CHETHAN DASS,BANGALORE vs. THE ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE-6(3)(1), BANGALORE

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ITA 940/BANG/2018Status: DisposedITAT Bangalore08 February 2019AY 2013-143 pages

In favour of the Revenue: the assessee's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the interest claimed was not payable on an accrual basis as the assessee was unable to discharge its obligations under the agreement. The liability was considered a contingent liability or no liability in the eyes of law.

What were the facts?

The assessee claimed a deduction for interest amounting to Rs. 23,94,375/-. The Assessing Officer disallowed this claim, and the CIT(A) confirmed the disallowance. The assessee appealed to the ITAT.

What were the issues?

Whether the claimed interest deduction on advances was allowable on an accrual basis when the underlying agreement was not fulfilled. Whether interest levied under sections 234B and 234C was erroneous.

Which sections of the Income-tax Act were involved?

Section 234B,Section 234C

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “B” BENCH : BANGALORE

Before: SHRI ARUN KUMAR GARODIA & SHRI LALIET KUMAR

For Appellant: Smt. Suman Lunkar, CA
For Respondent: Shri R.N. Siddappaji, Addl. CIT (DR)
Hearing: 05.02.2019Pronounced: 08.02.2019

O R D E R

Per Shri A.K. Garodia, Accountant Member

1.

This appeal is filed by the assessee and the same is directed against the order of ld. CIT(A)-6, Bangalore dated 30.11.2017 for Assessment Year 2013-14.

2.

The grounds raised

by the assessee are as under. “1. The learned Assessing Officer had erred in passing the order in the manner passed by him and the learned Commissioner of Income tax (Appeals) has erred in confirming the same. The impugned orders being bad in law are required to be quashed.

2. The learned Assessing Officer had erred in the disallowing the claim of deduction of interest of Rs.23,94,375/- and the learned Commissioner of Income tax (Appeals) has erred in confirming the same.

3. The lower authorities have arrived at an erroneous conclusion on an improper appreciation of facts. On correct appreciation of facts it will be clear that deduction of Rs. 23,94,375/- was correctly claimed by the appellant and the same is to be allowed to the appellant.

4. The learned Assessing Officer has also erred in levying Interest U/s. 234B, 234C of the I.T. Act, 1961. The appellant denies liability to pay Interest. The interest having been levied erroneously is to be deleted.

5. In view of the above and on other grounds to be adduced at the time of hearing, it is requested that the disallowance out of interest be deleted and interest levied be also deleted.”

3.

At the very outset, it was squarely considered by ld. AR of assessee that the issue involved in this appeal is squarely covered against the assessee by the Tribunal order in assessee’s own case for Assessment Year 2011-12 in dated 19.10.2017. She submitted a copy of this Tribunal order. She drawn our attention to Para no. 10 of this Tribunal order. The ld. DR of revenue supported the order of CIT(A).

4.

We have considered the rival submissions. We first reproduce paras 10 to 12 of the Tribunal order in assessee’s own case for Assessment Year 2011- 12. The same are as under. “10. From the above, it is clear that the initial lease for a period of ten years expired on 19.05.1988 and there was no extension of lease agreement in favour of the assessee. On account of the above, we are of the opinion that once the assessee did not have any right to remain in possession of lease, there was no occasion for the assessee to enter into a sub-lease agreement initially with Tapovan Builders in the year 1987 and thereafter with Bangalore Hospitals Ltd. Moreover the existence of both the sub-lease agreements was dependent upon the clear and marketable title of the assessee, on the basis of which the assessee can execute the sub-lease agreement in favour of these two sub-lessees. Once the title of the assessee is under cloud, there is no occasion for the assessee to execute the sub-lease agreement in favour of these two entities. Further both the sub-lease agreements were only a prelude to the agreement as neither the title of the assessee was clear nor the assessee could put these two entities into possession, nor these two entities have paid the remaining amount of Rs.10 lakhs and Rs.45 lakhs respectively. 11. In view of the above, the claim of the assessee that the interest was payable on advances of Rs.9,50,000/- and Rs.40,00,000/- are not payable on accrual basis. Once the assessee was unable to discharge its obligation under the agreement, it is for the assessee to take a call and return the amount received by him immediately when he was unable to pay the amount. Further the credit of interest accrued in favour of these two entitles was relatable to the business of the assessee, as it was not wholly and exclusively connected with the business of the assessee. Our view is further supported by the fact that these two entities have not shown any interest amount towards these advances as receivables in their books of account. 12. In view of the above, we are of the opinion that the liability is only sought to be credited by way of crediting the interest amount was merely a contingent liability / or rather no liability in the eyes of law.

Page 3 of 3 Therefore the assessee was not entitled to credit the same amount by deducting it under the provisions of the Act. In view of the above, the reasoning given by the CIT (A) in para 3.17 and 3.18 are correct and no interference is called for.”

5.

In the present year the dispute is same and admittedly, this is covered against the assessee by the Tribunal order in assessee’s own case for Assessment Year 2011-12. Respectfully following the same, we decide the issue in the present year also against the assessee.

6.

In the result, the appeal filed by the assessee is dismissed. Order pronounced in the open court on the date mentioned on the caption page.

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