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TMI Blog2021 (9) TMI 1069X X X X Extracts X X X X X X X X Extracts X X X X ..... 2,40,835/- on account of diversion made by the assessee of borrowed funds, towards interest free advances. 3. Whether on the facts and circumstances of the case and in law, the Ld. C.I.T(A) was justified in deleting the disallowance made by the Assessing Officer of interest expenditure amounting to Rs. 2,22,40,835/- without verifying the contention of the assessee that its own funds were more than borrowed funds. 4. The appellant craves, leave, to add, to amend and / or to alter any of the grounds of the appeal, if need be. 5. The appellant, therefore, prays that on the grounds stated above, the order of the CIT(A)-52t Mumbai, may be set aside and that of the Assessing Officer restored. 2. Briefly stated, the assessee company had filed its return of income for A.Y. 2015-16 on 25.11.2015, declaring a total income of Rs. 3,53,40,670/-. The return of income was processed as such u/s 143(1) of the Act. Subsequently, the case of the assessee was selected for scrutiny assessment u/s 143(2) of the Act. 3. Original assessment was framed by the A.O vide his order passed u/s 143(3) of the Act, dated 13.12.2017 at an income of Rs. 6,10,98,730/- after inter alia making the following ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated by the ld. A.R, and rightly so, the issue as to whether or not the annual lettable value of the unsold flats that were held by the assessee as stock-in-trade of its business as that of a builder and developer were liable to be assessed under the head "house property‟ is squarely covered by the order passed by the Tribunal in the assessee‟s own case for A.Y. 2012-13 in ITA No. 6686/Mum/2016, dated 31.10.2018. On a perusal of the aforesaid order, we find that the Tribunal had observed that sub-section (5) of Sec. 23 of the Act which contemplates a relief to the real estate developers therein provides that if an assessee is holding any house property as his stock-in-trade which is not let out for the whole or part of the year, then, the annual value of such property will be considered as Nil for a period up to one year from the end of the financial year in which the completion certificate is obtained from the competent authority. It was, thus, observed by the Tribunal that as sub-section (5) of Sec. 23 had been made available on the statute vide the Finance Act, 2017 w.e.f 01.04.2018, therefore, the assessing of the ALV of the unsold flat that were held by the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Neha Builders P. Ltd. 296 ITR 661 and the order of the ITAT Mumbai in the case of Runwal Constructions v. ACIT (ITA Nos. 5408/Mum/2016 and 5409/Mum/2016 dated 22.02.2018), ITO v. Arihant Estates Pvt. Ltd. (ITA No. 6037/Mum/2016 dated 27.06.2018), C R Developments P. Ltd. v. JCIT (ITA No. 4277/Mum/2012 dated 13.05.2015), Sarang Property Developers Pvt. Ltd. v. ACIT (ITA No. 5620/Mum/2016 dated 26.06.2015). The Ld. counsel relies on the above decisions. 6. Per contra the Ld. DR relies on the decision in Ansal Housing Finance & Leasing Co. Ltd. (supra) and supports the order passed by the Ld. CIT(A). 7. We have heard the rival submissions and perused the relevant materials on record. The reasons for our decision are given below. On the above issue, we come across one decision for the assessee and another decision for the revenue. The decision in Neha Builders Pvt.Ltd.(supra) is for the assessee, whereas the decision in Ansal Hsg. Finance & Leasing Co. Ltd.,(supra) is for the Revenue. The Hon‟ble Supreme Court in the case of CIT v. Vegetable Products 88 ITR 192 (SC) has held that "if two reasonable constructions of a taxing provisions are possible, that construction which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee as stock-in-trade of its business of a builder and developer, we uphold the same. The Ground of appeal No.1 is dismissed. 9. We shall now take up the claim of the revenue that the CIT(A) had erred in deleting the disallowance of the assessee‟s claim for deduction of interest expenditure of Rs. 2,22,40,835//- u/s 36(1)(iii) of the Act. As is discernible from the records, the A.O being of the view that the assesee had diverted its interest bearing loans and advances for the purpose of giving interest free loans and advances of Rs. 13,08,28,440/-, had thus, disallowed the corresponding interest i.e @ 17% per annum and made a resultant addition/disallowance of interest expenditure of Rs. 2,22,40,835/-. On appeal, the CIT(A) observed that the issue qua disallowance of the assessee‟s claim for deduction of interest expenditure u/s 36(1)(iii) was a recurring issue that was decided by his predecessor in the assessee‟s own case for A.Y. 2013-14 and A.Y. 2014-15. Referring to the view taken by his predecessor while disposing off the assessee‟s appeal for A.Y. 2013-14, it was observed by the CIT(A) that his predecessor taking cognizance of availability of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay in the case of CIT Vs. Reliance Utilities & Power Ltd. 313 ITR 340 (Bom). It was submitted by the ld. A.R that the A.O giving effect to the aforesaid directions of the Tribunal had vide his order passed u/s 143(3) r.w.s 254 of the Act, dated 05.07.2019 observed that the interest free loans and advances given by the assessee were old loans that were advanced way back in the preceding years i.e A.Y. 2005-06, A.Y. 2007-08 and A.Y. 2009-10 and A.Y. 2010-11. It was submitted by the ld. A.R that the A.O in the course of the set-aside proceedings had after verifying the claim of the assessee that the interest free loans in question were advanced out of sufficient reserves and surplus, share capital and non-interest bearing funds as were available with it had vacated the disallowance of interest of Rs. 2,26,46,285/- that was made by his predecessor vide his original assessment order passé u/s 143(3), dated 12.03.2015. At this stage, we may herein observe that the ld. A.R had in all fairness pointed out that the Tribunal while disposing off the appeals in the case of the assessee for A.Y. 2013-14 in ITA No. 7288/Mum/2017 and A.Y. 2014-15 in ITA No. 7289/Mum/2017, dated 23.04.2019 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring period 01.04.2012 to 31.03.2015 Reduction during period 01.04.2012 to 31.03.2015 Closing Balance as on 31st March, 2015 1. Manish Enterprises 65,00,000 65,00,000 2. Mayur Enterprises 60,00,000 60,00,000 3. Sohil Kusumgar 2,85,000 2,85,000 4. Supreline Construction Pvt. Ld. 10,00,00,000 10,00,00,000 5. Ashok T. Chheda 5,00,000 5,00,000 6. B.G. Doshi 11,00,000 11,00,000 7. Bhavesh M.Chheda 85,000 85,000 8. Bindu H. Mehta 5,00,000 5,00,000 9. Chemfert Granulations Ltd. 2,00,000 2,00,000 10. Chemfert Traders Bom. Pvt.Ltd. 1,35,100 1,35,100 11. Devesh Agarwal 5,00,000 5,00,000 12. Dinesh Mehta 9,00,000 9,00,000 - 13. Giviben Chheda 5,63,000 5,63,000 14. Hukamatraj Mehta 6,00,000 6,00,000 15. Kamlesh Daftary 5,94,740 5,94,740 16. Kishor M. Purohit 2,05,000 2,05,000 17. Madhubala M. Chheda 95,000 95,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le ITAT. The Hon‟ble ITAT vide its order no. ITA No. 6686/Mum/2016 dated 31.10.2018 deleted the addition with regards to annual lettable value and set aside the issue of disallowance of interest wherein the Tribunal had set aside the order of Ld. CIT(A) and remitted the matter to the file of the A.O to make a de novo order as per ratio laid down in Madhav Prasad Jatia 118 ITR 200 (SC) and Reliance utilities & power Ltd. 313 ITR 340, after giving an opportunity of being head to the assessee. 3. Accordingly, notices u/s 143(2) and 142(1) were issued and served on the assessee. In response thereto Shri Nilesh Mehta, CA attended and made submissions. 4. During the course of the assessment proceedings, assessee was asked to furnish justification for the allowability of proportionate interest. In response to the same assessee submitted details vide letter dated 29.03.2019 wherein note on non-disallowance of proportionate interest has been submitted. The submissions of the assessee have been considered and found the same to be acceptable. In this regard, it is to mention here that assessee‟s own funds and non-interest bearing loans are sum of Rs. 185.84 crores against whic ..... X X X X Extracts X X X X X X X X Extracts X X X X
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