Commissioner of Income Tax, Koikataiii, Kolkata Vs. M/S. Cellice Developers Private Limited - Court Judgment

1 ORDER

SHEET GA No.2488 of 2014 ITAT No.123 of 2014 IN THE HIGH COURT AT CALCUTTA SPECIAL JURISDICTION (INCOME TAX) ORIGINAL SIDE COMMISSIONER OF INCOME TAX, KOIKATA-III, KOLKATA Versus M/S.CELLICE DEVELOPERS PRIVATE LIMITED BEFORE: The Hon'ble JUSTICE SOUMITRA PAL The Hon'ble JUSTICE DEBANGSU BASAK Date : 5th September, 2014.

Appearance: Mr.Ranjan Sinha, Adv.For the Appellant.

Mr.J.P.Khaitan, Sr.Adv.For the Respondent/Assessee.

The Court : - This appeal has been filed by the Revenue against the order dated 19th February, 2014 passed by the Income Tax Appellate Tribunal, “B” Bench, Kolkata in I.T.A.No.1101/Kol/2012 and I.T.A.No.1528/Kol/2012 for the Assessment Year 2008-2009 on the following questions:“i) Whether on the facts and in the circumstances of the case the learned Tribunal was justified in allowing relief to the assessee under Section 14A of the Income Tax Act, 1961?.

ii) Whether on the facts and in the circumstances of the case the learned Tribunal was justified in law in deleting the additions made by the Assessing Officer on account of treating interest as non allowable expenditure under Section 36 of the Income Tax Act, 1961?.

iii) Whether on the facts and in the circumstances of the case the learned Tribunal was justified in law in deleting additions made by the Assessing Officer on account of treating the processing fees for loan as non allowable expenditure under Section 37 of the Income Tax Act, 1961?.” Heard Mr.Ranjan Sinha, learned Advocate for the Appellant and Mr.J.P.Khaitan, learned Senior Advocate for the Respondent/Assessee.

So far as the question No.1 is concerned, we find from paragraph 9 that the Tribunal while concurring with the reasoning given by the C.I.T.(A) had held as under: – “A perusal of assessee’s balance-sheet as on 31.3.2008, which has been placed at page 5 of the paper book, show that opening investment as on 01.04.2007 was Rs.110,12,51,839/- and closing value of investment as on 31.03.2008 was Rs.109,32,88,180/-.

Schedule “E” of the said balance-sheet gives a break-up of investment.

As per this schedule, out of the above investment, Rs.107,35,58,387/was of shares held in Magma Shrachi Finance LTD.The position was same both at the beginning of the relevant previous year and as at the end of the relevant previous year.

Thus there is substantial strength in the argument of assessee that out of the total investment of Rs.109,32,88,180/-, major part was of shares in M/S.Magma Shrachi Finance LTD.It is not disputed by the Revenue that these shares came to the assessee by virtue of a merger of one M/S.Stratus Developers (P) LTD.with assessee, through Company Petition No.492 of 2005.

Company Application No.551 of 2005 has been placed at paper book pages 203 to 222.

Such shares were thus not a direct acquisition done by assessee.

Therefore, for making such investment and for holding such shares, it cannot be said that assessee would have incurred substantial expenditure.

Assessee had not purchased or sold any of the shares of M/S.Magma Shrachi Finance LTD.during the relevant previous year.

We also find that Assessing Officer had not made any disallownace for interest.

While applying Rule 8D(2) Assessing Officer had only made a disallowance under Clause [iii].thereof.

Thus, he has accepted that no loan funds were used by assessee for the purpose of making the investments.

Investments made by assessee during the relevant previous year was Rs.1,96,69,793/- only.

When viewed from this angle, we cannot say that the suo motu disallowance of Rs.88,390/made by assessee was incorrect or unbelievable”.

In our view, the above question really relates to the facts which cannot be disturbed.

So far as the question Nos.2 is concerned while concurring with the reasoning passed by the C.I.T.(A) the Tribunal held as under: “A claim of interest on capital borrowed for the purpose of business can be disallowed only where the borrowing is for acquisition of an asset intended for extension of an existing business.

In the case of the assessee here, we cannot say that the loan raised by assessee from ICICI Bank, which was utilized for paying advances for acquiring built up spaces, was in relation to extension of an existing business.

Business of assessee was real estate and the assessee’s intention was to trade in constructed spaces.

It never contemplated to use such constructed spaces for its own use.

In our opinion, the decision of the Hon’ble Mumbai High Court in the case of Lokhandwala Construction Industries Ltd.(Supra) would clearly come to the aid of assessee.

As long as the payment of advance was not for acquisition of fixed assets but only for acquiring stock-in-trade, assessee was entitled for deduction under Section 36(1)[iii].of the Act.

We are, therefore, of the opinion that learned C.I.T.(Appeals) was justified in deleting the addition made by the Assessing Officer”.

So far as the question no.3 is concerned the Tribunal while following the reasoning held as under:“We have heard the rival contentions.

Since loan raised from State Bank of India was used by the assessee for financing its stock, we are of the opinion that processing charges incurred for raising such loan was an allowable expenditure.

We do not find any reason to interfere with the order of learned CIT (Appeals).Ground No.3 of the revenue stands dismissed.” We find that so far as question Nos.2 and 3 the Tribunal had followed the same reasoning.

In our view, as the questions really relate to facts which cannot be disturbed, no substantial question of law arises.

Therefore, the application and the appeal are dismissed.

(SOUMITRA PAL, J.) (DEBANGSU BASAK, J.) snn.