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Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI
Before: SHRI D. KARUNAKARA RAO
सुनवाई की तायीख / Date of Hearing : 06.02.2017 घोषणा की तायीख /Date of Pronouncement : 06.02.2017 आदेश / O R D E R
PER D. KARUNAKARA RAO, AM:
This appeal filed by the Revenue on 14.9.2016 is against the order of the CIT (A)-16, Mumbai dated 29.6.2016 for the assessment year 2012-2013. In this appeal, Revenue raised the following grounds which read as under:- “1. Whether in the circumstances of the case and in law, the Ld CIT (A) erred in holding that there was a nexus between „interest bearing borrowings and‟ and „interest yielding advances‟ ignoring that, at best, there was only particle nexus and not complete nexus as evidenced by the fact that interest earned was Rs. 9,18,393/- whereas interest paid on borrowings made for making the interest yielding advances was Rs. 51,85,299/-?”
2. Whether in the facts and circumstances of the case and in law, the Ld CIT (A) failed to appreciate that notwithstanding a partial nexus between interest paid on borrowings utilized for interest yielding advances, the entire interest attributable to borrowings not utilized for making interest yielding advances could not have been allowed as business loss in view of the fact that neither the busine3ss had commenced nor was it carried on during the year?”
2. Briefly stated relevant facts of the case are assessee is engaged in the business of „real estate‟. Assessee filed the return of income declaring the loss of Rs. 41,15,956/-. Assessment was completed u/s 143(3) of the Act and the assessed income was determined at Rs. 10,69,340/-. During the assessment, AO observed that the assessee earned interest income of Rs. of Rs. 9,18,393/- . Further, assessee also paid interest on borrowings and the said interest paid works out to Rs. 51,85,299/-. In the assessment, AO disallowed the entire interest expenditure stating that the related borrowings are not incurred for business purposes. Accordingly, AO invoked the provisions of section 36(1)(iii) and 57(iii) of the Act. Aggrieved, assessee carried the matter in appeal before the first appellate authority.
During the proceedings before the first appellate authority, after considering the submissions of the assessee, CIT (A) allowed the appeal of the assessee relying on the order of the Tribunal in the assessee‟s own case for the AY 2011-2012. The contents of para 5.1.12 of the CIT (A)‟s order are relevant in this regard. Aggrieved with the said decision of the CIT (A), Revenue is in appeal before the Tribunal.
During the proceedings before the Tribunal, none appeared to represent the case of the assessee. However, considering the covered nature of the issue, I proceed to adjudicate this appeal with the help of the Ld DR for the Revenue, who relied heavily on the order of the AO.
On hearing both the parties and on perusal of the orders of the Revenue Authorities as well as the relevant material placed before us, I find, the contents of the said para 5.1.12 of the CIT (A)‟s order are relevant in this regard. Considering the significance and for the sake of completeness of this order, the said para 5.1.12 of the CIT (A)‟s order is extracted as under:- “5.1.12. The matter for AY 2011-12 was examined and allowed in favour of the appellant. There is no change in the facts and law in respect of the matter already adjudicated in AY 2011-12 in appellant‟s own case and compared to AY 2012-13. The Department has not filed appeal before the Income Tax Appellate Tribunal challenging the CIT (A) order passed for AY 2011-12. Further, it is observed that no disallowances / additions were made on identical issues by the AO in the recently concluded assessment for the AY 2013-14. The matter therefore stands settled in favour of the appellant.”
From the above, it is evident that the CIT (A) granted relief to the assessee complying with the directions of the Tribunal in the assessee‟s own case for the earlier AY 2011-12. CIT (A) gave finding and there is no change on the facts. Considering the above, I am of the opinion, the decision of the CIT (A) is fair and reasonable and it does not call for any interference. Accordingly, solitary ground raised
by the Revenue is dismissed.
7. In the result, appeal of the Revenue is dismissed.