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Income Tax Appellate Tribunal, VISAKHAPATNAM BENCH, VISAKHAPATNAM
Before: SHRI V. DURGA RAO & SHRI D.S. SUNDER SINGH
ITA No.41 /Vizag/2017 Akula Venkata Vijaya Sarathi, Rajamahendravaram Rep by GPA Holder Shri Posayya आयकर अपीलीय अधधकरण, धिशाखापटणम पीठ, धिशाखापटणम IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM श्री िी. दुगााराि, न्याधयक सदस्य एिं श्री धड.एस. सुन्दर ससह, लेखा सदस्य के समक्ष BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI D.S. SUNDER SINGH, ACCOUNTANT MEMBER आयकर अपील सं./I.T.A.No.41/Vizag/2017 (धनधाारण िर्ा / Assessment Year: 2012-13) Akula Venkata Vijaya Sarathi CIT(A)-2, Rajamahendravaram Guntur Rep by GPA Holder Shri Posayya Camp: Visakhapatnam [PAN No.AMYPA9125C] (अपीलाथी / Appellant) (प्रत्याथी / Respondent)
अपीलाथी की ओर से / Appellant by : Shri G.V.N. Hari, AR प्रत्याथी की ओर से / Respondent by : Shri P.S. Murthy, DR सुनिाई की तारीख / Date of hearing : 09.05.2018 घोर्णा की तारीख / Date of Pronouncement : 16.05.2018 आदेश / O R D E R PER D.S. SUNDER SINGH, Accountant Member:
This appeal filed by the assessee is directed against order of the Commissioner of Income Tax (Appeals)-2, Guntur, Camp Office Visakhapatnam vide appeal No.158/2015-16 dated 16.11.2016 for the assessment year 2012-13.
ITA No.41 /Vizag/2017 Akula Venkata Vijaya Sarathi, Rajamahendravaram Rep by GPA Holder Shri Posayya 2. All the grounds of appeal are related to the interest of Rs. 2,36,223/- earned on short term deposits from the bank. Assessee has taken a loan of Rs.1.00 crore from State Bank of Hyderabad on 08.01.2011 and transferred the same to the short term deposits of Rs. 20 lakhs each on 17/01/2011. For the period from 17.1.2011 to 23.6.2011, the assessee earned interest of Rs.2,36,223/- but the same was not offered to the income for the relevant Assessment Year (A.Y.), hence, the assessing officer called for the explanation of the assessee and the assessee explained that a sum of Rs.3,43,907/- was the interest accrued / charged on the bank loan taken by the assessee and the same should be set off against the interest received on deposit of Rs.2,36,223/- in which case, the resultant income would be nil, thus requested to not to assess the interest on deposits separately as the income from other sources. Not being satisfied with the explanation of the assessee, the A.O. viewed that the interest of Rs.3,43,907/- was already capitalized by the assessee towards the godown purchase account in the concerned A.Y. and hence, no further set off is required and accordingly made the addition of Rs.2,36,223/- and brought to tax.
Aggrieved by the order of the A.O., the assessee filed appeal before the CIT(A) and reiterated the submissions made before the AO. In addition, the assessee also submitted that the capitalization was 2
ITA No.41 /Vizag/2017 Akula Venkata Vijaya Sarathi, Rajamahendravaram Rep by GPA Holder Shri Posayya wrongly made and a reverse entry was passed subsequently in the A.Y.2013-14, hence requested to set off interest on bank loan, against the interest received on deposits. However, the Ld. CIT(A) viewed that the events subsequent to 31.3.2011/31.03,2012 but happenings up to and finalization of account/up to the filing of return u/s 139(1) of the Income Tax Act, 1961 (hereinafter called as 'the Act') always be considered but in the present case, the entry was passed only in 2013- 14, which cannot be taken cognizance of and accordingly dismissed the appeal of the assessee.
Aggrieved by the order of the CIT(A), the assessee carried the matter to the Tribunal. During the appeal hearing, the Ld. A.R. reiterated the submissions made before the Ld. CIT(A) and argued that initially the assessee has capitalized the interest, subsequently the same was reversed, hence requested to set off of interest payment against the receipt. The Ld. AR further submitted that interest payment and receipt was inextricably linked to each other.
On the other hand, the Ld. D.R. relied on the orders of the lower authorities and argued that determination of income of each year is independent and the reversal of entries made in the subsequent years cannot be considered for set off in the year under consideration. The
ITA No.41 /Vizag/2017 Akula Venkata Vijaya Sarathi, Rajamahendravaram Rep by GPA Holder Shri Posayya Ld.DR further argued that the assessee has capitalized the interest payment to godowns account but not offered the interest to the income account, hence the AO has rightly made the addition and no interference is called for.
We have heard both the parties, perused the materials available on record and gone through the orders of the authorities below. The assessee has taken a loan of Rs.1.00 crore from State Bank of Hyderabad on 8.1.2011 and deposited the same in the State Bank of Hyderabad as short term deposits in multiples of Rs.20 lakhs each on 17.01.2011. The said deposits were matured on 23.6.2011 and the same were used for the purpose of godowns. It appear from the statement of facts that the assessee has taken the loans for construction of godowns. The interest accrued on bank loan for the period from 8.1.2011 to 31.3.2011 and the subsequent period of 1.4.2011 to 23.6.2011 aggregating to Rs.3,43,907/- was stated to be capitalized towards godown purchase account in both the relevant assessment years. On maturity of deposits, the assessee earned interest of Rs.2,36,223/- but the same was not offered to income, which should have been offered as income. However, when the issue was raised by the A.O., in the assessment proceedings the assessee has requested for set off of interest on bank loan against the interest receipt. The 4
ITA No.41 /Vizag/2017 Akula Venkata Vijaya Sarathi, Rajamahendravaram Rep by GPA Holder Shri Posayya assessee argued that the interest received is directly linked to the bank loan and the payment of interest allowable as deduction u/s 57(iii). Though the assessee’s argument is correct but the assessee choose to capitalize the interest and capitalized same towards godown purchase account in the A.Y. year concerned and the treatment given by the assessee also is one of the permissible accounting practice and accordingly the books of accounts were closed and the returns were filed by the assessee. However the assessee omitted to include the interest earned from the deposits which required to be taxed separately. Having capitalized the interest on bank loan, no further adjustment of set off of interest is possible after filing the return of income and closed the books of account The income of the assessee has to be computed each year independently. In this case, the assessee has closed the books of accounts filed the return of income capitalizing the interest on bank loan towards purchase of godowns. The interest earned by the assessee on deposits did not find place in the return. After finalizing the books of accounts and filing the return of income, the assessee cannot make a fresh claim to reverse the entry and request for deduction. Since the interest on bank loan was already capitalized no set off is possible and the Ld. CIT(A) has rightly held that the event subsequent to 31.3.2011 and 31.3.2012 but happening up to finalization of 5
ITA No.41 /Vizag/2017 Akula Venkata Vijaya Sarathi, Rajamahendravaram Rep by GPA Holder Shri Posayya accounts/ up to filing of ITR u/s 139 of the Act always can be considered but not the happenings subsequent to the filing of the return. Therefore, a reversal of entries made in the assessment year 2013-14 cannot be taken cognizance of in the year under consideration for allowing the deduction u/s 57(iii) and the CIT(A) has rightly upheld order of the A.O. and the same is upheld.
In the result, the appeal filed by the assessee is dismissed.
The above order was pronounced in the open court on 16th May’18.
Sd/- Sd/- (िी. दुगााराि) (धड.एस. सुन्दर ससह) (V. DURGA RAO) (D.S. SUNDER SINGH) न्याधयक सदस्य/JUDICIAL MEMBER लेखा सदस्य/ACCOUNTANT MEMBER धिशाखापटणम /Visakhapatnam: ददनांक /Dated : 16.05.2018 VG/SPS आदेश की प्रधतधलधप अग्रेधर्त/Copy of the order forwarded to:- 1. अपीलाथी / The Appellant – Akula Venkata Vijaya Sarathi, Rep. By GPA Holder Shri Posayya, D.No.54-9-9, Addepalli Colony, Rajamahendravaram-533 103. 2. प्रत्याथी / The Respondent – The ITO, Ward-2(1), Rajahmundry 3. आयकर आयुक्त / The Pr. CIT, Rajahmundry 4. आयकर आयुक्त (अपील) / The CIT (A)-2, Guntur, Camp: Visakhapatnam 5. धिभागीय प्रधतधनधध, आय कर अपीलीय अधधकरण, धिशाखापटणम / DR, ITAT, Visakhapatnam 6. गाडा फ़ाईल / Guard file आदेशानुसार / BY ORDER // True Copy // Sr. Private Secretary ITAT, VISAKHAPATNAM