2019 (7) TMI 796 - AT - Income Tax

Disallowance of interest paid - interest on unsecured loans - HELD THAT - We find that this tribunal in assessee s own case for the Asst Year 2013-14 had held the loans received from aforesaid parties to be genuine and deleted the additions made u/s 68. We hold that once the loans were held to be genuine, the interest paid on such loans are also allowable expenditure. It is not the case of the revenue that the borrowed funds from aforesaid parties were diverted by the assessee for non-business purposes. The assessee is a builder and developer and deriving business income from such projects. The borrowings were utilized only for the purpose of business which fact remain undisputed by the revenue. - We direct the ld AO to grant deduction of interest paid on such loans - Ground Nos. 2 and 3 raised by the assessee are allowed. Disallowance of depreciation claimed on motor car - AO state that assessee is not the owner of the said motor car as it was in the name of director of assessee company - HELD THAT - We find that the assessee company had given reasonable explanation for registering the vehicle in the name of the individual director to reduce the incidence of indirect taxes , levies etc. This does not hinder in any way to allow the claim of depreciation in the hands of the assessee company, as the motor car was reflected in the balance sheet of the assessee company and that the vehicle loan was also borrowed for the same by the assessee - See M/S. BANGLORE SHIRT COMPANY PVT. LTD., 2018 (8) TMI 1849 - ITAT MUMBAI company. - Decided in favour of assessee Addition u/s 43CA on account of suppression of sales - difference between agreement value and stamp duty value - allotment had been made prior to 31.3.2013 - section 43CA of the Act are applicable only from Asst Year 2014-15 - HELD THAT - We are conscious of the fact that the provisions of section 43CA of the Act are applicable only when there is transfer of land or building or both. All the documentary evidences clearly go to prove that the assessee had not completed the construction of the office during the relevant year. It could also be inferred that pursuant to registration of agreement with the stamp duty valuation authorities, a right is created in favour of the flat buyer. Hence what the assessee had transferred pursuant to registration of the agreement was only the rights in the flat/ office (which is under construction) and not the property per se. Hence it could be safely concluded that there was no transfer of any land or building or both by the assessee in favour of the flat buyers pursuant to registration of the agreement in the year under appeal. Hence we hold that the provisions of section 43CA of the Act cannot be made applicable to the same. We find that the decision in case of SHRI YASIN MOOSA GODIL, 2012 (4) TMI 380 - ITAT, AHMEDABAD are directly applicable to the facts of the case before us hence, we hold that the provisions of section 43CA of the Act could not be made applicable to the issue in dispute before us. Accordingly, the grounds raised by the assessee are allowed.

Summary

Issues Involved:
1. Disallowance of interest paid to various entities.
2. Disallowance of depreciation claimed on a motor car.
3. Addition made under section 43CA of the Income Tax Act due to alleged suppression of sales.

Issue-Wise Detailed Analysis:

1. Disallowance of Interest Paid to Various Entities:
The assessee challenged the disallowance of interest paid to M/s Nayan Gems and other entities totaling ?6,88,767/-. The Assessing Officer (AO) had previously deemed the loans borrowed from these entities as ingenuine, leading to the disallowance of interest. However, the Tribunal noted that in the assessee's own case for the previous assessment year (2013-14), the loans were held to be genuine, and additions made under section 68 were deleted. Since the loans were deemed genuine, the interest paid on such loans was considered an allowable expenditure. The Tribunal directed the AO to grant the deduction of the interest paid, allowing the assessee’s grounds.

2. Disallowance of Depreciation Claimed on a Motor Car:
The assessee claimed depreciation of ?10,80,912/- on a motor car registered in the name of its Director but used for business purposes. The AO disallowed this claim, stating that the car was not registered in the company's name. However, the Tribunal found that the car was reflected as a fixed asset in the company’s balance sheet, and the vehicle loan was taken by the company. The Tribunal cited a precedent where a similar issue was adjudicated in favor of the assessee. Following this, the Tribunal directed the AO to allow the depreciation for the assessment year 2014-15, thereby allowing the assessee’s ground.

3. Addition Made Under Section 43CA Due to Alleged Suppression of Sales:
The AO added ?3,41,41,270/- to the assessee's income under section 43CA, citing discrepancies between the agreement value and the stamp duty value of certain properties. The assessee argued that these properties were allotted in earlier years and that the difference should be considered in the year of project completion (AY 2015-16). The Tribunal examined the facts and found that the properties were under construction during the year under appeal, and the agreements registered were for properties under construction, not completed properties. Citing various tribunal decisions, the Tribunal held that section 43CA applies only to the transfer of land or building or both, and since the properties were under construction, the provisions of section 43CA were not applicable. The Tribunal allowed the assessee’s grounds, stating that the difference in value should not be treated as suppressed sales.

Conclusion:
The Tribunal allowed the appeal of the assessee, directing the AO to grant deductions for the interest paid and depreciation claimed, and ruled that the addition under section 43CA was not applicable for the properties under construction. The Tribunal emphasized that the provisions of section 43CA could not be invoked in the given circumstances, thereby providing relief to the assessee.