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1 IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 22ND DAY OF FEBRUARY 2016
PRESENT
THE HON’BLE MR.JUSTICE JAYANT PATEL
AND
THE HON’BLE MRS.JUSTICE S SUJATHA
ITA No.212/2015
BETWEEN:
THE COMMISSIONER OF INCOME-TAX
C R BUILDING
QUEENS ROAD
BANGALORE.
THE DEPUTY COMMISSIONER OF INCOME-TAX
CIRCLE-11(1),
RASHTROTHANA BHAVAN
NRUPATHUNGA ROAD
BANGALORE-560 001.
….APPELLANTS
(BY SRI:K V ARAVIND, ADV)
AND:
M/S EMBASSY PROPERTY DEVELOPMENTS LTD., (FORMERLY DYNASTY DEVELOPERS (P) LTD.,) 1ST FLOOR, EMBASSY POINT 150, INFANTRY ROAD BANGALORE-560 001.
…RESPONDENT
(BY SRI:K K CHAITANYA, ADV)
THIS APPEAL IS FILED UNDER SECTION 260-A OF INCOME TAX ACT 1961 ARISING OUT OF ORDER DATED 05.12.2014 PASSED IN ITA NO.516/BANG/2012 FOR THE ASSESSMENT YEAR 2007-08 PRAYING TO FORMULATE THE SUBSTANTIAL QUESTION OF LAW STATED ABOVE, ALLOW THE APPEAL AND TO SET ASIDE THE ORDER PASSED BY THE INCOME-TAX APPELLATE TRIBUNAL, BANGALORE IN ITA NO.516/BANG/2012 DATED 05.12.2014 AND CONFIRM THE ORDER OF THE APPELLATE COMMISSIONR CONFIRMING THE ORDER PASSED BY THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-11(1), BANGALORE.
THIS APPEAL COMING ON FOR ADMISSION THIS DAY, JAYANT PATEL J., DELIVERED THE FOLLOWING:
JUDGMENT
The present appeal has been preferred by the revenue by raising the following substantial question of law:
“Whether the Hon’ble Tribunal was justified in allowing relief to the assessee when the disallowance under Section 36(1) (iii) was made by the assessing officer after analyzing the cash flow statement as the assessing officer observed that the assessee company had not made any profits from the projects and hence, the advance made to sister concerns and advances for purchase of properties had been made out of these loans received?”
We have heard Mr.K V Aravind, learned Counsel appearing for the appellants-revenue and Mr.K K Chaitanya, learned Counsel appearing for the respondent-assessee.
We may record that the Tribunal in the impugned order at paragraph 33 has observed thus:
“If the principle is considered on the applicability of Section 36(1)(iii), the findings recorded by the Tribunal that the amount of interest paid in respect of capital borrowed for the purpose of business or profession is allowable, cannot be said to be erroneous. The Tribunal has further found that the assessee was spending money on the properties not for the purpose of acquiring any fixed asset for its own and it was found by the Tribunal that it was a part of its regular business in real estate and therefore, disallowance was not permitted.”
Learned Counsel appearing for the appellants wanted to raise a contention that in the order of CIT appeals, there is a reference that the properties were shown as fixed asset in the balance sheet and therefore, it was contended that if the assessee has treated the properties as asset in the balance sheet, disallowance of interest for the capital borrowed can be said as justified. As such, the aforesaid does not appear to be a ground before the Tribunal. If the reasons recorded by the Tribunal are considered and appreciated in the light of proceeding arose from the assessing officer and
4 CIT appeals, the Tribunal has made observations in respect of properties if made to use for earning profits, the interest cannot be treated as revenue expenditure. But thereafter the Tribunal has considered that the interest paid for borrowed capital is for the purpose of business in real estate and has directed for deletion of disallowance.
Considering the facts and circumstances, we do not find that any substantial question of law would arise for consideration as sought to be canvassed.
Hence, the appeal is dismissed.
Sd/- JUDGE
Sd/- JUDGE
*bgn/-