MRS. JAGJIT KAUR,NEW DELHI vs. ITO, NEW DELHI

During the course of hearing, the learned counsel for the assessee at the very outset stated that a similar issue was a subject matter of the departmental appeal in assessee’s own case, for the A.Y. 2009-10 in wherein vide order dated 16.10.2017, the issue has been decided against the department and in favour of the assessee, copy of the said order was furnished which is placed on record. In his rival submissions, the learned DR although supported the orders of the authorities below but could not controvert the aforesaid contention of the learned counsel for the assessee.

I have considered the submissions of both the parties and perused the material available on the record. In the present case, it is an admitted fact that an identical issue was a subject matter of the departmental appeal in ITA No. 5994/Del/2015 for the A.Y. 2009-10 wherein vide order dated 16.10.2017. The issue has been decided in favour of the assessee by the ITAT Delhi ‘SMC’ “Bench, New Delhi and the relevant findings has been given in para 9 to 11 which read as under: “9. The merits of the first addition made by the assessing officer, as deleted by the first appellate authority, relates to amount of 33,95,802/- comprising of rupees 33,47,778/- and rupees for 48,024/, on account of there being no business activity and business income being taken as nil. Ld. assessing officer has discussed the merits of the case in paragraph 3.1 to paragraph 3.5 of the order passed by him (from pages 4 to 7). I have carefully gone through the findings of assessing officer in the assessment order recorded particularly in paragraph 3.4 & 3.5 , on which I am unable to agree with the case of the Department/revenue inasmuch as mere not carrying of business activity inferred out of nil business income is outrightly and patently wrong and incorrect. From long back it is settled legal position that quantum of receipts appearing in credit side of P&L account cannot decide the allowability of the expenditure claimed. In 20 ITR Pose 1 it was held that it is not must under income tax law that there is reciprocity between expenditure and income and it is always not must that expenditure made results in positive income. So the reasoning and foundation laid by assessing officer in impugned order is ex- facie erroneous and rightly interfered by Commissioner of income tax appeals.

Regarding this issue, elaborate and detailed finding contained in order passed by CIT-Appeals is reproduced below for ready reference: “I have considered the submissions of the appellant as well as the findings of the Ld. AO. keeping into consideration the various case laws of the higher appellate authorities and the Hon’ble Courts held relied on by the Ld.AR and the following facts and circumstances of the appellant’s case. I incline to agree with the contention of the appellant that the Ld. AO is not justified in making addition on account of disallowance of interest expenses incurred to generate the income of FDRs amounting to Rs.33,47,7781- and other expenses of Rs.48,024/-. (i) On perusal of the documentary evidences filed by the Ld.AR during the course of assessment as well as appellate proceedings, it is evident that the loan of Rs.2.50 crores taken from ICICI Bank is not home loan and is loan against the property. The words “Home Loan” mentioned over the Loan Agreement is as per the Categorization System of the bank. This can be made more clear by the fact that the property mentioned in loan agreement i.e. House No.9, West Punjabi Bagh, West Avenue, Delhi- 220026, has already been purchased by S. Sukhbir Singh (Husband of the Assessee) on 25th day of February, 1970 and thus the observation of the Ld.AO being the same property purchased against the loan is factually not correct. 1. The appellant produced the copy of bank statement along with detailed chart for of FDR which clearly reflect that Rs.2.50 crores have been received by her against loan from ICICI Bank under loan against property (LAP) on 05-01-2007 and 5 FDRs were created on 12-01-2007 of Rs.50 lakh each. 2. Thereafter such FDRs are utilized for purchase of property and jewellery with the clear intention to conduct the business from A.Y. 2008-09. (ii) The most relevant aspect, which is to be seen in this case, is the intension of the Assessee for purchase of jewellery, gold, diamond & property that can be reflected from the facts of the case and the conduct of the Assessee. The Assessee has taken a loan of Rs.2.5 crores for starting his business and as a prudent businessman, she has invested such amount for purchase of jewellery and property. The intension of Assessee clearly reflect from the trading account and profit & loss account declared from the start of his business, i.e .A.Y.2008- 09 and shown under the head purchase / closing stock / opening stock of properties and jewellery. The documents produced during the assessment proceeding clearly reveals that loan availed from ICICI Bank is utilized for purchase of jewellery and property w.e.f.01-04-2007. No person shall take loan for investment in any jewellery and property. iii) The intention for purchase of particular assets not depend on the nature of the asset, but it depends on the intension of the Assessee for the purpose for which such asset has purchased. In the present case, the Assessee has kept office, raise the loan, made sale and purchase for jewellery and property, spend on stationery and other expenses, which lead to conclude that there is a business conducted by Assessee and the intension to purchase such assets are to conduct the business rather than make the investment. (iv) The assessee showing the sale and purchase of such jewellery and property under the head business and profession, the Assessee also lose the benefit of indexation, which is available when such assets are shown under the head investment. So the Assessee has loose such benefit of indexation for conducting the business and this conduct clearly reveals the intension of Assessee to purchase such assets for business and profession. (v) It was held by Delhi High Court in the case of CIT vs Smt. Radha Bhai (2005) 272 ITR 264 that the period for retaining p of immovable property does not determine the nature but the intension of purchase of such property determined the status and nature of such property. It was further held by Punjab & Haryana High Court in the case of CIT Vs. Sushila Devi Jain (2001) 259 ITR 671 that it was necessary to determine the intention of assessee at the time of purchase of land and property should be considered. Therefore, keeping in view, the ratio of judgments of various courts law of higher authorities and Hon’ble Courts. I incline to agree with the contention of Ld.AR and delete the addition of Rs.33,47,778/- made on account of disallowance of interest and other expenses. Hence, the ground of appeal

In the result, appeal of the assessee is allowed. (Pronounced in the open court on 28.11.2017.)