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Income Tax Appellate Tribunal, DELHI BENCH “E” NEW DELHI
Before: SHRI SHAMIM YAHYA & SHRI CHALLA NAGENDRA PRASAD
आदेश /O R D E R PER C.N. PRASAD, J.M.
This appeal is filed by the Assessee against the order of learned Commissioner of Income Tax (Appeals)-4, Delhi dated 29.07.2019 for the AY 2015-16. Assessee raised the following grounds in her appeal: -
“That the Ld. Commissioner of Income tax (Appeal)-IV New Delhi has grossly erred in law and on the facts in confirming the action of the AO in computing the total income of the assessee after disallowing of interest paid to bank to the tune of Rs,66,96,097/ which has been claimed by assessee against the income from other sources.
That the Ld. Commissioner of Income tax (Appeal) has grossly erred in Law as well as on facts in confirming the action of AO computing the income of the assessee after disallowance of interest paid to banks Rs 66,96,097/ which has been claimed by assessee against the income from other source.
I.T.A.No.7686/Del/2019
3. That the order of the Ld. Commissioner of Income tax (APPEAL) is bad in law.
4. That both the lower authorities have failed to appreciate the income under the head "Income from other sources" would be taxed only after netting off the same against interest paid.” 2. Briefly stated the facts are that assessee filed return of income on 15.10.2015 for the AY 2015-16 declaring total income of Rs.27,41,380/-.
The assessment was completed on 08.12.2017 u/s 143(3) determining income at Rs.1,05,23,064/-. While completing the assessment the Assessing Officer denied the claim for set off of interest paid by the assessee to banks against interest received by the assessee on the loans advanced to various parties. In the course of assessment proceedings the Assessing Officer required the assessee to justify the claim for set off of interest paid against interest received. The assessee replied that during the FY 2013-14 she has taken loans against property from NBFC’s and other financial institutions on which she was paying interest and she had given loans to Companies on which she earned interest, therefore, interest paid has been claimed as expenditure from interest income earned. However, the claim of the assessee was denied by the Assessing Officer observing that as per the provisions of Section 57 of the Act the expenses laid out or expanded wholly and exclusively for the purpose of making or earning such income can only be allowed and in the assessee’s case loans/advances on which assessee earned interest has been give out of assessee’s income for which no interest or expense was incurred by the assessee. On appeal the Ld. CIT(Appeals) sustained the order of the I.T.A.No.7686/Del/2019 Assessing Officer observing that from the loan statements it is noted that the loans have been granted either for purchase of home or for development of the land. The Ld.CIT(A) observed that the purpose for which the loans are granted to Assessee are related to real estate and it is not as if the loans were taken from banks for the purpose of granting further loans to other parties and earning interest thereon.
Before us, the Ld. Counsel for the assessee submitted that Assessee is an individual earning income from House property and Income from other sources i.e., interest income from bank and also from various parties.
Against this income assessee has claimed interest paid to various banks and financial agencies. From them loan was taken against property or otherwise. It is relevant to state that assessee has already claimed interest paid on the loans taken to purchase property. It would be noticed that during the year total rent received was Rs. 2,28,00,000/- against which Rs. 1,29,57,254/- was claimed and allowed by the AO (PB Pg 1-3 i.e., computation of income). Apart from this assessee has declared interest income of Rs. 66,96,097/- against which assessee claimed interest paid to various banks of Rs 67,56,682/- during the year in concern which was disallowed by the AO on the ground that assessee may have taken loan for her personal purposes due to which the expenditure claimed was not laid out or expended wholly and exclusively for the purpose of earning such income. It is submitted that both the lower authorities have erred in non- appreciation of the correct facts while arriving on conclusion. It is I.T.A.No.7686/Del/2019 submitted that the said loan has not been taken for property but ‘loan against property ’. Referring to Paper book Pages 10 and 14, Ld. Counsel stated that the said loans have not been taken for the purpose of development of real estate as erroneously observed Ld. CIT(A) but loan was taken against property. It is submitted that assessee is a woman of means having a status and a decent standard of living and is well to do in this age of life. It is submitted that on a careful perusal of the paper book it would be observed that a copy of Certificate of Interest Paid from Indiabulls Home Loans dated 24-08- 2017, for the instant assessment year i.e., 2015-16 PB (Pg. 8) and certificate dated 19-10-2016 (PB Pg 9), specifying the breakup between interest and principal component and the amount of interest paid, copy of ledger account of various banks from which loan in taken against property as mentioned in the books of assessee [PB Pg 96 - 115], copy of bank statement of ICICI Bank annexed at Page 14 of the Paper-book specifically mentioned that the said ‘loan is against property’ and not ‘for property’. It is submitted that Ld. CIT(A) did not appreciate the submission given from pg 15-18 along with ledger accounts of various parties placed at Pg 19 to 40 that all the loans were granted in order to earn interest and the loan was granted after receiving the same from financial institutions against property owned by the assessee. At page 16 it was explained how and when the loan was given to different parties and after returning by that party the loan was granted to another one in order to earn interest only. The loan was given out of capital of the assessee but in order to build
I.T.A.No.7686/Del/2019 relations the loan was granted after pledging its immovable property and interest was earned in granting loans. Such as loan granted to M/s Shivangi Shelters was out of loan received from M/s Indiabull Housing on 08.12.2011 and income earned was declared and interest paid was claimed against such income. Copy of computation of income from AY 2011-12 to 2018-19 along with assessment order are enclosed for your kind perusal and it would be seen that interest paid to bank was claimed against interest earned from parties in AY 2011-12, PB 41-43, copy of assessment order at PB 44-47. In AY 2012-13 interest earned from the parties was declared and due tax thereon was paid PB 48 to 50, AO is placed at PB Pg 51 to 53. In AY 2013-14 interest paid to bank was claimed and duly been allowed by AO 54 to 59.
Similar claim was made in AY 2014-15 PB 61 to 68. Even in the subsequent years i.e., in AY 2016-17, 2017-18 and 2018-19 claim was made and allowed PB 69 to 95.
It is further submitted that assessee is an income tax assessee and regularly filing income tax return and no addition on this issue of netting off of interest has ever been made in any of the previous or subsequent assessment years in the case of the assessee. Ld. Cousnel referred to PB Pg 41 to 95 pertaining to AYs 2011-12 to 2018-19 where this issue has been accepted from year to year and no addition on this ground has ever been made. It is humbly submitted that from the perusal of the aforesaid chart it may kindly be appreciated that assessee has granted loans to various parties out of loans received from financial institutions and interest paid
I.T.A.No.7686/Del/2019 thereon was always held to be allowable expenditure in earlier as well as subsequent year when all the assessment were made u/s 143(3). Both the lower authorities did not appreciate that assessee in a woman of means and declaring huge income every year from property and developed relationships with the builders who have benefitted her in purchase of property also. In AY 2012-13 assessee purchased property out of loan and declared huge income under the head income from house property while no interest was paid to any financial institution. In previous year i.e., AY 2011- 12 interest was less as against income earned from parties. The assessee wants to enhance its interest income from parties and started granting loans after getting the loan against the property and in AY 20I8-19 the interest paid to bank was quite less than interest earned from parties. The income earned therefore was on account of prudent business woman who in some year did not gain much but maintained relationships and ultimately interest paid to bank was substantially reduced. The revenue authorities cannot sit on the arm chair of a business woman who is earning income and making relations in order to earn interest income from various parties as banks are not paying much interest while private parties are paying more interest. The loans granted were returned but assessee cannot presume unexpected returns and regularly paying interest to financial intuitions who normally deduct amount on pre payment of loan due to which it is the decision of man or woman to decide what amount to be granted as loan after examining the financials of loan recipient due to which in some years
I.T.A.No.7686/Del/2019 she incurred loss also. From the perusal of the chart the nexus is quite clear as assessee used to take loans from financial intuitions in order to grant loan to various parties and such loans was not for any other purpose but was taking in order to earn interest income. Therefore, it is submitted that the same is an allowable expenditure.
The Ld. Counsel for the assessee placed reliance on the decision of the Hon’ble Delhi High Court in the case of Vodafone South Ltd. Vs. CIT [378 ITR 410] in respect of his above contentions.
The Ld. Counsel for the assessee further submits that rule of consistency is required to be followed as in the case of the assessee in none of the years either in the earlier assessment years or in the subsequent assessment years the claim of the assessee was denied except in the year under consideration i.e. AY 2015-16. Reliance was placed on the judgments of the Hon’ble Supreme Court in the case of CIT Vs. Excel Industries Ltd. [358 ITR 295], CIT Vs. J.K. Charitable Trust [308 ITR 161], Radha Soami Satsang Vs. CIT [193 ITR 321] (SC).
On the other hand, the Ld. DR strongly supported the orders of the authorities below.
Heard rival submissions, perused the orders of the authorities below and the material placed before us. The Assessing Officer while completing the assessment denied the claim for set off of interest paid by the assessee to banks/financial institutions against the income earned 7
I.T.A.No.7686/Del/2019 by the assessee from various companies on the ground that the assessee has not expanded the interest expenditure for earning interest income.
The Ld. CIT(A) sustained the stand of the Assessing Officer observing that on perusal of the loan statements it is noticed that the loans have been granted either for purchase of home or for development of land. The Ld.CIT(A) was of the view that the loans were taken from the banks for the purpose of not granting loans to other parties and earning interest thereon. However, the loan statements appearing in the paper book at pages 8 to 14 clearly indicate that the loans were granted by India Bulls Homes & Finance Ltd. and ICICI Bank against the property and not for purchase of any immovable property. Therefore, the observation of the Ld. CIT(A) that the loan has been obtained for purchase of real estate is erroneous and contrary to record.
We further observed that the assessee has been making similar claims from the assessment years 2011-12 onwards and the assessments were completed u/s 143(3) of the Act accepting the claim of the assessee. All the assessments right from the AYs 2011-12 to 2018-19 were completed u/s 143(3) of the Act accepting the claim of the assessee except during the year under consideration i.e. 2015-16 and the details are as under:
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AY Income Income Interest Interest Nature of addition, if returned Assessed received paid to any from parties financial (PB pg) instituti ons/Ban ks for granting loans 2011-12 6,38,030/- 6,38,030/- 8,55,975/- 5,74,645/- Income returned (PB Pg 41) (Pg 44) (Pg 41) (PB 41) accepted u/s 143(3), PB 44 2012-13 10,50,470/- 17,21,804/- 5,91,700/- - No such issue as (Pg 48-50) (PB 53) (PB Pg 48) no interest paid to bank. 2013-14 10,86,160/- 10,86,160/- 16,29,459/- 34,42,284/- Income returned (PB Pg 54) (PB 57) (PB 54) (PB 54) accepted u/s 143(3), PB 57 2014-15 63,14,940/- 63,14,940/- 48,17,394/- 50,29,894/- Income returned (PB Pg 67-68) (PB 61) (PG 68) (PB Pg 68) accepted u/s 143(3), PB 61 2015-16 27,41,380/- 1,05,23,064/- 66,96,097/- 67,56,682/- Disallowance of (PB Pg 1-3) (PB 4-6) (PB 1) (PB 1) deduction Rs.67,56,682/- 2016-17 18,34,550/- 18,34,550/- 45,07,982/- 70,97,089/- Income returned (PB 69-71) (PB 72-73) (PB Pg 69) (PB Pg 69) accepted u/s 143(3), PB 72-73 2017-18 73,11,900/- 73,55,400/- 65,73,636/- 62,28,913/- 43,500/- (PB 74-76) (PB 77-84) (PB Pg 74-75) (PB Pg 74-75) Disallowance on account of excess deduction claimed u/s 24(b) of the Act. 2018-19 88,18,660/- 88,18,600/- 81,18,890/- 51,46,303/- Income returned (PB 86-88) (PB 89) (PB Pg 86) (PB Pg 86) accepted u/s 143(3) under National E- Assessment, PB 89-90 9.1 The Revenue year after year right from the AY 2011-12 has been examining the claim of the assessee in respect of the loans received by the assessee and the loans advanced by the assessee and the claim for set off of interest paid against interest earned by the assessee u/s 57 of the Act. In none of the assessment years there was any disallowance except in the year under consideration.
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In the case of Bharat Sanchar Nigam Ltd. Vs. Union of India [282 ITR 273] the Hon’ble Apex Court referring to the decision in the case of Radha Soami Satsang (supra) held as under:
20. The decisions cited have uniformly held that res judicata does not apply in matters pertaining to tax for different assessment years because res judicata applies to debar courts from entertaining issues on the same cause of action whereas the cause of action for each assessment year is distinct. The courts will generally adopt an earlier pronouncement of the law or a conclusion of fact unless there is a new ground urged or a material change in the factual position. The reason why courts have held parties to the opinion expressed in a decision in one assessment year to the same opinion in a subsequent year is not because of any principle of res judicata but because of the theory of precedent or the precedential value of the earlier pronouncement. Where facts and law in a subsequent assessment year are the same, no authority whether quasi- judicial or judicial can generally be permitted to take a different view. This mandate is subject only to the usual gateways of distinguishing the earlier decision of where the earlier decision is per incuriam. However, these are fetters only on a co-ordinate Bench which, failing the possibility of availing of either of these gateways, may yet differ with the view expressed and refer the matter to a Bench of superior strength or in some cases to a Bench of superior jurisdiction.
The principle accepted by the Revenue for the earlier four assessment years and three subsequent assessment years to the assessment year under consideration was that the assessee has been taking loans from the banks and financial institutions and the same were lent to various other companies for earning interest income and the claim for set off of interest paid to banks/financial institutions was allowed against interest earned by the assessee u/s 57 of the Act. Since the Revenue was accepted the principle consistency in earlier assessment years and also in subsequent assessment years there is no justification 10
I.T.A.No.7686/Del/2019 and deviating from the said principle only for the assessment year under consideration i.e. AY 2015-16.
The Hon’ble Delhi High Court in the case of Vodafone South Ltd. Vs. CIT (supra) held that where assessee having availed of loan from HSBC advanced said amount to its holding company there was a direct nexus between earning of interest on loan advanced by assessee to its holding company and payment of interest to HSBC. The assessee’s claim for netting off of interest in terms of Section 57(iii) of the Act was in order. Ratio of the decision applies to the facts of the case.
In view of what is discussed above, we set aside the order of the Ld. CIT(Appeals) and direct the Assessing Officer to delete the disallowance made u/s 57 of the Act. Grounds raised by the assessee are allowed.
In the result, appeal of the assessee is allowed.
Order pronounced in the open court on 16/02/2023