ASHISH LAND & PROPERTY DEVELOPERS P.LTD,MUMBAI vs. ITO 9(1)(4), MUMBAI

IN THE INCOME-TAX APPELLATE TRIBUNAL “A” BENCH MUMBAI BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER (Assessment Year 2012-13) M/s Ashish Land & Property ITO-9(1)(4) Developers Pvt. Ltd. Aayakar Bhavan, 215, Atrium, 10th Floor, Vs. New Marine Lines, Near Marriot Courtyard Hotel, Mumbai. Andheri-Kurla Road, Andheri (E), Mumbai-400093. PAN: AAGCA2673J Appellant Respondent Appellant by : Shri Anuj Kisnadwala (AR) Respondent by : Shri Rajesh Kumar Yadav (DR) Date of Hearing : 01.05.2018 Date of Pronouncement : 31.07.2018 ORDER UNDER SECTION 254(1)OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER;

1. The learned Commissioner of Income Tax, erred in law & facts in confirming order of Assessing officer -of disallowing alternate claim of appellant in respect of allowance of proportionate interest u/s 36(1)(iii) on advances made for purchases of property amounting to Rs.5,51,85,094/-. The advances are made in the course of business of the appellant being builders & developers and not for acquiring capital assets and nor for extension of existing business. The same is for the main business as builder & developers. The same should be allowed as business expenditure.

Kanakia and Rs. 45,94,350/- to M/s Kanakia Spaces Pvt. Ltd. The Assessing Officer also noted that there is no investment in the property i.e. R.B. Kanakia School Building as compared to preceding year. The Assessing Officer took the view as there is no addition of value in the House Property either on account of acquisition, construction, repair or renewal. The assessee has claimed interest expenses in respect of Long Term and Short Term borrowing. Since there is no increased in the value of House Property, therefore, the loan cannot be said to be utilized for the purpose of acquisition, construction or re-construction of the property. The assessee was asked to furnish the statement of utilization of borrowed capital and interest expenses claimed against the House Property. The assessee furnished its reply dated 09.02.2015. Along with the reply, the 2 Mum 2016-M/s Ashish Land & Property Developers Pvt. Ltd. assessee filed copy of sanctioned letter and interest accrued and paid, rate of interest from M/s Yes Bank. From the loan taken from Shri Rasesh B.

Kanakia, the assessee furnished the copy of ledger account specified the amount of interest paid by assessee for the purpose of acquisition of property. The information furnished by assessee was not accepted by the Assessing Officer holding that the amount borrowed from M/s Kanakia Spaces Pvt. Ltd. is not utilized for any purpose specified in section 24(b) or in relation to House Property against the property from which Income from House Property was shown. Therefore, the Assessing Officer disallowed the interest expenditure of Rs. 45,94,350/-. The assessee in alternative claimed the interest expenditure under section 36(1)(iii). In alternative claim the assessee contended that part of loan was given as a property advance. After perusal of confirmation letter furnished by assessee, the Assessing Officer took his view that said loan was not given as advance for acquisition of development right; therefore, alternative contention of the assessee was also discarded. On appeal before the ld. CIT(A), the assessee challenged the disallowance on proportionate interest under section 36(1)(iii) only. The ld CIT(A) confirmed the action of assessing officer, therefore, further aggrieved the assessee has filed the present appeal before us raising the grounds of appeal as mentioned above.

3. The perusal of records reveals that the appeal is filed 10 days beyond the prescribed period of limitation. In support of condonation of delay, the 3 Mum 2016-M/s Ashish Land & Property Developers Pvt. Ltd. assessee has filed an application along with the affidavit of Ashish R. Kanakia. In the affidavit, it is contended that the order of ld. CIT(A) was received on 19.10.2016, the deponent-Director of the assessee was travelling to Gujarat from 12.12.2016 till 22.12.2016. After returning from journey, appeal fees of Rs. 10,000/- was paid on 23.12.2016 and the appeal was filed on 28.12.2016, therefore, there is delay of 10 days in filing the present appeal. Apart from the contents of affidavit, it is contended in the application that there is marginal delay in filing the appeal; the delay was not intentional or deliberate and the same may be allowed. The ld. AR for the assessee made is submissions on similar lines. The ld. AR submits that the assessee has good case on merit and is likely to succeed.

4. On the other hand, the ld. DR for the Revenue submits that there is gross negligence on the part of Director of assessee. There is no genuine reason pleaded in the application for contention of delay. The ld. DR for the Revenue prayed for rejection of application of contention of delay.

5. We have considered the rival submission of representative of the parties and have noted that there is only 10 days delay in filing the present appeal. The Director of the assessee has filed affidavit inter alia deposing that the delay was neither deliberate nor intentional but due to the reason that he was out of station for 10 days. Considering the contents of application and the affidavit, the delay is condoned. Mum 2016-M/s Ashish Land & Property Developers Pvt. Ltd.

6. On merit, the ld. AR of the assessee submits that assessee is in the business of real estate development. During the course of business, the assessee made advance of Rs. 5,00,18,171/- to Periwinkle Construction Pvt. Ltd. and Rs. 51,66,926/- to R & H Real Estate Developer. The Assessing Officer not allowed the alternative claim holding that as per proviso of section 36(1)(iii), interest on money borrowed for acquiring a capital asset till the date on which assets was brought to use even if it is for extension of business, is not allowable as revenue deduction. The ld. CIT(A) sustained the action of Assessing Officer holding that as on date of acquisition, no construction work was stated on the development right taken by the assessee. Therefore, proviso of section 36(1)(iii), interest on money for acquisition of capital asset till the date on which asset was brought to use is not allowable deduction. The ld. AR of the assessee submits that the proviso to section 36(1)(iii) is not applicable to the assessee. In support of his submission, the ld. AR of the assessee relied upon the decision of Hon’ble Delhi High Court in case of CIT vs. Dhoomketu Builders and Developers Pvt. Ltd. (Del. HC) (368 ITR 680), decision of single bench of Jaipur Tribunal in case of ACIT vs. Aditya Propcon P. Ltd. (ITA No. 760/JP/2014) dated 30.01.2014.

Order pronounced in the open court on 31.07.2018.