Ita/29/2013 Of Commissioner Of Income Tax v. M/S. Golf View Homes Ltd

IN THR HIGH COURT OF KARNATAKA AT BENGALURU DATRBD THIS THE 3[‘T]DAY OF NOVEMBER 20106) PRESENT THE HON’BLE MR.JUSTICE JAYANT PATEL AND THR HON’ BLE MR.JUSTICEK PS DINBSH KUMAR ITA NO.29 OF 2013 BETWEEN 1.)COMMISSIONBR OF INCOME —- TAX BANGALORE iaDBPUTY COMMISSIONBR OF INCOME - TAX, CIRCLE — 11(2) BANGALORE APPBRLLANT (BY SRI.K.V.ARAVIND, ADVOCATE) AND M/S. GOLF VIEW HOMES LTDNO.73-01, SHERIFF CENTREST. MARK’S ROADBANGALORE RBSPONDENT (BY SRI.A.SHANKAR & SRI.M.LAVA, ADVOCATES) THIS [TA IS FILED UNDER SEKC.260-A OF [INCOMTAX|ACT1961,|ARISINGOUT.OF|ORDERDATBD.26.08.2005 PASSED IN ITA NO.939/BANG/2003, FOR THE|ASSESSMENT YEAR 1999-2000, PRAYING THAT THIS)HON’BLE COURT MAY BR PLEASED TO FORMULATE THE| SUBSTANTIAL QUESTIONS OF LAW STATED THEREIN ANDBIC. THIS ITA COMING ON FOR ORDERS THIS DAY,JAYANT PATEL J., DELIEVERED THE FOLLOWING: JUDGMENT We may at the out set record that since the delaywas a very long delay of 2986 days, we found itappropriate to consider the merits of the appealsimultaneously. ? The revenue has preferred this appeal byraising four substantial questions of law but in our viewonly first question would arise for consideration andsubsequent questions are only the consequentialaspects. Hence, we find that the main question whicharise for consideration is as under:- UWhether the Tribunal was correct in holdingthat the interest deduction claimed by _ thassessee iS an allowable deduction without|taking into account the fact that the assessee|had not utilized the loan amount in the course ofbusiness activity and the same had been utilized 3 by its sister concern and consequently recordeda perverse finding? 3.The short facts of the case appear to be thatthe assessee is in the business of real estate viz.,construction of building, leasing of building, acquiringof properties, etc. For the assessment year 1999-2000,assessee claimed a deduction of interest out of the!amount paid towards interest to the Banks from whichthe assessee had taken loan. There were also other|deductions claimed from the assessee but in the presentappeal, we are not required to examine the said aspectand therefore, we find that the discussion in that regardis not required. The Assessing Officer assessed thereturn and so far as the allowance of the interest on theamount paid to the Diamond District and Platinum City,which were sister concerns of the assessee as per theassessee, the Assessing Officer disallowed the interestover the amount of loan utilized for giving advance tothe Diamond District and Platinum City. The matter 4 WaS carried in appeal before the Commissioner(Appeals) and the Commissioner (Appeals) concurredwith the view of the Assessing Officer. However, theCommissioner (Appeals) when considered other aspects—of dealing with the income from house property, foundthat the assessee is in the business of construction ofone building after another including acquiring propertyrights in Diamond District, Platinum City and IndiaBuilder Association. However, so far as the interest overthe amount of loan utilized for giving advance to theaforesaid two sister concerns viz., Diamond District andPlatinum City, the Commissioner (Appeals) found noproof was produced and therefore, he dismissed theappeal of the assessee to the said extent. The matterwas further carried in appeal before the Tribunal andthe Tribunal ultimately at Para 5.2 has observed thus: 5.2.The CIT(A) has recorded the followingfinding at para 5.3 (page 31) of the appellateorder. “MoreovertheappellantCOMmpanyhas.continued|To constructOnebuildingafteranotherand|alsoacquiringproperty rights in M/s.DiamondDistrict, M/s.Platinum City andM/s.Indta Builders Association.so the appellant's activity as aideveloper and contractor is wellorganized and continuous.” 5.2.The CIT(A) has recorded the followingfinding at para 5.3 (page 31) of the appellateorder. “MoreovertheappellantCOMmpanyhas.continued|To constructOnebuildingafteranotherand|alsoacquiringproperty rights in M/s.DiamondDistrict, M/s.Platinum City andM/s.Indta Builders Association.so the appellant's activity as aideveloper and contractor is wellorganized and continuous.” Similar findings are also recorded at pages31/32 and 33 of the appellate order. Before us,the department has not disputed the abovefinding offact recorded by CIT(A). Therefore, it isan undisputed fact that the payments made bythe assessee to its sister concerns are only toacquire property rights. It is also an admittedfact that the assessee is in real estate businessand acquiring property rights is a part of itsbusiness. Thus, the payments made by theassessee to its sister concerns ought not havebeen held by the lower authorities as diversion offunds for non business purposes. In the lightof the above, it is not possible for us to agreewith the learned CIT(A) that the assessee shouldhave produced independent evidence in supportof an undisputed fact. It is tritethat evidence 1Srequired to be let in only on disputed facts andno evidence is required to support an admittedfact. Consequently, we hold that the paymentmade by the assessee to its sister concerns ts forthe purpose of its business. As a result, interestis required to be allowed u/s 36 of the Act. Wemake it clear that out of the total interest paid bythe assessee, a part will be allowed u/s 24 andthe balance of interest which does not qualify fordeduction u/s24, will have to be allowed u/s36. Accordingly, we direct the Assessing Officerto allow the interest paid by the assessee toCorporation Bank and to Jammu and KashmirBank, like any other business expenditure, andthe resultant loss, if any, to be set off againstproperty income in terms of Section 71 of theAct.” — Under the circumstances, the present appeal bythe revenue before this Court. 4We have heard Sri.Aravind, learned counselappearing{Ortheappellant-revenueandalsoori.Shankar, learned counsel appearing for the assesseeon merits of the appeal. 5The contention raised on behalf of the'appellant-revenue was that the finding recorded by theTribunal about the activity of the assessee is perverse inas much as the extract of Para 5.3 from the order otClIT(Appeals) is wrongly construed and interpreted bythe Tribunal. He submitted that the Tribunal ought tohave undertaken its scrutiny for disallowance of claimof interest by considering the finding of CIT (Appeals)that no proof was produced. so far as the otherdiscussion made by the CIT (Appeals), it was pertainingto the income from house property and it cannot bemixed up with the issue for disallowance of interest ofthe advances given to the sister concerns viz., DiamondDistrict and Platinum City. He therefore submitted that the Tribunal has committed a serious error and in anycase the finding of the Tribunal is perverse and hencethis Court may set aside the order of the Tribunal tothat extent and allow the appeal of the revenue. 6.|Whereas the counsel appearing for therespondent-assessee supported the finding recorded bythe Tribunal and contended that the finding is based on‘a finding of fact’ recorded by CIT (Appeals) coupled withthe aspect that the department had not disputed theabove finding recorded by the CIT (Appeals). Hesubmitted that if the advances were given to sisterconcerns for acquiring proprietary rights viz., DiamondDistrict and Platinum City, the interest is allowable asdeduction under Section 36 ot the Act. He submitted|that the appeal of the revenue be dismissed. 9 observation of the Tribunal, there is also reference to)similar finding recorded by CIT (Appeals) on Pages 32. and 33. As the said finding is not reproduced by theTribunal in its order, we find it appropriate to reproducethe same. | 3.|When CIT (Appeals) was considering theapplicability of the decision in the case of|CIT VS.VEE RABHADRA INDUSTRIE_ reported in240 ITR 5 9 observation of the Tribunal, there is also reference to)similar finding recorded by CIT (Appeals) on Pages 32. and 33. As the said finding is not reproduced by theTribunal in its order, we find it appropriate to reproducethe same. | 3.|When CIT (Appeals) was considering theapplicability of the decision in the case of|CIT VS.VEE RABHADRA INDUSTRIE_ reported in240 ITR 5 (AP)while distinguishing the said decision, it has beeninteralia recorded as under: “similarly its reliance on the judgmentin the case of CIT vs. Veerabhadra Industries|reported in 240 ITR 5 (AP) is also misplaced in|that rental income in that case was held as|assessable as income from house property in|as much as there was only single act of|construction of godown and letting it out|asagainst the systematic activity of constructionof one building after another _and_alsacquiring property rights in Diamond District 10| and Platinum City.0 (emphasis supplied) QO It isinter alia_ Observed by CIT (Appeals) while considering the judgment in the case of|CIT VS. R.M.M MEENAKSHI SUNDARAMreported in212 ITR| 221, as under:-_ “In the present case, the construction ofone building after anotherand acquiringproperty rights in Diamond _ District aPlatinum City _is_ nothing but business aletting out the building till sale takes placewith an option to the lessee to purchase andletting being one of the incidental or ancillaryobjects (No.15)to attain the main objects ofdevelopment and construction satisfies these|conditions.” (emphasis supplied) 10.|In our considered view, the finding which is already recorded by CIT (Appeals) and re-produced bythe Tribunal in the above referred paragraph at 9.2 as. well as the above referred reference by CIT (Appeals),makes it clear that CIT (Appeals) was satisfied about theactivity of the assessee as of construction of onebuilding after another and acquiring of property rightsin Diamond District and Platinum City. 11.)If such was the finding that the activity ofthe assessee was also of acquiring property rights inM/s.Diamond District and M/s.Platinum City, anyadvance given by the assessee to M/s.Diamond Districtand M/s.Platinum City is to be treated for acquiringproperty rights and once it is treated as for acquiringproperty rights may be of a sister concern, it would bean allowable deduction under Section 36 of the Income§Tax Act, since it is for the business activity. 12 _The aforesaid fact is coupled with the aspectthat in the very observation of the Tribunal, it has beenrecorded as under:- 17- “Before us, the department has notdisputed the above finding offact recorded by|CIT (Appeals).” Meaning thereby, the aforesaid finding was not even disputed by the department before the Tribunal. 13.|The attempt on the part of the revenue tocontend that the finding arrived at by the Tribunal isperverse by misconstruing the order of CIT (Appeals)cannot be countenanced for three told reasons: One is that the department itself beforethe Tribunal did not dispute the aforesaid|finding of fact recorded by CIT (Appeals). The second is that it is not only at one.place the aforesaid finding of fact is recorded|but subsequently as observed earlier at two|places similar factum is also recorded. The third is that when such finding of fact. was not disputed and was also reiterated by the Commissioner(Appeals)andthesaid reiteration was also not disputed and the|Tribunal has relied upon the same and has|proceeded as an undisputed fact, such a view|on the part of the Tribunal cannot be said to beperverse view. | 14.|When one talks about perversity, the testwould be that no reasonable person would take suchview. But if the view taken by the Tribunal is a possiblereasonable view, such view cannot said to be perverse. |If the perversity is tested from the material on record,then also, we cannot accept the contention that thefinding of fact so recorded by the Tribunal is perverse orwithout there being any material on record. The third is that when such finding of fact. was not disputed and was also reiterated by the Commissioner(Appeals)andthesaid reiteration was also not disputed and the|Tribunal has relied upon the same and has|proceeded as an undisputed fact, such a view|on the part of the Tribunal cannot be said to beperverse view. | 14.|When one talks about perversity, the testwould be that no reasonable person would take suchview. But if the view taken by the Tribunal is a possiblereasonable view, such view cannot said to be perverse. |If the perversity is tested from the material on record,then also, we cannot accept the contention that thefinding of fact so recorded by the Tribunal is perverse orwithout there being any material on record. 15.Further.attemptmadeby the|learnedcounsel for the appellant that it is misunderstanding ofthe order of the Tribunal or the Tribunal has wrongly interpreted the observations made by the CIT (Appeals)also cannot be accepted for two reasons: One is that had such being the position,nothing prevented the department from raising|the dispute for applicability of such finding|when the aspect for allowance of the interest|under Section 36 of the Act was to be!considered. Another is that, if on one part CIT.(Appeals) which allows the claim on the ground)that no evidence was produced to show the|nexus and on the other part, if CIT (Appeals)|does find the activity of the assessee|inter aliafor acquiring property rights in M/s. Diamond|District and M/s.Platinum City, which are|sister concerns coupled with the aspect of such|reiteration, further at two places, the earlier|observations made that there is no independent|evidence produced before him would not only| result into contradiction in finding but it wouldalso lose its efficacy. In any case, even if two|views are possible, the interpretation would|lean in favour ot the assessee that too when thejudicial review is limited to question of law and|limited to perversity in any finding of fact.Under such circumstances, the contention|raised on behalf of revenue falls. 16.|In view of the aforesaid observations and|discussion, we find that the question which is raised bythe revenue in the present appeal deserves to beanswered in negative, against the revenue and in favourof the assessee by holding that the finding of theTribunal cannot be said to be perverse. 1/7.We find that there is no perversity in thefinding of the Tribunal in allowing the appeal of theassessee so tar as the deduction oft the interest on theloan taken which is utilized for giving advances to the sister.Concerns1.€.,M/s.Diamond_District andM/s.Platinum City. 18.|In view of the aforesaid observations and|discussion, we find that when the appeal is without anymerit and even if too lenient view is taken on the aspectof delay, though it is strongly resisted by the learnedcounsel for the assessee to condone such long delay ofmore than 2500 days, delay is condoned but as themain appeal as per reasons recorded by us is meritless,the same is dismissed. Prs* Sd/-|JUDGE Sd/-|JUDGE