Loading judgment…
Facts
The appeals were filed by the assessee and the revenue against the common order of CIT(A) NFAC for AY 2017-18. The issues involved were common and related to identical facts, leading to the adjudication of both appeals together. The assessee's return declared 'nil' income, but the assessment order quantified it at Rs. 154,54,66,856/- after various additions and disallowances.
Held
The Tribunal held that Ground I (Violation of Natural Justice) was not pressed and dismissed. For Ground II (Disallowance u/s 14A), the Tribunal allowed the appeal, stating that no disallowance should be made as the assessee had not earned any exempt income. For Ground III (Depreciation on rented portion), the issue was restored to the AO for verification. For Ground IV (Notional Rent), the appeal was allowed as the flats were not acquired in the financial year. For Ground V (Disallowance u/s 40(a)(ia)), the appeal was allowed as the assessee had complied with TDS provisions where applicable. For Ground VI (Deduction u/s 35DD), the appeal was allowed, directing the AO to allow the claim. For Ground VII (Disallowance u/s 38(2)), the issue was restored to the AO for verification. For Ground VIII (Interest accrued but not receivable), the appeal was allowed. For Ground IX (Interest expenses on advance for flats), the issue was restored to the AO. For Ground X (Interest cost on debentures), the appeal was allowed. For Ground XI (Discrepancies with Form 26AS), the issue was restored to the AO. The Revenue's appeal was dismissed.
Key Issues
Several issues were raised, including violation of natural justice, disallowance under Section 14A, depreciation on rented property, addition of notional rent, disallowance under Section 40(a)(ia), deduction under Section 35DD, disallowance under Section 38(2), addition of accrued interest, disallowance of interest expenses on advance, disallowance of interest cost on debentures, and additions due to discrepancies with Form 26AS. The Revenue's appeal questioned the CIT(A)'s directions for verification.
Sections Cited
14A, 38(2), 35DD, 40(a)(ia), 23(1)(a), 36(1)(iii), 196(iv), 10(23D), 24(a)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “A” BENCH, MUMBAI
Before: SHRI VIKAS AWASTHY & SHRI AMARJIT SINGH
आदेश / O R D E R Per Amarjit Singh (AM): Both these cross appeals are filed by the assessee and revenue for assessment year 2017-18 directed against the common order of CIT(A) NFAC. Since, common issue on identical facts are involved in these appeals filed by the assessee and revenue, therefore, for the sake of convenience both these appeals are adjudicated together by taking ITA No. 1968/Mum/2023 as lead case. ITA No.1968/Mum/2023 “GROUND I: VIOLATION OF PRINCIPLES OF NATURAL JUSTICE: 1. On the facts and circumstances of the case and in law, the Ld CTT (A) erred in passing the impugned order without providing an opportunity of hearing to the Appellant and incorrectly observing that the Appellant has sought adjournment for video conferencing 2. He further erred in rejecting the Appellant's contention that the Assessing Officer ('AO) has passed the assessment order in violation to principle of natural justice without considering the submissions made during the course of assessment proceedings 3. He further erred in passing the impugned order without appreciating and referring to the documents placed on record in the course of Assessment Proceedings and in the course of Appeal 4. The Appellant, therefore, prays that the impugned order passed in gross violation of the principles of natural justice be held as bad in law and the additions/disallowances made be deleted WITHOUT PREJUDICE TO GROUND I GROUND II: DISALLOWANCE U/S, 14A OF THE ACT AMOUNTING TO RS.82,36,70,816/-: 1. On the facts and circumstances of the case and in law, the Id. CIT(A) erred in upholding the interest disallowance made by the AO u/s 14A of the Act amounting to Rs. 82,36,70,816/-in absence of any exempt income earned during the year. 2. The Appellant prays that the disallowance u/s 14A of the Act of Rs. 82,36,70,816/- be deleted. WITHOUT PREJUDICE TO GROUND I GROUND III: DISALLOWANCE AMOUNTING TO RS. 9,22,25,022/-ON ACCOUNT OF DEPRECIATION ON THE RENTED PORTION OF THE PROPERTY:
P a g e | 3 ITA No.1968 & 2710/Mum/2023 Aasan Corporate Solutions Pvt. Ltd. Vs. DCIT, Circle 6(1)(1)
On the facts and in the circumstances of the case and in law, the Id. CIT(A) erred directing the AO for verification of the claim of the Appellant without appreciating the facts on record that no depreciation has been claimed on the portion of the building let out, the income from which is offered to tax under the head Income from House Property and thus the question of disallowance of depreciation amounting to Rs. 9,22,25,022 made by the AO does not arise 2. The Appellant prays that the disallowance of depreciation amounting to Rs. 9,22,25,022/- based on aforesaid incorrect premise be deleted WITHOUT PREJUDICE TO GROUND I: GROUND IV: ADDITION OF NOTIONAL RENT AT ADHOC RATE OF 8% OF THE VALUE OF THE INVESTMENT IN FLATS OF RS. 144,17,67,600/ 1. On the facts and circumstances of the case and in law, the Id CIT (A) erred in upholding the AO's contention of making addition of notional rent at the adhoc rate of 8% u/s 23(1)(a) of the Act and directing that such interest should be calculated from the date of allotment letter without appreciating that the Appellant has not received the possession of the said flats in the year under consideration and thus, the question of addition on account of notional rent does not arise. 2. The Appellant prays that the addition made of notional rent at the adhoc rate of 8% of the value of the investment in flats be deleted or appropriately reduced WITHOUT PREJUDICE TO GROUND I GROUND V: DISALLOWANCE U/S. 40(a)(ia) AMOUNTING TO RS. 3,64,91,478/- 1. On the facts and in the circumstances of the case and in law, the Id. CIT (A) erred in upholding the AO's action of disallowing a sum of Rs 3,64,91,478/- u/s 40(a)(ia) of the Act, being 30% of the interest paid to Franklin Templeton and Alpex Holdings Pvt Ltd on the alleged ground that tax has not been deducted at source thereon 2. He, without appreciating the fact on record, failed to appreciate and ought to have held that tax is already deducted in case of Alpex Holdings Pvt. Ltd. and there is no liability to deduct tax on interest to Franklin Templeton by virtue of Section 196(iv) of the Act. 3. The Appellant therefore, prays that the disallowance made u/s. 40(a)(ia) amounting to Rs. 3,64,91,478/- be deleted. WITHOUT PREJUDICE TO GROUND I GROUND VI: DISALLOWANCE OF DEDUCTION U/S 35DD OF THE ACT AMOUNTING TO RS, 5,00,00,000/-: 1. On the facts and in the circumstances of the case and in law, the Id CIT(A) erred in upholding the AO's action of disallowing the deduction claimed by the Appellant u/s 35DD of the Act amounting Rs. 5,00,00,000/ being 1/5th of the stamp duty paid on demerger
P a g e | 4 ITA No.1968 & 2710/Mum/2023 Aasan Corporate Solutions Pvt. Ltd. Vs. DCIT, Circle 6(1)(1)
He further erred in holding that since the stamp duty is capitalised to the immovable property, the income from which is offered to tax as Income From House Property, and all available deduction has been claimed, the Assessee cannot claim twin deduction by claiming the same under Section 35DD of the Act 3. The Appellant prays that deduction of Rs 5,00,00,000 being 1/5th of the stamp duty paid on demerger be allowed as per the provisions of the Act WITHOUT PREJUDICE TO GROUND I. GROUND VII: DISALLOWANCE U/S 38(2) OF THE ACT AMOUNTING TO RS. 9,06,12,313/-: 1. On the facts and in the circumstances of the case and in law, the Id CIT(A) erred in upholding the AO's action of disallowing expenses with regard to Repairs and Maintenance amounting to Rs. 5.22 51,876/- and Rates and Taxes amounting to Rs. 3,83,60,437/- on the alleged ground that the claim of the said expenses has led to double deduction in light of standard deduction claimed against the income from House Property without appreciating the facts on record 2. He failed to appreciate and ought to have held that the action of the AO to disallow the entire expense debited to the profit and loss has led to double disallowance to the extent the Appellant has already disallowed in its computation of income the said expenses pertaining to the portion of building let out, income from which is offered to tax under the head Income from House Property 3. The Appellant prays that disallowance made u/s 38(2) of Rs 5,22,51,876 and Rs 3,83,60,437 be deleted or appropriately reduced. WITHOUT PREJUDICE TO GROUND I, GROUND VIII: ADDITION OF RS, 25,39,33,829/- IN RESPECT OF INTEREST ACCRUED BUT NOT RECEIVABLE WHICH IS ALREADY OFFERED TO TAX BY THE APPELLANT: 1. On the facts and in the circumstances of the case and in law, the LD CIT(A) erred in directing the AO to verify whether the income amounting to Rs 25,39,33,829 has been offered to tax, without appreciating the details placed on record which clearly shows that the said income is already included in the total income 2. The Appellant prays that the AO he directed to delete the addition of Rs.25,39,33,829 made in respect of accrued interest but not receivable. WITHOUT PREJUDICE TO GROUND I, GROUND IX: DISALLOWANCE OF INTEREST EXPENSE AMOUNTING TO RS. 2,80,70,582/- IN RESPECT OF ADVANCE GIVEN FOR FLATS: 1. On the facts and circumstances of the case and in law, the LD CIT(A) erred in upholding the AO's action of disallowing interest expense amounting to Rs.2,80,70,582/- in respect of advance given for flats
P a g e | 5 ITA No.1968 & 2710/Mum/2023 Aasan Corporate Solutions Pvt. Ltd. Vs. DCIT, Circle 6(1)(1)
amounting to Rs.1,44,17,67,600 on the alleged ground that the same is capital expenditure 2. He further erred in making incorrect observations that the flats have been shown as capital investment and the income therefrom has been offered under the head House Property whereas the Appellant has disclosed the same under the head current assets. 3. The Appellant prays that disallowance of interest expense amounting to Rs.2,80,70,582/- made by treating the same as capital expenditure be deleted. WITHOUT PREJUDICE TO GROUND I, GROUND X: DISALLOWANCE U/S 36(1)(iii) OF THE ACT IN RESPECT OF INTEREST COST TOWARDS INVESTMENT IN DEBENTURES: 1. On the facts and circumstances of the case and in law, the LD CIT(A) erred in upholding AO's action of disallowing interest expense pertaining to the investment in debentures on the alleged ground that since the investment is capital in nature, the interest ought to be capitalised, after restricting the quantum of disallowance @10% as against 15% made by AO 2. He further erred in disregarding that the interest income earned on debentures is taxable and has been offered to tax as business income which has been accepted by the AO. 3. The Appellant prays that the AO be directed to delete the entire disallowance made under Section 36(1)(iii) of the Act WITHOUT PREJUDICE TO GROUND I GROUND XI: ADDITION OF RS. 1,99,04,808/- AND RS. 2,57,16,666/- ON ACCOUNT OF DISCREPANCIES WITH FORM 26AS: 1. On the facts and circumstances of the case and in law, the Id CIT(A) erred in upholding the AO's action of adding a sum of Rs.1,99,04,808/- and Rs. 2,57,16,666/- merely on account of discrepancy of the amounts recorded in the books of accounts and the amounts reflecting in Form 26AS without appreciating that the Appellant has furnished a detailed reconciliation as regards the income offered to tax and the corresponding credit claimed by the Appellant 2. He further erred in observing that the correct way of resolving the issue is to approach the deductor and file a correction statement which is in contradiction to the provisions of the Act and settled legal position that addition cannot be made merely on account of mismatch with Form 26AS 3. The Appellant prays that the addition of Rs. 1,99,04,808/-made to the interest income and Rs. 2,57,16,666/- made to the business income on account of discrepancy with Form 26AS be deleted.” 2. Fact in brief is that return of income declaring total income at Rs.nil was filed on 30.10.2017. The case was subject to scrutiny
P a g e | 6 ITA No.1968 & 2710/Mum/2023 Aasan Corporate Solutions Pvt. Ltd. Vs. DCIT, Circle 6(1)(1)
assessment and notice u/s 143(2) of the Act was issued on 10.08.2018. Assessment u/s 143(3) of the Act was finalized on 28.12.2019 after making various additions/disallowances and total income was assessed at Rs.154,54,66,856/-. Further fact of the case are discussed while adjudicating the various grounds of appeal filed by the assessee and the revenue. ITA No. 1968/Mum/2023 (Assessee’s Appeal) Ground No.1: Violation of Principles of Natural Justice: 3. This ground of appeal was not pressed therefore, the same stand dismissed. Ground No.2: Disallowance u/s 14A of the Act amounting to Rs.82,36,70,816/-: 4. During the course of assessment the assessing officer noticed that assessee has made various investment in equity shares and mutual funds, income from which is exempt under the provisions of Income Tax Act, 1961. Therefore, the assessee was asked to explain why not disallowance u/s 14A should be made in its case. The assessee explained that it has not earned any exempt income during the year under consideration, therefore, no disallowance should have been made u/s 14A of the Act. However, the assessing officer has not agreed with the submission of the assessee after referring the CBDT Circular No. 5 of 2014 dated 11.02.2014 disallowed an amount of Rs.82,36,70,816/- u/s 14A of the Act and added to the total income of the assessee. 5. The assessee filed the appeal before the ld. CIT(A). The ld. CIT(A) has dismissed the appeal of the assessee. 6. During the course of appellate proceedings before us the ld. Counsel submitted that amendment inserted in Finance Act 2022 is prospective in nature and the same cannot be applied in the case of the
P a g e | 7 ITA No.1968 & 2710/Mum/2023 Aasan Corporate Solutions Pvt. Ltd. Vs. DCIT, Circle 6(1)(1)
assessee for making disallowance u/s 14A of the Act because assesse has not earned any exempt income during the year under consideration. The ld. Counsel has also placed reliance on the decision of Hon’ble Delhi High Court in the case of Pr.CIT Vs. Era Infrastructure (I) Ltd. (2022) 141 taxman.com 289 (Delhi). On the other hand, the ld. D.R supported the order of lower authorities. 7. Heard both the sides and perused the material on record. Without reiterating the facts as discussed above it is undisputed fact that during the year under consideration the assessee has not earned any exempt income from the investment made in the equity shares and in the mutual funds. We have perused the decision of Hon’ble Delhi High Court in the case of Pr.CIT Vs. Era Infrastructure (I) Ltd. as referred by the ld. Counsel wherein it is held that amendment made by the Finance Act 2022 to Sec. 14A by inserting a non-obstante clause and explanation will take effect from 01.06.2022 and cannot be presumed to have retrospective effects. Following the decision of Hon’ble High Court and various decisions of ITAT Mumbai, we consider that no disallowance should be made u/s 14A in the case of the assessee as it has not earned any exempt income during the year under consideration. Therefore, this ground of appeal of the assessee is allowed. Ground No.3: Disallowance amounting to Rs.9,22,25,022/- on account of depreciation on the rented portion of the property: 8. During the course of assessment on perusal of the profit and loss account the assessing officer noticed that assessee has claimed depreciation on the property in Piramal Tower from which it has received rental income as income from house property. The assessee has explained that it has received the said property under scheme of demerger from Piramal State Limited and justified its claim of
P a g e | 8 ITA No.1968 & 2710/Mum/2023 Aasan Corporate Solutions Pvt. Ltd. Vs. DCIT, Circle 6(1)(1)
depreciation on the said property. However, the AO has not agreed with the submission of the assessee. The assessing officer stated that the assessee has offered income as house property from the said property and not as business income. He stated that said property was not used for business purpose. Accordingly, claim of depreciation of Rs.922,25,022/- was disallowed and added to the total income of the assessee. 9. The assessee filed the appeal before the ld. CIT(A). The ld. CIT(A) has dismissed the appeal of the assessee reiterating the fact stated by the assessing officer. 10. During the course of appellate proceedings before us the ld. Counsel submitted that Piramal Property was comprised 1 to 10 floors. The assessee has given 1 to 9 floor on rent from which it has received rental income under the head income from house property. However, the 10th floor of the building was used for business purposeand it has claimed depreciation only in the case of 10th floor of the building. Therefore, the ld. Counsel submitted that assessee is entitled for depreciation. On the other hand, the ld. D.R supported the order of lower authorities. 11. Heard both the sides and perused the material on record. The assessing officer has disallowed the claim of depreciation on the ground that assessee has not used the building for the purpose of its business. However, we have perused the copy of annexure A3 placed at page no. 36 of the paper book filed by the assessee showing depreciation as per Income Tax for the year ending 31.03.2017. It is noticed that assessee has claimed depreciation on the commercial building at Rs.9,22,25,022/- and the value of this building as on 31.03.2017 was shown at Rs.98,05,99,826/-. The assessee has also shown part of the
P a g e | 9 ITA No.1968 & 2710/Mum/2023 Aasan Corporate Solutions Pvt. Ltd. Vs. DCIT, Circle 6(1)(1)
building valued at Rs.141,01,27,116/- given on rent on which it has not claimed any depreciation. The AO has not brought any material on records contrary to the evidences provided by the assessee in supports of its claim of depreciation as discussed above. Interalia the AO has even not considered the aforesaid material brought on record by the assessee. Looking to the above facts and circumstances we restore this issue to the file of the AO to verify and allow the claim of the assessee in case it has only claimed the depreciation for the 10th floor of the building which was used for commercial purpose. Therefore, the ground of appeal of the assessee is allowed for statistical purpose. Ground No. 4: Addition of Notional Rent at Adhoc rate of 8% of the value of the investment in flats of Rs.144,17,67,600/-: 12. During the course of assessment the assessing officer noticed that assessee has shown under long term loan and advances “Flats at Bandra Kurla Complex” of Rs.144,17,67,600/-. The AO stated that assesse has not provided any break-up and detail about the aforesaid loan and advances and details regarding the possession of the property. Therefore, the assessing officer presumed that assessee received the possession of the said property and treated 8% of the cost of investment in the property to the amount of Rs.11,53,41,408/- as annual value of the property. The assessing officer determined notional rent to the amount of Rs.807,38,986/- after allowing standard deduction of 30% u/s 24(a) of the act and same was added to the total income of the assessee. 13. The assessee filed the appeal before the ld. CIT(A). The ld. CIT(A) has dismissed the appeal of the assessee. 14. During the course of appellate proceedings before us the ld. Counsel submitted that assesse has not acquired these flats during the year under consideration and amount was shown as loan and advances
P a g e | 10 ITA No.1968 & 2710/Mum/2023 Aasan Corporate Solutions Pvt. Ltd. Vs. DCIT, Circle 6(1)(1)
in the balance sheet. The ld. Counsel referred page no. 11 of the paper book showing the amount of Rs.144,17,67,600/- as loan and advances given for flats at BKC under the head Loan and Advances in schedule 13 to the notes to the Balance Sheet. The assessee also submitted that these flats were not acquired during the year. 15. Heard both the sides and perused the material on record. We have perused the copy of balance sheet for the year ended 31.03.2017 placed at page no. 11 of the paper book and noticed that in schedule 13 under the head long term loan and advances assessee has shown amount of Rs.144,17,67,600/- categorically affirming that during the year the company has paid advances for purchases of 6 flats. Even during the course of assessment the assessee company has brought to the notice of the AO vide its submission dated 16.12.2019 placed in the paper book alongwith copies of allotment letters dated December 2016 and March 2017 to demonstrate that possession as well as the registration of all the flats has taken place in subsequent financial year. Since assessee has not acquired these flats during the financial year 2016- 17, therefore, the action of the assessing officer of charging notional rent @ 8% on the aforesaid advances is not justified. Therefore, this ground of appeal of the assesse is allowed. Ground No. 5: Disallowance u/s 40(a)(ia) amounting to Rs.3,64,91,478/-: 16. During the course of assessment the assessing officer noticed that assessee has made payments to the following parties on which no tax was deducted: Sr. No. Particulars Amount (Rs.) 1. Franklin Templeton 6,98,72,628 2. Franklin Templeton 5,15,17,222 3. Alpex Holdings Pvt. Ltd. 2,48,410 Total 12,16,38,260
P a g e | 11 ITA No.1968 & 2710/Mum/2023 Aasan Corporate Solutions Pvt. Ltd. Vs. DCIT, Circle 6(1)(1)
The AO stated that assessee has not made any submission, therefore, 30% of the said expenses to the amount of Rs.364,91,478/- was disallowed u/s 40(a)(ia) of the Act. 17. The assessee filed the appeal before the ld. CIT(A). The ld. CIT(A) has dismissed the appeal of the assessee. 18. During the course of appellate proceeding before us the ld. Counsel submitted that the assessee has deducted tax at source wherever the TDS provisions are applicable. In respect of payment of interest on debenture issued by the assessee company and subscribed by the mutual funds tax is not required to be deducted as per provision of Sec. 196(iv) of the Act. The detail of such interest are given in annexure 53 placed at 115 of the paper book. On the other hand, the ld. D.R supported the order of lower authorities. 19. Heard both the sides and perused the material on record. We have perused the copy of Annexure 53 placed at page 115 of the paper book which was also submitted before the AO at the time of assessment vide submission dated 27.12.2019 showing that assessee has deducted tax at source of Rs.26,601/- in respect of interest payment made to Alpex Holdings Pvt. Ltd. and explained in its submission that interest payment to mutual fund specified u/s 10(23D) are not subject to deduction of tax as per Sec. 196(iv) of the Act. Considering the fact that assessee has made deduction of tax on the interest payment to Alpex Holding Pvt. Ltd. and in respect of payment to mutual fund no tax was deducted by virtue of Sec. 196(iv) of the Act. we find that decision of ld. CIT(A) in sustaining the disallowance is not justified. Therefore, this ground of appeal of the assessee is allowed. Ground No. 6: Disallowance of Deduction u/s 35DD of the Act amounting to Rs.5,00,00,000/-:
P a g e | 12 ITA No.1968 & 2710/Mum/2023 Aasan Corporate Solutions Pvt. Ltd. Vs. DCIT, Circle 6(1)(1)
During the course of assessment the assessing officer noticed that assessee has claimed an amount of Rs.5,00,00,000/- as deduction u/s 35DD of the Act being 1/5 of stamp duty paid to ROC which was capitalized to the building cost in the fixed asset schedule. The assessing officer further observed that said building was let out during the year and its income was offered as rental income for taxation under the head income from house property, therefore, claim of deduction u/s 35DD was disallowed. 21. The assessee filed the appeal before the ld. CIT(A). The ld. CIT(A) has dismissed the appeal of the assessee. 22. During the course of appellate proceedings before us the ld. Counsel submitted that assessee had incurred demerger related expenditure of Rs.25,00,31,000/- during the F.Y. 2016-17. It is also submitted that the demerger scheme was also approved by the Hon’ble High Court vide its order dated 23.10.2015. The ld. Counsel submitted that amortization of expenditure in case of demerger scheme is to be allowed to the assessee u/s 35DD of the act irrespective of the fact that part of the building was given on rent showing income from house property. On the other hand, the ld. D.R supported the order of lower authorities. 23. Heard both the sides and perused the material on record. The assessee has claimed the stamp duty paid as part of the demerger expenses as the same was incurred as a result of demerger. The demerger scheme was approved by the Hon’ble High Court vide order dated 23.10.2015. The demerger expenses were incurred for the company as a whole for the purpose of registering the scheme in order to give effect to the scheme of arrangement sanctioned by the Hon’ble High Court of Bombay. The assessee has also filed copy of challan at
P a g e | 13 ITA No.1968 & 2710/Mum/2023 Aasan Corporate Solutions Pvt. Ltd. Vs. DCIT, Circle 6(1)(1)
page 277 of the paper book. Since, the assessee has incurred stamp duty expenses on demerger therefore, considering the above facts and material placed on record we direct the AO to allow the claim of deduction as per provisions of Sec. 35DD of the Act. Therefore, this ground of appeal is allowed. Ground No.7: Disallowance u/s 38(2) of the Act amounting to Rs.9,06,12,313/-: 24. During the course of assessment the AO noticed that assessee has claimed expenses towards repairs, rates and taxes, commission and interest expenses attributable to earning the rental income. The assessing officer was of the view that assessee has already claimed standard deduction under the head income from house property, therefore, claim of repair and maintenance and rate and taxes were not allowable. Therefore, the same was disallowed and added to the total income of the assessee. 25. The assessee filed the ground of appeal before the ld. CIT(A). The ld. CIT(A) has dismissed the appeal of the assessee. 26. During the course of appellate proceedings before us, the ld. Counsel submitted that assessee has claimed the aforesaid expenses in respect of 10th floor of the building which it has used for commercial purpose. In this regard, the ld. Counsel has referred page no. 146 of the paper book as a part of submission dated 24.12.2019 filed during the course of assessment proceedings that the assessee has suo motto disallowed the expenses related to the house property and only claimed the expenses which are pertained to the property used for commercial purpose. On the other hand, the ld. D.R supported the order of lower authorities.
P a g e | 14 ITA No.1968 & 2710/Mum/2023 Aasan Corporate Solutions Pvt. Ltd. Vs. DCIT, Circle 6(1)(1)
Heard both the sides and perused the material on record. We find that assessing officer has treated the whole amount of expenses claimed towards repairs and maintenance, rates and taxes as the expenses under the head income from house property and disallowed the same on the ground that assessee had already claimed standard deduction under the Head Income from House Property. However, we find that the assessing officer has not considered the claim of the assessee that aforesaid expenses was pertained to the 10th Floor of the building of Piramal Tower which was used for commercial purpose and assessee has already disallowed the similar expenses which were pertained to the 1 to 9th floor of the said property from which income was shown under the head house property. In this regards the AO has not considered the submission of the assessee made during the course of assessment proceedings explaining that it has already disallowed such expenses related to the house property. In view of the above facts and considering material on record, we restore this issue to the file of the AO to verify and allow the claim of the assessee, if the amount of expenses is pertained to the 10th floor of the building which was used for commercial purpose. Therefore, this ground of appeal is allowed for statistical purposes. Ground No. 8: Addition of Rs.25,39,33,829/- in respect of interest accrued but not receivable which is already offered to tax by the appellant: 28. During the course of assessment the assessing officer noticed that assessee has shown an amount of Rs.25,39,33,829/- as interest accrued but not receivable in the schedule of current assets. In response the assessee submitted that entire interest accrued but not receivable of Rs.25.39 crores has already been included as a part of total interest income of Rs.155.59 crores credited to the profit and loss account for the financial year relevant to the assessment year. However,
P a g e | 15 ITA No.1968 & 2710/Mum/2023 Aasan Corporate Solutions Pvt. Ltd. Vs. DCIT, Circle 6(1)(1)
the AO has not agreed with the submission of the assessee and added the amount of Rs.25,39,33,829/- in respect of interest accrued but not receivable to the total income of the assessee stated that the assessee has not furnished the documentary evidences. 29. The assessee filed the appeal before the ld. CIT(A). The ld. CIT(A) has dismissed the appeal of the assessee. 30. During the course of appellate proceedings before us the ld. Counsel submitted that assessee has already offered the amount of interest accrued but not receivable in its total income, therefore, the AO and CIT(A) is not justified in making the addition to the total income. The ld. Counsel has also referred the paper book page no. 12 schedule 18 under the head revenue from operation stating that assessee has shown total interest income including the interest accrued but not receivable. On the other hand, the ld. D.R supported the order of lower authorities. 31. Heard both the sides and perused the material on record. We have perused the schedule 18 under the head Revenue from operations of the Notes forming part of the financial statements for the year ended March 31, 2017 placed at page 12 of the paper book showing the amount of Rs.155,59,70,184/-. Further, we have also perused the annexure 54 placed at page no. 123 of the paper book showing break- up of interest accrued but no receivable shown in the current assets to the amount of Rs.25,39,33,829/-. We have also perused the page no. 214 of the paper book as annexure 55 pertaining to detail of interest income on loan and advance to the amount of Rs.155,59,70,184/- in which the assessee has also included the aforesaid interest accrued but not receivable of Rs.25.39 crores. Considering the above facts and relevant material on record, we find that decision of ld. CIT(A) in
P a g e | 16 ITA No.1968 & 2710/Mum/2023 Aasan Corporate Solutions Pvt. Ltd. Vs. DCIT, Circle 6(1)(1)
sustaining the impugned addition is not correct therefore, this ground of appeal of the assessee is allowed. Ground No. 9: Disallowance of interest expenses amounting to Rs.2,80,70,582/- in respect of advance given for flats: 32. The assessing officer noticed that assessee has claimed interest expenses of Rs.280,70,582/- pertaining to investment made in property. On query, the assessee explained that it had obtained advance of Rs.144,17,67,600/- for purchase of 6 properties and this interest amount of Rs.2.80 crores was paid on these advances. The assessing officer had not agreed with the submission of the assessee, he was of the view that assessee had obtained the advances for the purpose of capital expenditure therefore, claim of interest expenses as revenue expenses was disallowed. 33. The assessee filed the appeal before the ld. CIT(A). The ld. CIT(A) has dismissed the appeal of the assessee. 34. During the course of appellate proceedings before us the ld. Counsel submitted that assessee company was engaged in the business of real estate property and assessee as a part of its business given advances for booking of 6 properties which were sold only in financial year 2023-24, therefore, the claim of the assessee is allowable. 35. Heard both the sides and perused the material on record. The assessee has not acquired these 6 flats during the year under consideration and assessee has shown the amount as loan and advance as evident from the balance sheet and other schedule placed in the paper book. Since the assessee was in the business of real estate property therefore, action of the assessing officer for treating the interest expenses as capital expenditure without verification of the relevant material mentioned in the submission made at the time of assessment as placed in the paper book is not justified. Therefore, we restore this
P a g e | 17 ITA No.1968 & 2710/Mum/2023 Aasan Corporate Solutions Pvt. Ltd. Vs. DCIT, Circle 6(1)(1)
issue to the file of the AO for deciding a fresh after verification of relevant supporting material placed on record by the assessee. Therefore, this ground of appeal of the assessee is allowed for statistical purposes. Ground No.10: Disallowance u/s 36(1)(iii) of the Act in respect of interest cost towards investment in debentures: 36. During the course of assessment the AO noticed that assessee has shown interest expenses of Rs.288,57,85,956/- in the statement of cash flow in respect of utilization of debentures money raised towards the business and towards investment purpose. The AO stated that assessee has not furnished supporting documentary evidences, therefore, treated the proportionate interest @ 15% of the interest expenses of Rs.288,57,85,956/- pertaining to debenture as capital in nature and disallowed an amount of Rs.43,28,67,893/-. 37. The assessee filed the appeal before the ld. CIT(A). The ld. CIT(A) has dismissed the appeal of the assessee. 38. During the course of appellate proceedings before us, the ld. Counsel submitted that assessee has shown interest received on debenture as business income, therefore, interest expenditure on making investment in debenture cannot be considered as capital expenditure. In this regard he referred page no. 10 of the paper book showing detail of investment made in debentures. He also referred page no. 214 of the paper book as a detail of interest income on loan and advance including interest income earned on making investment in debentures. On the other hand, the ld. D.R supported the order of lower authorities. 39. Heard both the sides and the perused the material on record. We have perused the detail of investment in debenture placed at page no.
P a g e | 18 ITA No.1968 & 2710/Mum/2023 Aasan Corporate Solutions Pvt. Ltd. Vs. DCIT, Circle 6(1)(1)
10 of the paper book as notes forming part of the financial statement for the year ended 31.03.2017. It is noticed that assessee has made investment in debentures of following parties:- i. Icon Spaces Pvt. Ltd. ii. Miraya Realty Pvt. Ltd. iii. Shriprop Dwellers Pvt. Ltd. We have also perused the page no. 214 of the paper book showing detail of interest income on loan and advances given and noticed that assessee has included in the interest income interest earned from the aforesaid investment made in the debenture. The assessee has included the interest income earned from the above parties in the total interest income of Rs.155,59,70,184/- as per Annexure 55 submitted before the AO at the time of assessment. In view of the above facts and material placed on record we find that the assessing officer has incorrectly on presumption basis disallowed the claim of interest cost towards investment in debenture made by the assessee, therefore, this ground of appeal of the assessee is allowed. Ground No. 11: Addition of Rs.1,99,04,808/- and Rs.2,57,16,666/- on account of discrepancies with form 26AS: 40. During the course of assessment the AO has compared the interest income appearing in form 26AS with the income offered by the assesse in the return of income. The assessing officer found discrepancies of interest income of Rs.199,04,808/- and other income of Rs.257,16,666/- and the same was added to the total income of the assessee. 41. The assessee filed the appeal before the ld. CIT(A). The ld. CIT(A) has dismissed the appeal of the assessee. 42. During the course of appellate proceedings before us the ld. Counsel submitted that assessee has filed detailed reconciliation in
P a g e | 19 ITA No.1968 & 2710/Mum/2023 Aasan Corporate Solutions Pvt. Ltd. Vs. DCIT, Circle 6(1)(1)
respect of the income offered to tax and the corresponding credit claimed by the assessee and submitted that same was not verified by the assessing officer. On the other hand, the ld. D.R supported the order of lower authorities. 43. Heard both the sides and perused the material on record. The AO has added the aforesaid amount because of mismatch of interest income shown by the assessee and the amount of interest income appearing in form no.26AS. Further the assessing officer has also made disallowance of contractual and professional and rental income as shown by the assessee compared to the amount appearing in form no. 26AS. In this regard, we find that assessee in its submission dated 27.12.2019 made before the AO as per para 7 of the submission given the party wise reconciliation alongwith the annexure, however AO has not given any finding in the assessment order about the reconciliation of the aforesaid discrepancies furnished by the assessee. Therefore, this ground of appeal of the assessee is restored to the file of the AO for deciding afresh after verification of the reconciliation statement and other relevant detail furnished by the assessee. Therefore, this ground of appeal of the assessee is allowed for statistical purposes. 44. In the result, the appeal of the assessee is partly allowed. ITA No.2701/Mum/2023 (Revenue’s Appeal) “Whether on the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in directing the AO to call for necessary and factual details on account of disallowance of depreciation on rented property on account of interest accrued and on account of interest occurred and on account of interest expenses attributable to investment at the time of giving effect to the order passed by Ld. CIT(A) and then re-compute the income of the assessee on the line stated in the order without giving any clear-cut findings with quantification of deletion or confirmation of additions made by the AO. As such the order of Ld. CIT(A) qua verification by AO borders on the line of matter being set aside to the file of Assessing Officer a power not available with the CIT(A).”
P a g e | 20 ITA No.1968 & 2710/Mum/2023 Aasan Corporate Solutions Pvt. Ltd. Vs. DCIT, Circle 6(1)(1)
The issues of disallowance of depreciation, addition in respect of interest accrued and disallowance of interest cost towards investments etc. have already been adjudicated vide grounds of appeal no. 3, 7 and 10 of the appeal of the assessee vide ITA No. 1968/Mum/2023 as supra in this order. Applying those findings mutatis mutandis to the grounds of appeal to the revenue, we don’t find any merit in this cross appeal of the revenue. Accordingly, this cross appeal filed by the Revenue is dismissed. 46. In the result, the appeal of the assessee is partly allowed and appeal of the revenue is dismissed. Order pronounced in the open court on 05.01.2024
Sd/- Sd/- (Vikas Awasthy) (Amarjit Singh) Judicial Member Accountant Member Place: Mumbai Date 05.01.2024 PS. Rohit
आदेश की प्रतितिति अग्रेतिि/Copy of the Order forwarded to : अपीलाथी / The Appellant 1. प्रत्यथी / The Respondent. 2. 3. आयकर आयुक्त / CIT 4. विभागीय प्रविविवि, आयकर अपीलीय अविकरण DR, ITAT, Mumbai 5. गार्ड फाईल / Guard file. सत्यावपि प्रवि //True Copy// आदेशानुसार/ BY ORDER,
उि/सहायक िंजीकार (Dy./Asstt. Registrar) आयकर अिीिीय अतिकरण/ ITAT, Bench, Mumbai.