Ita/212/2015 Of The Commissioner Of Income-Tax v. M/S Embassy Property

IN THE HIGH COURT OF KARNATAKA AT BENGALURU|DATED THIS THE 22 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: 1.|THE COMMISSIONER OF INCOME-TAX. CR BUILDING| QUEENS ROAD BANGALORE. 2.|THE DEPUTY COMMISSIONER OF INCOME-TAX CIRCLE-11(1), RASHTROTHANA BHAVAN NRUPATHUNGA ROAD| BANGALORE-560 OO1. | _ APPELLANTS (BY SRI:K V ARAVIND, ADV) AND:| M/S EMBASSY PROPERTY.DEVELOPMENTS LITD.,(FORMERLY DYNASTY DEVELOPERS (P) LTD.,)1[S]]FLOOR, EMBASSY POINT|150, INFANTRY ROADBANGALORE-560 OO1.| RESPONDENT| (BY SRI:K K CHAITANYA, ADV) THIS APPEAL JIS. FILED UNDER SECTION 260-A OINCOME TAX ACT 196L 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 PATELJ., 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 justifiedin allowing relief to tne 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|tnat the assessee company nad 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?| 2.|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. 3.|We may record tnat the Tribunal in the impugned.order at paragraph 33 has observed thus: “If the principle is considered on the applicability of Section 36(1)(iil), 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 pe erroneous. [The Tribunal nas further found tnat 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 reguiar Dusiness|in real estate and therefore, disallowance was not permitted.”| 4Learned 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 sneet and therefore, it was contended|that if the assessee has treated the properties as asset in the|Dalance sheet, disallowance of interest for the _ capitaborrowed can be said as justified. As such, the aforesaid doesnot 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| CIT appeals, the Tribunal has made observations in respect of properties if made to use for earning profits, the interestcannot 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. 5.|Considering the facts and circumstances, we donot find that any substantial question of law would arise forconsideration as sought to be canvassed. Hence, the appeal is dismissed. | *pgn/-- Sd/-. JUDGE Sd/- JUDGE