Income Tax Appellate Tribunal - Mumbai
Dcit Cen Cir 10, Mumbai vs Concord Shipping P.Ltd, Mumbai on 9 August, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL " C" BENCH, MUMBAI
BEFORE SRI MAHAVIR SINGH, JM AND SRI RAJESH KUMAR, AM
ITA No.1202/Mum/2013
(A.Y:2009-10)
Dy. Commissioner of Income M/s Concord Shipping Pvt.
Tax, Circle-10 Ltd.
Room No. 802, 8 t h Floor, Old 101, Dheeraj Arma, A.K.
Vs.
CGO Annex Bldg, Marg, Bandra(E)
M.K. Road, Mumbai-400 051
Mumbai-400 020
Appellant .. Respondent
ITA No.1855/Mum/2014
(A.Y:2009-10)
M/s Concord Shipping Pvt. Dy. Commissioner of Income
Ltd. Tax, Circle-10
101, Dheeraj Arma, A.K. Room No. 802, 8 t h Floor, Old
Vs.
Marg, Bandra(E) CGO Annex Bldg,
Mumbai-400 051 M.K. Road,
Mumbai-400 020
Appellant .. Respondent
Revenue by .. Shri Rajat Mittal, DR
Assessee by .. Shri Vinod K. Bindal, AR
Date of hearing .. 19-06-2017
Date of pronouncement .. 09-08-2017
ORDER
PER MAHAVIR SINGH, JM:
These cross appeals are arising out of the order of CIT(A)-37, Mumbai, in appeal No. CIT(A)-37/I.T-246/DCCC-10/2012-13 dated 17-01- 2014. The assessment was framed by ACIT-CC-10, Mumbai for the A.Y. 2009-10 vide order dated 27-12-2011 under section 143(3) of the Income Tax Act, 1961 (hereinafter 'the Act').
2. The first common issue in these cross appeals is as regards to the order of CIT(A) in considering the capital gains as short term capital gain in respect of flat No. 002,401 and 402 Lavlesh Court, Bandra (West), Mumbai, under section 50 of the Act, thereby further enhancing income of the assessee at Rs. 1,71,15,000/- treating the sale consideration of I T A N o . 1 2 0 2 / Mu m / 2 0 1 3 & I T A N o . 1 8 5 5 / Mu m / 2 0 1 4 M/ s C o n c o r d S h i p p i n g P v t . L t d . ( A . Y : 2 0 0 9 - 1 0 ) Flat No. 401 and 402 Lavlesh Court, Bandra (West), Mumbai as short term capital gain. For this assessee has raised following ground No. 1 to 4: -
"I) The Ld. CIT (A) erred in law and on facts in considering the capital gain as short term in respect of flat no. 002, 401 and 402, Lavlesh Court tinder section 50 without appreciating that section 50 does not say that any asset on which depreciation, that too erroneously has been allowed by the assessing officer will be covered under this section but it covers only those assets which can legally form pan of the block of assets on which depreciation is allowed under this Act. Thus, the addition treating the gain under the head short term capital gain must he reversed.
2) The Ld. CIT (A) erred in law and on facts in stating that 50% of the flat no. 002 Lavlesh Court cannot be considered as investment without appreciating that the assessing officer himself accepted that since beginning the asset was rented out and therefore, depreciation was disallowed.
Thus, 50% of the flat has to be considered as non- depreciable long term capital asset only.
3) The Ld. CIT (A) erred in law and on facts in confirming the addition made by the assessing officer of Rs. 22,64,733/- (Rs. 58.12,554/- as computed by assessing officer less Rs. 35,48,821/- as offered by appellant) without appreciating that the asset was never used for business purpose and even if it is included mistakenly in the block of asset. no depreciation was allowed as per law. Thus, the addition as short term capital gain on sale of the said property must be deleted.
Page 2 of 16I T A N o . 1 2 0 2 / Mu m / 2 0 1 3 & I T A N o . 1 8 5 5 / Mu m / 2 0 1 4 M/ s C o n c o r d S h i p p i n g P v t . L t d . ( A . Y : 2 0 0 9 - 1 0 )
4) The Ld. CIT (A) erred in law and on facts in enhancing the income of the assessee by Rs.
1,71,15,000/- treating the sale consideration of flat nos. 401 and 402. Lavlesh Court. bandra West Mumbai as short term capital gain without appreciating that such flats were never used for the business purpose and no depreciation was claimed on these flats u/s 32 of the Act."
Further, assessee has raised following additional ground No. 8 and 9, challenging the jurisdiction of the CIT(A) whereas the predecessor CIT(A) has already accepted the long term capital gain in respect of Flat No. 401 and 402 Lavlesh Court, Bandra (West), Mumbai: -
"8) The ld. CIT (A) has erred in law in exceeding his jurisdiction as per the law by reviewing the order of his predecessor in the first round of appeal and in enhancing the accepted long term capital gain of Rs. 42,95,658/- in respect of the two flat nos. 401 and 402 Lavlesh Court, Bandra, Mumbai to Rs.
1,71,15,000/- and that too as short term capital gain though this issue was not under appeal. Thus, this action of the CIT(A) must be declared as illegal and void ab-initio.
9) The ld. CIT (A) erred in law and on facts in confirming the addition made by the assessing officer without appreciating that the assessing officer erred in Iaw in passing an order giving effect to the CIT (A)'s order dated 30/01120)3 by converting the verification proceedings of the submissions of the appellant as per directions in the order of the CIT (A) into a fresh assessment proceeding by issuance of a fresh notice u/s 142(1) of the Act. Thus, the Page 3 of 16 I T A N o . 1 2 0 2 / Mu m / 2 0 1 3 & I T A N o . 1 8 5 5 / Mu m / 2 0 1 4 M/ s C o n c o r d S h i p p i n g P v t . L t d . ( A . Y : 2 0 0 9 - 1 0 ) order giving effect to the CIT(A)s order must be held as invalid.."
The Revenue has challenged the deletion of gain on sale of flat as short term capital gain in regard to flat No. 002 Lavlesh Court, Bandra (West), Mumbai. For this Revenue has raised following ground: -
"(i) On the facts and in the circumstances of the case, the Ld. CIT(A) erred in deleting the addition of Rs. 1,70,40,561/- representing gain on sale of flats without considering the fact that any gait; on account of sale of fiat was not disclosed in its validly filed return of income and capital gain on sale of flat No. 002 Lavlesh court was' short term capital gain since depreciation was claimed for that fiat."
3. Briefly stated facts are that the original assessment was completed for the relevant AY 2009-10 by the AO under section 143(3) of the Act vide order dated 27-12-2011. The AO in this assessment order treated the capital gain on sale of asset amounting to Rs. 1,70,40,560/- as short term capital gain on sale of assets (net). But from the assessment order one cannot infer what was the basis of computing this short term capital gain on sale of asset amounting to Rs. 1,70,40,561/-. The assessee challenged the same before CIT(A). Before CIT(A), it was contended that the assessee has filed the working of capital gain on sale of flat No. 002, 401 and 402 at Lavlesh Court, Bandra (West) Mumbai, along with working of short term capital gain on sale of property on which depreciation is allowed. The detailed calculation of gain was field by assessee, as reproduced by CIT(A) and for the sake of clarity of facts, the same is being again reproduced from the order of the CIT(A) dated 08-11-2012 in appeal No. CIT(A)-37/I.T-533/ACCC-10/11-12. The relevant reads as under: -
"Capital gains on Sale of flat Nos. 401 & 402 at Lavlesh Court:Page 4 of 16
I T A N o . 1 2 0 2 / Mu m / 2 0 1 3 & I T A N o . 1 8 5 5 / Mu m / 2 0 1 4 M/ s C o n c o r d S h i p p i n g P v t . L t d . ( A . Y : 2 0 0 9 - 1 0 ) Particulars Amount(Rs.) Amount(Rs.) Flat no. 401 Flat no. 402 Date of sale of asset 20/0612008 20/06/2008 Sale consideration 85,57,500 85, 57, 500 Date of purchase of asset 04/11/1996 04/11/1996 Purchase cost Purchase value 31,00,000 31,00,000 Stamp Duty 2,48,750 2,48,750 Other charges 10,270 10,270 .................. ...............
33,59,020 33,59.020 Indexed cost of acquisition 64,09,671 64,09,671 Capita; gain on sale of asset 21,47,829 21,47,829 Long Term Capital Gain @20% 4,29,566 4,29,568 Total tax on above 8,59,132 (A)
Capital gain on Sale of Flat No. 002 at Lavlesh Court:
Particulars Amount(Rs.) Date of sale of asset 20/06/2008 Sale consideration 71,50,000 Share of property on which depreciation is not allowed 50%
Sale consideration for the share of property on which no depreciation is allowed 35,75.000 Total purchase cost Purchase cost 31,78,500 Page 5 of 16 I T A N o . 1 2 0 2 / Mu m / 2 0 1 3 & I T A N o . 1 8 5 5 / Mu m / 2 0 1 4 M/ s C o n c o r d S h i p p i n g P v t . L t d . ( A . Y : 2 0 0 9 - 1 0 ) Stamp Duty 2,24,800 Other charges 20,060 .............
34,23,360 Purchase cost for share in the property not used for business purpose 17,11,680 Indexed Cost of acquisition 28,38,170 Long Term Capital gain on Flat no. 002 7,36.830 Tax on above@20% 1,47,366 (B) Working of Short term Capital Gain on sale of properly on which depreciation is allowed:
Opening WDV as on 01104/2008 8,42,252 Add Depreciation claimed from 2000-01 to 2006-07 To the extent disallowed by the AO(as per note 4,94,194 attached) Less Sale consideration of the share of asset on which 35,75,000 Depreciation is claimed and is part of Block Closing WOV as on 31103109 excluding the assets on Which no depreciation is claimed as were not used for Business purpose (22,38,554) Short Term Capital Gain u/s.50 22,38,554 Tax liability on Short Term Capital Gain @30% 6.71,566 (C) Note The asset purchased during the year has not been considered as part of block as no depreciation is claimed on it and it is used for long term capital gain Total tax liability Long Term Capital gain on fiat no. 401 & 402 8,59,132 Long Term Capital gain on fiat no. 002(50% share) 1,47,366 Short Term Capital gain on fiat no 002(50% share) 6,71,566 .............
16,78,064
Add Education Cess @ 2% 33,561
..............
17,11,625
Interest u/s. 234B @ 100% per month
For the period 01/04/09 to 27/12/11(30 months) 5,13,488
Page 6 of 16
I T A N o . 1 2 0 2 / Mu m / 2 0 1 3 &
I T A N o . 1 8 5 5 / Mu m / 2 0 1 4
M/ s C o n c o r d S h i p p i n g P v t . L t d . ( A . Y : 2 0 0 9 - 1 0 ) Total tax liability ...............
22,25,113 Add. Interest u/s 220(2) of the income tax act (From 2,00,260 27101/12 to 30/09/12) ...............
24,25,373 Total amount of tax payable Note: Depreciation disallowed by the Assessing Officer as per Assessment orders passed u/s. 153A r.w.s. 143(3) Asstt. Year Amt.(Rs.) Date of order AY 2000-01 77,776 31/0312007 AY 2001-02 70,623 31/03/2007 A.Y 2002-03 64,189 31/03/2007
4. The assessee before CIT(A) contended that the profit on sale of assets amounting to Rs. 1,70,40,561/- was reflected in the profit and loss account for the relevant assessment year and excluded this item from the total income as the same has been included in the books of account. It was stated that the capital gain on sale of flat No. 401 and 402 at Lavlesh Court, Bandra, Mumbai was computed as long term capital gain whereas part of capital gain on sale of flat no. 002 Lavlesh Court, was computed as long term capital gain and part was computed as short term capital gains reason being part was let out with no depreciation allowance was claimed but on part balance deprecation was claimed and allowed. Now, before us, the learned Counsel for the assessee drew our attention to the above computations. Further, the learned Counsel for the assessee now, before us took us through the findings of CIT(A) whereas CIT(A) has accepted the long term capital gain on sale of flat No. 401 and 402. In respect of short term capital gain on sale of flat no.002 on which depreciation was allowed in the past on part of the flat, the capital gain was computed on short term basis and on part which was given on rent and no depreciation was claimed and allowed, was taken as long term capital gain. The learned Counsel for the assessee stated that the CIT(A) Page 7 of 16 I T A N o . 1 2 0 2 / Mu m / 2 0 1 3 & I T A N o . 1 8 5 5 / Mu m / 2 0 1 4 M/ s C o n c o r d S h i p p i n g P v t . L t d . ( A . Y : 2 0 0 9 - 1 0 ) has only directed to the AO to verify the facts and bring the above amount as capital gains and taxed accordingly. The learned Counsel for the assessee drew our attention to Para 5.3.2 of the CIT(A)'s order in the first round which reads as under: -
"5.3.2. I have perused the assessment order and considered the submission made by the Ld. AR. It is apparent from the records that the appellant had submitted the photocopies of sale agreements and purchase agreements of the properties at Lavlesh Court vide its letters dated 10/08/11 and 22/11/11 filed before the Ld. AO respectively. As the appellant itself conceded that Long Term Capital Gains on sale of flat nos. 401 & 402 amounting to Rs. 21,47,829/- had not been offered by it for taxation. Ld. AO is directed to consider the same while giving effect to this order. Similarly, the appellant has conceded that Long Term Capital Gain on flat no. 002 at Lavlesh Court amounting to Rs. 7.36,830/- was not offered for taxation and it was ready to pay tax along with interest on the same. Further, Short Term Capital Gain on sale of flat no. 002 on which depreciation was allowed in the past was also not offered for taxation amounting to Rs.22,38,554/-. The above points have been fairly conceded by the appellant and it has agreed to pay total tax of Rs, 17,11.625/- alongwith interest of Rs.5,13,488/- u/s. 234B and other interest of Rs2,00.260/- u/s. 220(2) totaling in all to Rs.24,25,373/-. As the factum of capital gains is borne out of the records of the Ld.AO, he is directed to verify and bring to tax the above amounts or capital gains which have remained to be taxed.
However, the addition made by the ld. AO without any discussion in the body of the order cannot Page 8 of 16 I T A N o . 1 2 0 2 / Mu m / 2 0 1 3 & I T A N o . 1 8 5 5 / Mu m / 2 0 1 4 M/ s C o n c o r d S h i p p i n g P v t . L t d . ( A . Y : 2 0 0 9 - 1 0 ) sustained in the eyes of law and is accordingly deleted. As a result this ground of appeal is partly allowed."
5. At this point, the learned Counsel for the assessee stated that the Revenue has not filed any appeal against the findings of CIT(A), whereby long term capital gain on flat No. 401 was accepted at Rs. 21,47,829/- was accepted and becomes final. Further, capital gain on sale of flat No. 002 was computed at Rs. 7,36,830/- (on part of it) and on part of the same where depreciation was claimed and allowed was computed at Rs. 22,38,554/- as short term capital gain and taxes were paid accordingly. The AO while giving appeal effect to the order of CIT(A) vide order dated 30-01-2013 computed the long term capital gain on sale of flat No. 401 and 402 Lavlesh Court, as per the offer made before CIT(A) by the assessee at Rs. 21,47,824/- on each of the flat and a total amounting to Rs. 42,95,658/- was assessed as long term capital gain. This has become final. The AO while giving appeal effect to the order of CIT(A) computed entire capital gain on flat No. 002 Lavlesh Court, as short term capital gain under section 50 of the Act amounting to Rs. 58,13,554/-. The relevant computation made by the AO reads as under: -
PARTICULARS AMOUNT
Income from House Property 3,07,313
(As per return of Income)
Profits/ Gains of Business 6,45,401
(As per return of income)
Capital Gains
Long term capital gains 42,95,658
(On sale of immovable property bearing No. 401 & 402, Lavlesh Court) [As per the offer made before the Ld. CIT(A)] Short term capital gain under section 50 (on sale of capital asset being immovable property 58,13,554 bearing No. 002, Lavlesh Court) [As discussed in para 12 above] Income from other sources: 52,24,283 (On account of interst income) [As per the assessment order under section 143(3)] Total Income 1,62,86,209 Page 9 of 16 I T A N o . 1 2 0 2 / Mu m / 2 0 1 3 & I T A N o . 1 8 5 5 / Mu m / 2 0 1 4 M/ s C o n c o r d S h i p p i n g P v t . L t d . ( A . Y : 2 0 0 9 - 1 0 ) Rounded off 16,286,210
6. From the above computation of income it is clear that the AO while giving effect to the order of CIT(A) passed order under section 143(3) read with section 251 of the Act computing the income apart from other incomes long term capital gain of Rs. 42,95,658/- on account of sale of flat No. 401 and 402 at Lavlesh Court, Bandra (West), Mumbai and short term capital gain on account of sale of flat No. 002 at Lavlesh Court, Bandra (West), Mumbai and disallowance of interest expenditure of Rs. 7,43,912/-. Aggrieved, assessee preferred the appeal before CIT(A) in second round. The CIT(A) confirmed the action of the AO in respect of short term capital gain on sale of flat No.002 Lavlesh Court as short term capital under section 50 of the Act. For this CIT(A) observed in Para 5.10 as under:
"5.10. In my view, the situation is analogous to sale of motor car, where the motor car forms part block of asset. If a part of depreciation is disallowed on account of personal use, it does not mean that any part of the car can be held to be an investment. When the car is sold the entire sale proceeds will be reduced from the block of assets, and short term capital gains u/s.50 of the 1.1. Act would arise if the sale proceeds exceeds the WDV of the block of assets in respect of motor cars. In the present case, 002 Lavlesh Court is a single flat of hardly 500 sq ft. area. It is partly used by the appellant for its own business and partly also used by its sister concern for which rental income has been received. It is on these facts that the AO disallowed a part of the depreciation claim. However, this does not mean that 50% of the flat can be treated as investment on which indexation benefits has to be computed and long term capital gain determined. Further, the appellant has never reflected any part of the cost of Page 10 of 16 I T A N o . 1 2 0 2 / Mu m / 2 0 1 3 & I T A N o . 1 8 5 5 / Mu m / 2 0 1 4 M/ s C o n c o r d S h i p p i n g P v t . L t d . ( A . Y : 2 0 0 9 - 1 0 ) the flat as investment in its books of accounts till date. It has claimed depreciation on entire value of Flat as part of block of assets in all the returns of income filed both before and after search. The addition to block of assets as office Premises was made at Rs 34.28.360 in respect of this Flat 002 in AY 1999-00. I therefore, find no infirmity in the computation of short term capital gain uIs.50 of the I.T. Act by the AC in this case Accordingly. ground of appeal no.1 and 2 are dismissed."
Aggrieved, now assessee is in second appeal before Tribunal.
7. We have heard the rival contentions on this issue and gone through the facts and circumstances of the case. We find that the assessee's claim was that the flat No. 002 at Lavlesh Court, was partly let out and partly used for the business purposes. For this assessee furnished the separate working of long term capital gain and also short term capital gain by dividing the entire sale proceeds of the sale of flat in two equal parts. It was claimed by the assessee that the let out portion of the said flat on which depreciation was not allowed by the Revenue was allowable to be taxed as long term capital gain in the hands of the assessee and indexation of cost acquisition of this part should be considered. In respect of other 50% of the flat, the opening WDV of building that falls into block of assets as 01-04-2008 should be adjusted by the depreciation claimed from FY 2000-01 to 2006-07 to the extent disallowed by the AO in respect to assessment orders. Whereas, Revenue's contention before us was that the entire cost of flat was added to the block of assets in AY 1999-2000 and depreciation has been claimed on the entire asset in all the subsequent assessment years and there continue to claim depreciation on full value year after year till AY 2006-07. Accordingly, it was argued that once the flat No. 002 at Lavlesh court was treated as part of block of asset on which depreciation has been claimed, the same is to be treated depreciable business asset Page 11 of 16 I T A N o . 1 2 0 2 / Mu m / 2 0 1 3 & I T A N o . 1 8 5 5 / Mu m / 2 0 1 4 M/ s C o n c o r d S h i p p i n g P v t . L t d . ( A . Y : 2 0 0 9 - 1 0 ) where block of asset ceased exist after sale and thereafter the same is to be assessed as short term capital gain in entirety.
8. We find from the records of the case that assessee has claimed depreciation in respect to the flat from AY 1999-2000 till AY 2006-07 but on part of the flat depreciation claimed was disallowed by the AO i.e. 50% and that is why the assessee has rightly treated the 50% of the flat as long term capital gain and 50% wherein the asset was used for the business purposes and was part of block of asset on which depreciation was claimed and treated as short term capital gains. Accordingly, we direct the AO to allow the 50% of sale consideration as long term capital gain on sale of flat No. 002 at Lavlesh Court, and 50% is to be termed as short term capital gain amounting to Rs. 22,38,554/- and assess accordingly. We direct the AO accordingly.
9. In respect to enhancement of income by CIT(A) on account of sale consideration of flat No. 401 and flat No. 402 at Lavlesh Court, Bandra (West), Mumbai. The first argument by the learned Counsel for the assessee in respect to the additional ground was that in the first round CIT(A) has categorically directed the AO to assess the long term capital gain from these two flats as declared by assessee and AO vide his order dated 30-01-2013 while giving effect to the said order of the CIT(A), accepted the amount received by the assessee as long term capital gain in respect to said two flats. The learned Counsel for the assessee relied on the Co-ordinate Bench decision in the case of Aventis Pharma Ltd. vs. DCIT in ITA No. 4179/Mum/2003 for the AY 1998-99 reported in 2013 TIOL-25-ITAT-Mum, wherein it is held that when the AO's jurisdiction was limited in the remand proceedings to consider and decide a particular issue as per the directions of CIT(A), and AO taking a particular decision in view of the direction of CIT(A) in first round, the CIT(A) appeal cannot enlarge or enhance the assessment while passing appellate order against the giving effect to the order of CIT(A). The jurisdiction of the CIT(A) cannot be enlarge to that of the AO because in case there is error Page 12 of 16 I T A N o . 1 2 0 2 / Mu m / 2 0 1 3 & I T A N o . 1 8 5 5 / Mu m / 2 0 1 4 M/ s C o n c o r d S h i p p i n g P v t . L t d . ( A . Y : 2 0 0 9 - 1 0 ) in the order of CIT(A) in first round, the same should be challenged by way of appeal before the higher form. The Tribunal in Para 6 held as under: -
"6 In view of the facts and circumstances of the case when the limited aspect/dispute of allocation of indirect cost to the export of trading goods was remanded to the record of the Assessing Officer, then in the giving effect proceedings in pursuant to the directions of the Commissioner of Income. Tax(Appeals), the jurisdiction and power of the Assessing Officer is confined only to the issue and aspect, which has been remanded for reworking and redetermination. Hence, in the proceedings pursuant to the directions of the Commissioner of Income Tax(Appeals), the Assessing Officer cannot go beyond the issue and aspect which was directed to be reconsidered and decided. Thus, in our view, by taking up the issue of reduction of 90% of the receipts arising from sales tax refund, processing charges and sale of scrap, the Assessing Officer has travelled beyond his jurisdiction limited to the direction of the Commissioner of Income Tax(Appeals)."
10. On the other hand, the Revenue relied on the decision of the Hon'ble Bombay High Court in the case of Narrondas Manordass vs. CIT (1957) 31 ITR 909 (Bom) wherein it is held that once an assessment comes before AAC, his competence is not restricted to examining those aspects of assessment which are complained of by the assessee but his competence ranges overall assessment. But in the present case, the facts are that the CIT(A) in second round is questioning the enhancement which has already been deliberated by CIT(A) in first round. The facts as discussed in that case only qua the original order of CIT(A) and not that Page 13 of 16 I T A N o . 1 2 0 2 / Mu m / 2 0 1 3 & I T A N o . 1 8 5 5 / Mu m / 2 0 1 4 M/ s C o n c o r d S h i p p i n g P v t . L t d . ( A . Y : 2 0 0 9 - 1 0 ) of AAC giving effect to the order of the AO in appellate proceedings. In view of the above, we are of the view that in the present case, the CIT(A) has exceeded his jurisdiction beyond his powers and income enhancement should not be taken place in the present case and accordingly, we quashed the order of CIT(A) on jurisdictional issue. Accordingly, this issue of assessee's appeal is allowed.
11. As regards to the issue of Revenue's appeal, since, we have adjudicated the issue on merits above and that all the three aspects of Revenue's appeal does not survive on the same facts. Accordingly, the appeal of revenue is dismissed.
12. The next ground in this appeal of assessee is against the order of CIT(A) disallowing the expenditure incurred for earning interest income at Rs. 7,43,912/-. For this assessee has raised following ground No. 5 & 6: -
"5. The ld. CIT(A) erred in law and on facts in disallowing the expenditure of Rs 7,43,912/- incurred for earning interest income stating that no such ground was specifically taken before the CIT(A) in the first round of appeal through in the written submission, it was specifically mentioned that the expenditure was incurred for earning interest income taxable under the head income from other sources. Thus, the disallowance of expenses of Rs 7,43,912/- by CIT(A) must be deleted.
6. The ld. CIT(A) erred in law and on facts in stating that prepayment charges cannot be considered as incurred for earning interest income without appreciating that such expenses are part of the finance cost of loan taken which was utilized for earning interest income. Thus, the same must be deleted."Page 14 of 16
I T A N o . 1 2 0 2 / Mu m / 2 0 1 3 & I T A N o . 1 8 5 5 / Mu m / 2 0 1 4 M/ s C o n c o r d S h i p p i n g P v t . L t d . ( A . Y : 2 0 0 9 - 1 0 )
13. We have heard the rival contentions and gone through the facts and circumstances of the case. We find that the AO has disallowed all the expense on the ground that no business was carried out by the assessee. The AO treated all the income from other sources and has not allowed any claim of expenses in the computation of income. The CIT(A) in the first round challenged the disallowance of expenses of Rs. 36,92,315/- but did not specify the part of the expenses amounting to Rs. 7,43,912/- which was interest expenses and was claimed against interest income offered under income from other sources. We find that these are pre-payment charges paid on loan raised from CITI bank but the assessee could not co-relate the nexus between the interest income earned and this interest paid to CITI bank. Now, before us the assessee filed the details of loan but at this stage we are unable to co-relate and hence we restore this issue back to the file of the AO. The assessee has to establish the nexus that this interest disallowance pertains to interest income earned. In case there is nexus, AO will allow the claim of the assessee. This issue of assessee's appeal is remanded back to the file of the AO and allowed for statistical purposes.
14. In the result, the appeal of Revenue is dismissed and that of the assessee is partly allowed for statistical purposes.
Order pronounced in the open court on 09-08-2017.
Sd/- Sd/-
(RAJESH KUMAR) (MAHAVIR SINGH)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Mumbai, Dated: 09-08-2017
Sudip Sarkar /Sr.PS
Page 15 of 16
I T A N o . 1 2 0 2 / Mu m / 2 0 1 3 &
I T A N o . 1 8 5 5 / Mu m / 2 0 1 4
M/ s C o n c o r d S h i p p i n g P v t . L t d . ( A . Y : 2 0 0 9 - 1 0 ) Copy of the Order forwarded to:
1. The Appellant
2. The Respondent.
3. The CIT (A), Mumbai.
4. CIT
5. DR, ITAT, Mumbai
6. Guard file. //True Copy// BY ORDER, Assistant Registrar ITAT, MUMBAI Page 16 of 16