal . The y were therefore heard together and are bei ng di sposed off by thi s consol i dated common order.
For the sake of conveni ence we shal l be deal i ng wi th the facts i n the case of I TA No .262/Chd/2015 rel ating to assessment year 2011-12 and our deci si on rendered t herei n wi l l appl y mutati s mutandi s to other appeal s al so. ITA No.262/Chd/2015(A.Y.2011-12):
2. Ground No.1 rai sed by the assessee reads as under:
"(1) That order passed u/s 250(6) of the Income Tax Act, 1961 by the Ld. Commissioner of Income Tax (Appeals)-II, Ludhiana is against law and facts on the file in as much he was not justified to arbitrarily uphold the disallowance of Rs. 95.73.276/- out of total disallowance of Rs. 1,49,62,428/- made by the Ld. Assessing Officer u/s 57 out of interest account."
3. Bri ef facts rel ati ng to the i ssue are that return decl ari ng total i ncome of Rs. 1, 55,36,200/- was fi led on 30.09.2011. The assessee deri ves i ncome from ca pi tal gai ns and i ncome fro m other source s. Duri ng the course of 3 ITA No.261/Chd/2015 A.Y.2011-12 ITA No.22/Chd/2017 A.Y.2012-13 ITA No.262/Chd/2015 A.Y.2011-12 ITA No.23/Chd/2017 A.Y.2012-13 assessment proceedi ngs A.O. no ted that the ass essee had cl ai med i nterest e xpenses of Rs. 1,49,62,428/- against i nterest i ncome of Rs. 1,52,77,082/-. The A.O. asked the assessee to e xplai n ho w each of these e xpenses cl aimed had been i ncurred whol l y and e xc l usi vel y to wards earni ng i ncome. The ass essee submi tted that he had ra i sed loans from vari ous parti es/banks as overdraft faci l i ti es i n the past more than 4 to 5 years whi ch was i ntroduced by the assessee wi th hi s fami l y concerns namel y M/s Janpath Estates Pvt. Ltd. M/s Eastma n I mpe x, M/s JVR Forgi ngs Ltd. etc. That Over a peri od o f ti me some of the l oans were repai d and taken from some other parti es. That after havi ng number of entri es i n these 4 to 5 years, at present i t was not possi bl e for the assessee to establ i sh a ny ne xus of i nt erest pai d agai nst earni ng of i nterest i ncome. Keepi ng i n vi e w the submi ssi ons made by the asse ssee the A.O. asked the assessee to e xpl ai n why i nterest e xpenses cl ai me d ma y not be di sal l o wed us 57 of the I . T. Act. The A.O. con sidered the repl y of the assessee. Thereafter referri ng to the provi si ons of Secti on 57, whi ch provi de that deducti on woul d be al l o wed onl y i f expendi ture i s l ai d out or e xpended whol l y and e xcl usi vel y for the purpose of earni ng i ncome, the A.O. poi nted out that there had to be a di rect and complete ne xus bet ween i ncome and the e xpendi ture so as to cl aim deducti on u/s 5 7. I n thi s regard the A.O. poi nte d out that 4 ITA No.261/Chd/2015 A.Y.2011-12 ITA No.22/Chd/2017 A.Y.2012-13 ITA No.262/Chd/2015 A.Y.2011-12 ITA No.23/Chd/2017 A.Y.2012-13 the assessee h ad hi msel f adm i tted in the l e tter dated 16.12.2013 that i t was not possi bl e for the assessee to establ i sh any ne xus of i nterest pai d agai nst earni ng of i nterest i ncome.
4. The A.O. furth er poi nted out that on perusal of computati on of i ncome i t was seen that out of the interest recei pts of Rs. 1,52,77,083/-, Rs. 1,51,99,859/- had been recei ved from M/ s Janpath Estate s Pvt. Ltd. The A. O. further poi nted out that the l edger of the assessee i n the books of M/s Janpath Estates al so sho wed that si gni fi cant amount of pa yment made to M/s Janpath Estate Ltd. was duri ng the year under consi derati on. The A. O. further poi nted out that duri ng the year the assessee had wi thdra wn Rs. 18,51,55,5307- f rom M/s Eastma n I mpe x. The A. O. observed that the pa yments made to M/s Janpath Estate Ltd., from whom most of t he i nterest i nco me had been re cei ved, was out of funds recei ved from M/s Eastman I mpe x and not from borro wed funds. The A.O. t he refore hel d that i nterest beari ng l oans had not been used for earni ng of i nterest i ncome. The A.O . accordi ngl y di sal l o wed deducti on cl ai med u/s 57 amounti ng to Rs.1,49,62,428/-.
5. Before the Ld. CI T( A) the ass essee fi l ed det ai l ed submi ssi ons, re produced at pa ra 4.3 of the order The Ld.CI T( A) anal yzed the provi si ons of l a w i n thi s reg ard cul l ed 5 ITA No.261/Chd/2015 A.Y.2011-12 ITA No.22/Chd/2017 A.Y.2012-13 ITA No.262/Chd/2015 A.Y.2011-12 ITA No.23/Chd/2017 A.Y.2012-13 from vari ous judi ci al deci si ons and hel d that as per the provi si ons of se cti on 57( i i i ) of t he Act, any e xp endi ture i s al l o wabl e as deducti on agai nst the i ncome from other sources onl y it i ts is l ai d ou t or e xpanded whol l y or e xcl usi vel y for the purpose of maki ng or ear ni ng such i ncome. Thereaft er appl yi ng thi s provi si on to the facts of the case dra wn from the statement of affai rs of the assessee,at para 4.7 of the order, the Ld.CI T( A) hel d that at best, onl y funds amounti ng to Rs.11,55,30,660/- were depl o yed for earni ng i nterest and remai ni ng amounts of funds out of the total borro wed funds of Rs.22,35,30,371/- i .e. Rs.10,80,26,711/- were used for other acti vi ti es. Accordi ngl y, he hel d that the interest on these funds be di sal l o wed u/s 57 of the Act.
6. Before us, the Ld. counsel for assessee contended that the method empl o yed by the Ld. CI T( A) for worki ng out the di sal l o wance of i nterest was i ncorrect. I t was poi nted out that the fact of t he matter was th at there were mi xed funds avai l abl e wi th the assessee and i t was di ffi cul t, therefore, to work out the di rect ne xus bet ween the borro wed funds uti l i zed for maki ng l oans and advances. The Ld. Counsel for the assessee contended that i denti cal i ssue had been deal t wi th by the I TA T Chandi garh Be nches i n the cas e of ACI T, Ci rcl e-VI , Ludhiana Vs. Pa wan Kumar Goel i n I TA 6 ITA No.261/Chd/2015 A.Y.2011-12 ITA No.22/Chd/2017 A.Y.2012-13 ITA No.262/Chd/2015 A.Y.2011-12 ITA No.23/Chd/2017 A.Y.2012-13 No.1438/Chd/2010 dated 31.10.2011 wherei n the total amount of funds depl o yed for ea rni ng i nterest w as vi e wed agai nst the borro wed funds and after consi deri ng the same the di sal l o wance of i nterest u/s 5 7( i i i ) of the Act w as worked out. Our attenti on was dra wn t o para 4.5 of th e order as under:
"4. We have carefully perused the facts of the case, rival submissions and the case laws relied on by both the parties including the paper book. In this case the assessee submitted before the Id. CIT(A), as recorded at page 2 of the appellate order that own fund of the assessee exceeded borrowed funds, on which the interest was paid. It was, further, demonstrated in the form of submission field before the Id. CIT(A) that through out the year borrowed fund is on the lower side as compared to fund given on interest. As such it was contended that no disallowance on this count is called for. The relevant data in the matter is extracted from the order of Id. CIT(A) and is reproduced hereunder:-7 ITA No.261/Chd/2015
A.Y.2011-12 ITA No.22/Chd/2017 A.Y.2012-13 ITA No.262/Chd/2015 A.Y.2011-12 ITA No.23/Chd/2017 A.Y.2012-13 4.1 The Id. C1T(A) in his findings clearly held that the assessee had given Rs. 4,25.86,325/~, on interest to different parties. The assessee has taken an amount of Rs. 3,48,27,666/-, on interest. In view of this, it was held by the Id. G1T(A) that the funds for earning interest is higher than the amount of borrowed funds. Therefore, in the entirety of the facts and circumstances of the case, it is evident that the borrowed funds had not been used for other purposes than earning interest. Reference made by the Id. 'AR', to the contents of table 3 and 4 has force. Deployed funds for interest is always higher than the borrowed funds except for the month of December, 2006. In views of this, the decision of Hon'ble Jurisdictional High Court in the case of Abhishek Industries relied upon by the Id. 'AR1 is not applicable to facts of the case. Sirnilary, the decision in the case of Padmmavati Jaykrishna V. C1T, 131 ITR 653 (Guj) does not support the case of the revenue having regard to the facts of the case.
4.2 The findings of the Id. CIT(A) are given hereunder:
"1 have carefully considered the contention of the Ld. counsel for the appellant and perused the relevant record. The assessee has given Rs. 4,25,86,3257- to different parties on interest. Similarly the assessee has taken Rs.3,48,27,666/- on interest. Since fund_ deployed for earning interest is higher than the amount of borrowed fund hence in totality it seems that borrowed fund has not used for assessee has also point out that disallowance of interest expenditure at the ratio of 36.81 is against the fact of the case. The Id. counsel for the assessee has 8 ITA No.261/Chd/2015 A.Y.2011-12 ITA No.22/Chd/2017 A.Y.2012-13 ITA No.262/Chd/2015 A.Y.2011-12 ITA No.23/Chd/2017 A.Y.2012-13 further submitted that as per Table 3 prepared by the AO deployed fund for interest is always higher than the borrowed fund except for the month of December, 2006. The ld.
counsel in his submission has submitted that Table 4 as calculated by the AO has been taken as a basis for calculating the amount of interest not utilized wholly and exclusively for the purpose of earning of interest. Conclusion of fund deployment as per Table 4 does not in accordance with a conclusion of fund deployed as per balance sheet. The argument put forth by the Id. counsel has strong reason to believe that the ratio taken by the Dy. Commissioner for disallowing interest expenditure is not correct. In view of the above discussion the expenditure of Rs.17,32,8117- is directed to be considered as expenditure. This ground of appeal is therefore, allowed."
4 . 3 The decision relied upon by the Ld. 'AR' in the case of Appollo Trade Links v. ITO, B-Ward, 204 ITR (AT) 78 supports the case of the assessee.
5. In view of the above detailed legal and factual discussions, it is evident that borrowed funds were not used for advancing loans. However, the assessee used his surplus funds for earning the interest. Consequently, disallowance of interest by the AO under such fact-situation is not justified, therefore, we do not find any infirmity in the findings of the Id. C1T(A) and, hence, the same are upheld."
7. I t was poi nted out that thi s deci si on of the I . T.A. T. was fol l o wed i n the s ubsequent year i n the case of Pa wan Kumar Goel Vs. ACI T i n I TA No.528/Chd/2013 dated 11.7.2014. Further the Ld. counsel for assessee poi nted out that fol l o wi ng these deci si ons the A.O. had worked out di sal l o wance of interest u/s 57( 3) of the Act i n the case of the assessee i tsel f i n subsequent years .e. assessment year 2013-14 and as sessment year 2 014-15. Copi es of al l the above orders were pl aced before us. Our attenti on was dra wn to pages 3 to 5 of the assessm ent order for A. Y 2013-14, 9 ITA No.261/Chd/2015 A.Y.2011-12 ITA No.22/Chd/2017 A.Y.2012-13 ITA No.262/Chd/2015 A.Y.2011-12 ITA No.23/Chd/2017 A.Y.2012-13 poi nti ng out therefrom that fol l o wi ng deci si on of the I . T.A. T. i n the case of Pa wan Kumar Goel i n I TA No.1438/ Chd/2010 on noti ng that the facts were i denti cal i n the said case wi th that of the assessee, the A.O. had worked out disall o wance of i nterest by worki ng out monthwi se e xcess i nterest beari ng funds avai l abl e wi th the assessee as compared to the i nterest earni ng advances di sal l o wi ng i nterest rel ati ng to the same as under:
Interest Interest earning Interest bearing Interest bearing funds advances funds invested in disallowance Non-interest u/s 57(1) earning advances April- 238813515 226219957.14 12593557.86 125935.58 2012 May-2012 236404560 282969957.14 June- 238863723 290669957.14 2012 July-2012 238158189 289669957.14 August- 243135079 290819957.14 2012 Sep-2012 252273184 300169957.14 Oct-2012 268233343 303069957.14 Nov-2012 272047764 310599957.14 Dec-2012 241306970 307499957.14 Jan-2013 235013297 311999957.14 Feb-2013 242933362 315499957.14 March- 279709033 313364589.14 2013 Total 1,25,935.58 T hus, an amo un t of Rs. 1, 25, 936/- is d is al l o we d u /s 57 and added b ack to the inco me of th e assessee.
8. Our attenti on was dra wn to the identi cal cal cul ati on of i nterest for assessment year 2014-15 pl aced at Paper Book page No.30 poi nti ng therefrom that there were no surpl us i nterest beari ng funds i n that year and accordi ngl y, no di sal l o wance of i nterest was made i n the assessment framed 10 ITA No.261/Chd/2015 A.Y.2011-12 ITA No.22/Chd/2017 A.Y.2012-13 ITA No.262/Chd/2015 A.Y.2011-12 ITA No.23/Chd/2017 A.Y.2012-13 u/s 143( 3) of the Act vi de order dated 17.8.2016 whi ch was pl aced at Paper Book page No.34. Our attenti on was al so dra wn to i denti cal monthwi se wise detai l of i nterest beari ng borro wi ngs and i nterest beari ng advances for assessment year 2015-16 pl aced at Paper Book page No.36 poi nting out therefrom that t he cal cul ati on of i nterest di sal l o wance u/s 57( i i i ) amounted to Rs.1,92,766 /- whi ch was a ccordingl y sho wn to have been di sal l o wed by the assessee in i ts computati on of i ncome, pl aced at Paper Book page No.38 and whi ch was accepted i n assessment framed u/s 143( 3) of the Act, copy of order of whi ch was pl aced at Paper Book page No.40. Thus it was contended by the Ld. counsel for assessee that fol l o wi ng the pri nci pl e of consi stency, the di sal l o wance of i nterest i n the i mpugned year o ught to be worked out i n an i denti cal manner. Monthwi se detai ls of i nterest beari ng borro wi ngs and i nterest beari n g advances for the i mpugne d year were pl a ced before us a nd i t was pl eaded that the matter be restored back to be al l owed i n the l i ght of the deci si on of the I . T. A. T. i n the case of Pa wan Kumar Goel ( sup ra) fol l o wed by t he A.O. i n the c ase of the assessee for subsequent years as detai l ed above.
9. The Ld. DR, on t he other hand, r el i ed upon the or der of the CI T( A) poi nti ng therefrom that i t had made detai l ed e xerci se of worki ng out the amount of borrowed funds 11 ITA No.261/Chd/2015 A.Y.2011-12 ITA No.22/Chd/2017 A.Y.2012-13 ITA No.262/Chd/2015 A.Y.2011-12 ITA No.23/Chd/2017 A.Y.2012-13 uti l i zed for the purpose of maki ng i nterest earni ng l oans and advances and, th erefore, the di sal l o wance of i ntere st worked out by hi m, i t was contended, was ri ghtl y made.
10. We have heard the ri val contenti ons and perused the orders of the authori ti es bel o w. The i ssue i n the present ground before us rel ates to di sal l o wance of i nteres t e xpenses as per the provi si ons of secti on 57( i i i ) of the Act. I t i s an undi sputed fact that the funds avai l abl e wi th the assessee were mi xed fund s and some of th e i nterest beari n g advances had been made i n the precedi ng years and i t was di ffi cul t to work out the e xa ct ne xus bet ween the i nterest bea ring funds and i nterest bear i ng advances. No ne of the authori ti es bel o w we fi nd, have be en abl e to establ i sh di rectl y the absence of any such ne xus whi l e worki ng out the amount di sal l owabl e u/s 57( i i i ) of the Act. The AO we fi nd reasoned th at ma jorl y i nterest was earned by the assessee from one M/s Janpath Estates and scruti ni zi ng the l edger account of the said part y, worked out the advances made to i t duri ng the year on the basi s of di fference in the openi ng a nd cl osing bal ance. Thereaf ter he deri ved fr om the bank sta tement of the assessee that ma jor amount w as recei ved by th e assessee from M/s Eastman I mpe x whi ch was non i nterest bearing. He therefore deduced that thi s non i nterest beari ng fund had been advanced for earni ng ma jor porti on of i nterest duri ng 12 ITA No.261/Chd/2015 A.Y.2011-12 ITA No.22/Chd/2017 A.Y.2012-13 ITA No.262/Chd/2015 A.Y.2011-12 ITA No.23/Chd/2017 A.Y.2012-13 the year and ac cordi ngl y di sal l o wed enti re i nter est cl ai med by the assessee. Th e Ld.CI T( A) , we fi nd, adopted a total l y di fferent basi s for cal cul ati ng the di sal l o wance e xtracti ng fi gures from the statement of affai rs fi l ed by the assessee and fi ndi ng that total borro wi ngs beari ng i nterest duri ng the year were Rs.22.35 crores whi l e amount advanced for earni ng i nterest was onl y 11.55 crores, whi ch he hel d coul d at best be treated as made from i nterest beari ng funds. The rest of the i nterest pai d was accordi ngl y di sal l o wed by the Ld.CI T( A) . Thus t he di sal l o wance of i nterest u/s 5 7( i i i ) of the Act, made by th e Revenue autho ri ti es, we fi nd, was not on the basi s of di rect ne xus bet ween non i nterest beari ng funds depl o yed for maki ng i nvestments earni ng i nterest.
11. I denti cal fact situati on, we fi nd, was deal t wi th by the I . T.A. T. i n the c ase of Pa wan K umar Goel ( supr a) wherei n quantum of di s al l o wance u/s 57( i i i ) was worked out by cal cul ati ng the monthl y di fference of i nterest be ari ng funds and i nterest earni ng advances and di sal l o wi ng i nterest rel ati ng to the surpl us of i ntere st beari ng funds rai sed ,on the presumpti on that the i nterest beari ng funds had been depl o yed for ma ki ng these adva nces and the su rpl us i f any was therefore depl o yed for purposes other than earni ng i nterest i ncome. Moreover, we fi nd, that i n the case of the assessee i n the subsequent years di sal l o wance of interest 13 ITA No.261/Chd/2015 A.Y.2011-12 ITA No.22/Chd/2017 A.Y.2012-13 ITA No.262/Chd/2015 A.Y.2011-12 ITA No.23/Chd/2017 A.Y.2012-13 u/s 57( i i i ) was made on thi s ba si s fol l o wi ng the deci si on of the I TAT i n the case of Pa wan Goel ( supra) . Consideri ng the same, we hol d that the di sal l o wance u/s 57( i i i ) of the Act i n the present case al so shoul d be worked out accordi ngl y as prescri bed by the I TAT i n the case of Pa wan Goel (supra) and whi ch was fol l o wed i n the case of the assessee i n subsequent years. The i ssue i s accordi ngl y r estored back to the A.O. to work out di sal l owance of i nterest as above. Thi s ground of appeal by the as sessee i s, theref ore, al l o wed for stati sti cal purposes
12. Ground of appea l No.2 rai sed by the assessee rea ds as under:
"2. That he was not justified to arbitrarily uphold the disallowance of Rs.74,34,992/- made u/s 14A."
13. Thi s ground rel a tes to di sal l o wance of e xpenses made u/s 14A of the Act rel ati ng to those i ncurred for the purpose of earni ng e xempt i ncome.
14. Bri ef facts rel ati ng to the i ssue are that the assessee had sho wn i nvestment of Rs. 25,36,52,818/- and Rs.16,15,53,614/- as on 31. 03.2011 and 31.03.2010 respecti vel y i n the bal ance sheet. The i ncome from these i nvestments does not form part of the total i ncome. The A.O. further noted that the assessee had i ncurred i nterest e xpendi ture of Rs.1,49,62,428/-. The A.O. asked the 14 ITA No.261/Chd/2015 A.Y.2011-12 ITA No.22/Chd/2017 A.Y.2012-13 ITA No.262/Chd/2015 A.Y.2011-12 ITA No.23/Chd/2017 A.Y.2012-13 assessee to e xplai n why provi si ons of Secti on 14A ma y not be appl i ed i n the assessee's case. After consi deri ng the assessee's submi ssi ons on thi s i ssue, the A.O. hel d that provi si ons of Secti on 14 A were attracted i n the case. The A.O. computed di sal l o wance under Rul e 8D( i i ) at Rs. 74,34,992/- and under Rul e 8D( i i i ) at Rs.10,38,016/-. The total di sal l o wance of Rs.84,37,008/- was made. Ho wever, as the whol e of i nterest e xpendi ture of Rs.1,49,62,428/- was di sal l o wed by the A.O. u/s 57 of the Act, no further di sal l o wance on thi s account was made.
15. The Ld.CI T( A) on fi ndi ng that out of the total i nterest e xpendi ture of Rs.1,49,62,428/- cl ai med by the assessee an amount of Rs.95,73,276/- had been di sal l o wed u/s 57 of the Act and the remai ni ng had been hel d as i ncurred di rectl y for the purpose of earni ng i nterest i ncome and hel d that no further di sal l o wance was to be made out of the expendi ture hel d to have been i ncurred for the purpose of earning i nterest i ncome. Accordi ngl y, he tel escoped the di sal l o wance made by the asse ssee of Rs.74,34, 922/- u/s 14A i n the total di sal l o wance of i nterest of Rs.95,73,276/- made u/s 57 of the Act.
16. Before us, the Ld. counsel for assessee rel i ed on the fi ndi ngs of the Ld.CI T( A) that once the total i nterest e xpendi ture i s b i furcated for the purpose of sect i on 57 as 15 ITA No.261/Chd/2015 A.Y.2011-12 ITA No.22/Chd/2017 A.Y.2012-13 ITA No.262/Chd/2015 A.Y.2011-12 ITA No.23/Chd/2017 A.Y.2012-13 i ncurred for the purpose of earni ng i nterest i ncome and other wi se and the l ater porti on i s di sal l o wed, no further di sal l o wance u/s 14A can be mad e si nce the bal a nce cl earl y rel ated for the purpose of earni ng ta xabl e i nterest i ncome.
17. We fi nd meri t i n the contenti on of the Ld. counsel for assessee. The di sal l o wance, i f any, u/s 14A i s to be made out of the bal ance amount remai ni ng after maki ng di sal l o wance of i nterest u/s 57 of the Act. Th i s bal ance amount whi ch i s al l o wed u/s 57 of the Act i s on the ground that it has be en i ncurred for earni ng ta xabl e i nterest i ncome. Therefor e, thi s i nterest e xpenses cannot now be hel d to have been i ncurred for earni ng e xempt i ncome for the purpose of secti o n 14A of the Act and hence, we agree wi th the Ld. counsel for assessee that after the exerci se of di sal l o wance of i nterest u/s 57 of the Act i s completed vi s-à- vi s enti re i nterest e xpendi ture i ncurred by the assessee, no further di sal l o wance of i nterest i s warranted u/s 14A of the Act. Thi s ground of appeal , i s, therefore, al l o wed.
The appeal of t he assessee i s al l o wed for stati stical purposes.
ITA No.23/Chd/2017(A.Y. 2012-13:
18. Ground Nos.1 and 2 rai sed by the assessee read as under:
16 ITA No.261/Chd/2015
A.Y.2011-12 ITA No.22/Chd/2017 A.Y.2012-13 ITA No.262/Chd/2015 A.Y.2011-12 ITA No.23/Chd/2017 A.Y.2012-13 "1. That order passed u/s 250(6) of the Income Tax Act, 1961 by the Ld. Commissioner of Income Tax (Appeals)-
2, Ludhiana is against law and facts on the file in as much as she was not justified to arbitrarily uphold disallowance of a sum of Rs. 84,28,993/- out of interest account made by the Ld. Assessing treating the same as not allowable u/s 57 of the Income Tax Act, 1961.
2. That she was further not justified to uphold disallowance of Rs. 93,88,780/- u/s 14A as worked out by the Ld. Assessing Officer."
19. It was common ground that the issues i n ground Nos.1 & 2 rai sed by the assessee i n thi s appeal were si mil ar to ground Nos.1 & 2 rai sed by the assessee in I TA No.262/Chd/2015 adjudi cated above .Our deci si on rendered therei n at para s 10 -11 and 16 respecti vel y and wi ll therefore appl y mutati s mutandi s to these grounds al so fol l o wi ng whi ch Ground Nos. 1 rai sed by the assessee i s al l o wed for stati sti cal purposes whi l e ground no.2 i s al l o wed.
20. Ground No.3 rai sed by the assessee reads as under:
"3. That she further gravely erred in upholding an addition of Rs. 23,92,500/- to the long term capital gain made by the Ld. Assessing Officer by invoking the provisions of Section 50C."
21. Bri ef facts rel ati ng to the i ssue a re that an i nform ati on was recei ved from I TO, Ward 20( 1) ( 5) , Mumbai vi de letter dated 18.02.2015 that the assessee had sol d a fl at at Matunga, Mumbai for Rs. 85,00,000/-, the fai r market val ue of whi ch was Rs.1,08,92,500/-, The val uati on report attested by the Joi nt Su-Regi strar, Department of S tamp and Regi strati on, Mumbai -1 was al so provi ded in whi ch the 17 ITA No.261/Chd/2015 A.Y.2011-12 ITA No.22/Chd/2017 A.Y.2012-13 ITA No.262/Chd/2015 A.Y.2011-12 ITA No.23/Chd/2017 A.Y.2012-13 market val ue or the Stamp Dut y/ Val ue had been menti oned as Rs. 1,08,92,500/-. The assess ee was asked to e xpl ai n why the bal ance amount shoul d not be added back. The A. O. was not sati sfi ed wi th the assessee 's submi ssi on si nce the competent authori t y i n the matter had certi fi ed that the propert y was sol d at l ess than t he val ue adopted for Stamp Dut y purposes. Therefore, the A .O. made di sal l o wance of Rs.23,92,500/- a s di fference and added to the to tal i ncome of the assessee as Long Term Ca pi tal Gai n of the assessee. The A.O. pl aced rel i ance on the deci si on of the I . T.A. T., Mumbai Bench i n the case of Ral l i s I ndi a Ltd. Vs. Addl . CI T i n I TA No.2464( Mum.) of 2010.
22. Before the Ld.CI T( A) the assessee contended that before the A.O. the asse ssee had cl ai med that the fai r ma rket val ue of the propert y was l ess than th e stamp dut y val ue and th e A.O., therefore, as per the provi si ons secti on 50C of the Act shoul d have refe rred the matter f or val uati on to a Val uati on Offi cer. Rel i ance was pl aced on the deci si on of t he I . T.A. T. Pune Bench i n t he case of Subh ash Vi na yak Su pnekar Vs. ACI T. The Ld.CI T( A) thereafter u phel d the order of the A.O. hol di ng that si nce the competent authori t y i .e. Joint Sub Regi strar, Department of Stamp & Regi strati on, Mumbai -I had certi fi ed that the propert y was sol d at l ess than the 18 ITA No.261/Chd/2015 A.Y.2011-12 ITA No.22/Chd/2017 A.Y.2012-13 ITA No.262/Chd/2015 A.Y.2011-12 ITA No.23/Chd/2017 A.Y.2012-13 val ue adopted f or the stamp d ut y purposes, t herefore, no i nterference was requi red i n the order of the A.O.
23. Before us the L d. counsel for a ssessee rei terated the contenti ons made before the Ld. CI T( A) that i n v i e w of hi s asserti on before the A.O. that th e fai r market va l ue of the propert y was l ess than the stamp dut y val ue, the val uati on of the propert y shoul d have been referred to the Val uati on Offi cer as per secti on 50C( 2) of the Act. Our attenti on was dra wn to the pro vi si ons of secti on 50C( 2) of the Act, whi ch reads as under:
"50C. ( 1) Wher e the cons ider ation rece ived or accru ing as a res ul t of the tr ansf er by an assessee of a c ap i tal asse t, be ing l and or b u il d ing or bo th, i s l ess th an the v al ue ado p ted or assessed 86[ or assess abl e ] b y any au thor i ty of a S tate Govern men t ( here af ter in th is sec tion ref erred to as the "s tamp v al u ation au thor i ty" ) f or the pur po se of pay men t of s tamp du ty in res pec t of such tr an sf er, the v al ue so ado p ted or asse ssed 86[ or asse ss abl e ] sh al l , f or the pur poses of sec tion 48, be dee me d to be the f ull v al ue of the cons i der ation rece ived or accru ing as a resul t of such tr ansf er.
( 2) W ithou t pre jud ice to the pr ov is ions of sub- sec tion ( 1), wh ere --
( a) the assesse e cl ai ms bef ore an y Assess ing Of f icer th at the v al ue ado p ted or assessed 86[ or assess abl e ] b y th e s tamp v al u atio n au thor i ty under sub-sec tion ( 1) ex ceeds the f air marke t v al ue of the pro per ty as on th e d ate of tr ansf er;
( b ) the v al ue so ado p ted or assesse d 86[ o r assess abl e ] b y th e s tamp v al u atio n au thor i ty under sub-sec tion ( 1) h as no t been d is p u ted in an y appe al or rev is ion or no ref erence has been made bef ore an y o ther au thor i ty, cour t or the H igh Cour t, the Assess ing Of f icer may ref er the v al u ation of th e 19 ITA No.261/Chd/2015 A.Y.2011-12 ITA No.22/Chd/2017 A.Y.2012-13 ITA No.262/Chd/2015 A.Y.2011-12 ITA No.23/Chd/2017 A.Y.2012-13 c ap i tal asse t to a V al u ation Of f icer and wh ere an y such ref erence is made, the pr ov is ions of sub- sec tions ( 2), ( 3), ( 4), ( 5) and ( 6) of section 16A, cl ause ( i) of sub-sec tion ( 1) and sub-sec tions ( 6) and ( 7) of section 23A, sub-sec tion ( 5) of section 24, sec tion 34AA, s ec tion 35 and s ec tion 37 of the We al th- tax Ac t, 1957 ( 27 of 1957), sh al l , wi th necess ar y mod i-f ic ations, appl y i n rel ation to suc h ref erence as the y appl y in rel ati on to a ref erence mad e b y the Asse ss ing Of f icer under sub-sec tion ( 1) of section 16A of th at Ac t.
[ Ex pl an ation 1]. --For the pur pos es of th is sec tio n, "V al u ation Of f icer" sh al l h ave the s ame me an ing as in cl ause ( r ) of sec tion 2 of the We al th- tax Ac t, 1957 ( 27 of 1957).
[ Ex pl an ation 2. -- For the pur poses of th is sec tion, the ex press ion " assess abl e" me an s the pr ice wh ich the s tamp v al u ation au thor i ty wo ul d h ave , no t wi th s tand ing an yth ing to the con tr ar y con taine d in an y o ther l aw f or the ti me be ing in f orce, ado p ted or asse ssed, if it wer e ref erred to suc h au thor i ty f or the pur poses of the p ay me n t of stamp du ty. ] ( 3) Sub jec t to the prov is ions c on tained in sub - sec tion ( 2), wh er e the v al ue ascer tained un der sub - sec tion ( 2) excee ds the v al ue ado p ted or assessed [ or assess abl e ] by the s tamp v al u ation au thor i ty ref erred to in su b-sec tion ( 1), th e v al ue so ado p te d or assess ed [ or assess abl e ] b y su ch au thor i ty sh al l be taken as the f ul l val ue of the cons ider ation rece ived or accru i ng as a resul t of the tr ansf er. ] And al so to the submi ssi on made before the A.O., reproduced at page 15 of the A.O's order as under:
"S ir, Ref erence discus s ion on the l as t h e ar ing.
Reg ard ing Your Honours sho w c ause d ated
26. 02. 2015 wi th res pec t to the marke t v al ue of the pro per ty/f l at s ol d dur ing th e ye ar under cons ider ation be no t taken at Rs. 1, 08, 92, 500/- as ag ains t s al e con s ider ation sho wn in the re turn of inco me at Rs. 85, 00, 000/- b ased o n the inf or mation 20 ITA No.261/Chd/2015 A.Y.2011-12 ITA No.22/Chd/2017 A.Y.2012-13 ITA No.262/Chd/2015 A.Y.2011-12 ITA No.23/Chd/2017 A.Y.2012-13 rece ived f ro m Yo ur Honour f ro m IT O, wArd/20( 1)( 5 ), Mu mb ai. In re pl y, it is res pec tf ul ly sub mi tted th at wh ate ver was th e marke t pr ice, the assessee h as tr ans ac ted o n th at wh ere axs there we as no men tion of stamp du ty v al ue on the reg is tr ation deed wh ich requ ires f or appl i c ation of provis io n of Section 50C of the Ac t. In v ie w of the sub miss ion, i t i s sub mi tted th at b as is on wh ich th e marke t v al ue as rev ie we d b y the Ld. IT O, Ward-20( 1)( 5), Mu mb ai h as never been sho wn/ made av ail abl e to the assesse e and no add i tion i s c al l ed f or on th e b al an ce amo un t as des ired b y Yo ur Honour v ide o rder shee t en tr y d ated 26. 02. 201 5.
Ho pe Your Honour wil l f ind the abov e inf or mation in or der and sh al l pr oceed to f in al ize the proceed ings accord ingl y.
T hank ing you, Yours f aithf ul l y, Sd/-
( V in ay S ing al ) Encl : As above.
D ated-----
24. The Ld. counsel for assessee, therefore, pl eaded that i n the l i ght of the same, the matter be restored back to the A.O. for reference of the val uati on of the propert y to the DVO in accordance wi th the provi si ons of secti on 50C( 2) of the Act.
25. The Ld. DR, on t he other hand, r el i ed upon the or der of the CI T( A) .
26. We have heard the contenti ons of both the parties. The i ssue before us rel ates to the substi tuti on of the actual val ue of consi derati on recei ved from the sal e of a propert y by stamp dut y val ue for the purpose of cal cul ati ng capi tal gai ns 21 ITA No.261/Chd/2015 A.Y.2011-12 ITA No.22/Chd/2017 A.Y.2012-13 ITA No.262/Chd/2015 A.Y.2011-12 ITA No.23/Chd/2017 A.Y.2012-13 earned thereon as per the provi si ons of secti on 50C of the Act. The facts w hi ch are not di s puted are that t he assessee had sol d a fl at at Matunga, Mumbai for Rs.85 l acs. The Val uati on Report attested by the Joi nt Sub Regi strar, Department of Stamp & Regi strati on, Mumbai -I sho wed the stamp dut y val ue of the propert y at Rs.1,08,92,500/-. The provi si ons of se cti on 50C( 2) of the Act whi ch have been referred to by th e Ld. counsel fo r assessee and which have been reproduced above cl earl y state that the substituti on of the actual consi derati on recei ved wi th the stamp dut y val ue i s not automati c and where the assessee contends that the fai r val ue of the propert y di d not e xceed the stamp dut y val ue, i t i s i ncumbent upon the A.O. to veri f y thi s fact by referri ng for val uati on. I n the present case, we find that the assessee di d contend that the fai r market val ue of the propert y di d not e xceed the stam p dut y val ue. I n such facts and ci rcumstances we agree wi th the Ld. counsel for assessee that the A.O. shoul d have referred the matter to the DVO for val uati o n purposes. The act of the A.O. a nd CI T( A) i n i gnori ng thi s contenti on of the assessee, we hold, i s i n vi ol ati on of provi si ons of secti on 50C( 2) of the Act. We, therefore, set asi de the order of t he CI T( A) i n this regard and restore the i ssue back to the A.O . di recti ng hi m t o refer the val ue of the pro pert y to the Val uati on Offi cer i n accordance wi th the provi si ons of secti on 50(2) of the Act and thereafter 22 ITA No.261/Chd/2015 A.Y.2011-12 ITA No.22/Chd/2017 A.Y.2012-13 ITA No.262/Chd/2015 A.Y.2011-12 ITA No.23/Chd/2017 A.Y.2012-13 deci de the i ssue i n accordance wi th l a w. Thi s ground of appeal rai sed by the assessee is al l o wed for stati sti cal purposes.
The appeal i s al l o wed for stati sti cal purposes. ITA No.261/Chd/2015(A.Y. 2011-12:
27. The assessee has rai sed fol l o wi ng grounds:
"(1) That order passed u/s 250(6) of the Income Tax Act, 1961 by the Ld. Commissioner of Income Tax (Appeals)-II, Ludhiana is against law and facts on the file in as much he was not justified to arbitrarily uphold the disallowance of Rs.24,24,858/- out of total disallowance of Rs.60,95,957/- made by the Ld. Assessing Officer u/s 57 out of interest account."
2. That he was not justified to arbitrarily uphold the disallowance of Rs.25,78,108/- made u/s 14A."
28. It was common ground that the issues i n ground Nos.1 & 2 rai sed by the assessee i n thi s appeal were si mil ar to ground Nos.1 & 2 rai sed by the assessee in I TA No.262/Chd/2015 adjudi cated above .Our deci si on rendered therei n at paras 10 -11 and 16 respecti vel y wi l l therefore appl y mutati s mutandi s to these grounds al so fol l o wi ng whi ch Ground N os. 1 rai sed by the assessee i s al l o wed for stati sti cal purposes whi l e ground no.2 i s al l o wed.
The appeal of t he assessee i s al l o wed for stati stical purposes.
ITA No.22/Chd/2017(A.Y. 2012-13:
29. The assessee has rai sed fol l o wi ng grounds: 23 ITA No.261/Chd/2015
A.Y.2011-12 ITA No.22/Chd/2017 A.Y.2012-13 ITA No.262/Chd/2015 A.Y.2011-12 ITA No.23/Chd/2017 A.Y.2012-13 "(1) That order passed u/s 250(6) of the Income Tax Act, 1961 by the Ld. Commissioner of Income Tax (Appeals)-II, Ludhiana is against law and facts on the file in as much as she was not justified to arbitrarily uphold the disallowance of a sum of Rs.43,32,058/- out of interest accont made by the Ld. Assessing treating the same as not allowable u/s 57 of the Income Tax Act, 1961."
2. That she was further not justified to uphold disallowance of Rs.237,62,254/- u/s 14A as worked out by the Ld. Assessing Officer."
30. It was common ground that the issues i n ground Nos.1 & 2 rai sed by the assessee i n thi s appeal were si mil ar to ground Nos.1 & 2 rai sed by the assessee in I TA No.262/Chd/2015 adjudi cated above .Our deci si on rendered therei n at para s 10 -11 and 16 respecti vel y and wi ll therefore appl y mutati s mutandi s to these grounds al so fol l o wi ng whi ch Ground Nos. 1 rai sed by the assessee i s al l o wed for stati sti cal purposes whi l e ground no.2 i s al l o wed.
31. I n the resul t, al l the appeal s fi l ed by the assessee are al l o wed for stati sti cal purposes.
O r d e r p r on o u n c ed i n t h e O p e n Cou r t .
Sd/- Sd/-
संजय गग अ नपण
ू ा ग&ु ता
(SANJAY GARG) (ANNAPURNA GUPTA)
याय क सद य/Judicial Member लेखा सद य/Accountant Member
*दनांक /Dated: 29th March, 2019
*रती*
24 ITA No.261/Chd/2015
A.Y.2011-12
ITA No.22/Chd/2017
A.Y.2012-13
ITA No.262/Chd/2015
A.Y.2011-12
ITA No.23/Chd/2017
A.Y.2012-13
आदे श क ( त)ल*प अ+े*षत/ Copy of the order forwarded to :
1. अपीलाथ,/ The Appellant
2. (-यथ,/ The Respondent
3. आयकर आय.
ु त/ CIT
4. आयकर आय.
ु त (अपील)/ The CIT(A)
5. *वभागीय ( त न1ध, आयकर अपील"य आ1धकरण, च3डीगढ़/ DR, ITAT, CHANDIGARH
6. गाड फाईल/ Guard File आदे शानस ु ार/ By order, सहायक पंजीकार/ Assistant Registrar