Ita/506/2014 Of The Commissioner Of Income-Tax v. M/S Golf View Homes Ltd

1 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.5(06 OF 201 BETWEEN: 1.THR COMMISSIONBR OF INCOME —- TAX C.R. BUILDING, QUEENS ROAD. BANGALORE oOTHER ASST. COMMISSIONBR OF INCOME — TAX CIRCLE — 11(2), RASHTROTHANA BHAVAN NRUPATHUNGA ROADBANGALORE — 560 OO].BANGALORE — 560 OO]. _ APPBKRLLANTS| (BY SRI.K.V. ARAVIND, ADVOCATE) AND M/S. GOLF VIEW HOMES LTDNO.73/1, 5 KLOOR,SHERIFF CBHNTREST. MARK’S ROADBANGALORE .. RESPONDENT (BY SRILA.SHANKAR & SRI.M. LAVA, ADVOCATES) THIS [TA IS FILED UNDER SEC.260-A OF INCOME|TAX|ACT1961,|ARISINGOUT.OF|ORDERDATBD.26.08.2005 PASSED IN ITA NO.1743/BANG/2004, FOR THEASSESSMENT YRBAR 2OOO-O1 PRAYING TO FORMULATETHE SUBSTANTIAL QUESTIONS OF LAW STATED ABOVEAND ETC., THIS ITA COMING ON FOR ORDERS THIS DAY,JAYANT PATEL J., DELIEVERED THE FOLLOWING: JUDGMENT As such, the delay is of a long period of 3243 daysand hence, we find it appropriate to consider the meritsof the appeal. 2.But when we heard the learned counsel|appearing for the revenue, Mr. Aravind as well as Mr.Shankar, learned counsel appearing for assessee on themerit of the appeal, they fairly conceded that thepresent order, which is under challenge of the Tribunal,18 a common order for Assessment Years 1999-2000|and 2000-O1. So far as, Assessment Year of 1999-2000, |the revenue’s appeal has already been dismissed onmerits by this Court as per order passed today in ITA 3 No.29/2013 and this would stand covered by the saiddecision. | 3.The only point is that the delay in the earlierappeal in ITA No.29/2013 was 2586 days whereas inthe present appeal, the delay is 3243 days. 4We may record that on merits, in ITANo.29/2013 it has been observed by this Court asunder:-. 6)The revenue has preferred this appeal byraising four substantial questions of law but in ourVIEW|onlyfirstquestionwouldQriSe|forconsideration and subsequent questions are onlythe consequential aspects. Hence, we find that themain question which arise for consideration is asunder:- UWhether the Tribunal was correct in!holding that the interest deduction claimedby the assessee is an allowable deductionwithout taking into account the fact that theassessee had not utilized the loan qmount in the course of business activity and the samehad been utilized by its sister concern andconsequently recorded a perverse finding?| 2.The short facts of the case appear to bethat the assessee is in the business of real estateviz., construction of building, leasing of building,acquiring of properties, etc. For the assessmentyear 1999-2000, assessee claimed a deduction ofinterest out of the amount paid towards interest tothe Banks from which the assessee had taken loan.There were also other deductions claimed from theassessee but in the present appeal, we are notrequired to examine the said aspect and therefore,we find that the discussion in that regard is notrequired. The Assessing Officer assessed thereturn and so far as the allowance of the interest onthe amount paid to the Diamond District andPlatinum City, which were sister concerns of theassessee as per the assessee, the Assessing Officerdisallowed the interest over the amount of loanutilized for giving advance to the Diamond Districtand Platinum City. The matter was carried inappeal before the Commissioner (Appeals) and theCommissioner (Appeals) concurred with the view of 5 5 the Assessing Officer. However, the Commissioner(Appeals) when considered other aspects of dealingwith the income from house property, he found thatthe assessee is in the business of construction ofone building after another including acquiringproperty rights in Diamond District, Platinum Cityand India Builder Association. However, so far asthe interest over the amount of loan utilized forgiving advance to the aforesaid two sister concernsviz., Diamond District and Platinum City, theCommissioner (Appeals) found no proof wasproduced and therefore, he dismissed the appeal ofthe assessee to the sqid extent. The matter wasfurther carried in appeal before the Tribunal andthe Tribunal ultimately at Para 5.2 has observedthus: 5.2.The CIT(A) has recorded the followingfinding at para 5.3 (page 31) of the appellateorder. “MoreovertheappellantCOMmpanyhas.continued|To constructOrnebuildingafteranotherand|alsoacquiringproperty rights in M/s.Diamond 6 District, M/s.Platinum City andM/s.Indta Builders Association.so the appellant's activity as aideveloper and contractor is well) organized 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 diversionoffunds 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 isrequired to be let in only on disputed facts andno evidence is required to support an admitted 7 fact. Consequently, we hold that the paymentmade by the assessee to its sister concerns is 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|haveheardsri.Aravind,learnedcounsel appearing for the appellant-revenue andalso Sri.Shankar, learned counsel appearing for theassessee on merits of the appeal. 5.The contention raised on behalf of theappellant-revenue was that the finding recorded bythe Tribunal about the activity of the assessee 1sperverse in as much as the extract of Para 5.3 fromthe order of CIT(Appeals) is wrongly construed andinterpreted by the Tribunal. He submitted that theTribunal ought to have undertaken its scrutiny fordisallowance of claim of interest by considering thefinding of CIT (Appeals) that no proof wasproduced. So far as the other discussion made bythe CIT (Appeals), it was pertaining to the incomefrom house property and it cannot be mixed up withthe issue for disallowance of interest of theadvances given to the sister concerns viz., DiamondDistrict and Platinum City. He therefore submittedthat the Tribunal has committed a serious error andin any case the finding of the Tribunal is perverseand hence this Court may set aside the order of theTribunal to that extent and allow the appeal of theTevenue. 6. Whereas the counsel appearing for the|respondent-assesseesupportedthe|findingrecorded by the Tribunal and contended that thefinding is based on ‘a finding of fact’ recorded by 9 6. Whereas the counsel appearing for the|respondent-assesseesupportedthe|findingrecorded by the Tribunal and contended that thefinding is based on ‘a finding of fact’ recorded by 9 CIT (Appeals) coupled with the aspect that thedepartment had not disputed the above findingrecorded by the CIT (Appeals). He submitted that ifthe advances were given to sister concerns foracquiring proprietary rights viz., Diamond Districtand Platinum City, the interest is allowable asdeduction under Section 36 of the Act. Hesubmitted that the appeal of the revenue bedismissed. 7.As we have already re-produced_ thobservations of the Tribunal, we need not repeatthe same but the additional aspect is that in theabove observation of the Tribunal, there is alsoreference to similar finding recorded by CIT(Appeals) on Pages 32 and 33. As the said findingis not reproduced by the Tribunal in its order, wefind it appropriate to reproduce the same. 5.When CIT (Appeals) was considering the|applicability of the decision in the case ofCIT VS.VERE RABHADRA INDUSTRI/ reported inQ40ITR5 (AP)while distinguishing the said decision, it hasbeen interalia recorded as under: “similarly its reliance on the judgmentin the case of CIT vs. Veerabhadra Industries|reported in 240 ITR 5 (AP) is also misplacedin |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 Districtand Platinum City.8 (emphasis supplied) orIt is inter alla observed by CIT (Appeals)|while considering the judgment in the case ofCITVS. R.M..M MEAELBNAKSHI SUND' reported inDQIDITR DAI, aS under:- “In the present case, the construction ofone building after anotherand acquiringproperty rights in _Diamond_ District aPlatinum City is nothing but business andletting out the building till sale takes placewith an option to the lessee to purchase andletting being one of the incidental or ancillaryobjects _(No.15to attain the main objects of 117 development and construction satisfies these|conditions.” (emphasis supplied) 10.In our considered view, the finding which|is already recorded by CITI (Appeals) and reproduced by the Tribunal in the above referredparagraph at 5.2 as well as the above referredreference by CIT (Appeals), makes it clear that CIT(Appeals) was satisfied about the activity of theassessee as of construction of one building afteranother and acquiring of property rights inDiamond District and Platinum City. Il.If such was the finding that the activity ofthe assessee was also of acquiring property rightsin M/s.Diamond District and M/s.Platinum City,arlyadvance|givenby|theaASSCSSCCtO M/s.Diamond District and M/s.Platinum City is tobe treated for acquiring property rights and once itis treated as for acquiring property rights may be ofa sister concern, it would be an allowablededuction under Section 36 of the Income Tax Act,Since it is for the business activity. 17- 12.The aforesaid fact is coupled with theaspect that in the very observation of the Tnbunal,it has been recorded as under:- “Before us, the department has notdisputed the above finding offact recorded by|CIT (Appeals). ” Meaning thereby, the aforesaid finding was noteven disputed by the department before theTribunal. 13.The attempt on the part of the revenue tocontend that the finding arrived at by the Tribunalis perverse by muisconstruing the order of CIT(Appeals) cannot be countenanced for three foldTeCasSOns One is that the department itself before|the Tribunal did not dispute the aforesaidfinding offact recorded by CIT (Appeals). The second is that it is not only at one|place the aforesaid finding of fact is recordedbut subsequently as observed earlier at twoplaces similarfactum is also recorded. The third is that when such finding of|fact was not disputed and was also reiterated 13| “Before us, the department has notdisputed the above finding offact recorded by|CIT (Appeals). ” Meaning thereby, the aforesaid finding was noteven disputed by the department before theTribunal. 13.The attempt on the part of the revenue tocontend that the finding arrived at by the Tribunalis perverse by muisconstruing the order of CIT(Appeals) cannot be countenanced for three foldTeCasSOns One is that the department itself before|the Tribunal did not dispute the aforesaidfinding offact recorded by CIT (Appeals). The second is that it is not only at one|place the aforesaid finding of fact is recordedbut subsequently as observed earlier at twoplaces similarfactum is also recorded. The third is that when such finding of|fact was not disputed and was also reiterated 13| by the Commissioner (Appeals) and the saidreiteration was also not disputed and theTribunal has relied upon the same and hasproceeded as an undisputed fact, such a viewon the part of the Tribunal cannot be said to beperverse View. | 14.When one talks about perversity, the test|would be that no reasonable person would takesuch view. But if the view taken by the Tribunal isa possible reasonable view, such view cannot saidto be perverse. If the perversity is tested from thematerial on record, then also, we cannot accept thecontention that the finding of fact so recorded bythe Tribunal is perverse or without there being anymaterial on record. 15.Further attempt made by the _ learnecounselforthe|appellantthatit|1S misunderstanding of the order of the Tribunal or theTribunal has wrongly interpreted the observationsmade by the CIT (Appeals) also cannot be acceptedfor two reasons: One is that had such being the position,|nothing prevented the department from raising the dispute for applicability of such findingwhen the aspect for allowance of the interestunder Section 36 of the Act was to beconsidered. Another is that, tf on one part CIT(Appeals) which allows the claim on the groundthat no evidence was produced to show thenexus and on the other part, uf CIT (Appeals)does find the activity of the assessee inter aliafor acquiring property rights in M/s. DiamondDistrict and M/s.Platinum City, which aresister concerns coupled with the aspect of suchreiteration, further at two places, the earlierobservationsmadethatthere|1Snoindependent evidence produced before himwould not only result into contradiction infinding but it would also lose its efficacy. Inany case, even if two views are possible, theinterpretation would lean in favour of theassessee that too when the judicial review islimited to question of law and limited toperversity in any finding of fact. Under suchcircumstances, the contention raised on behalfof revenue fails. 16.In view of the aforesaid observations and|discussion, we find that the question which israised by the revenue in the present appealdeserves to be answered in negative, against therevenue and in favour of the assessee by holdingthat the finding of the Tribunal cannot be said to beperverse. 17.We find that there is no perversity in the|finding of the Tribunal in allowing the appeal of theassessee so far as the deduction of the interest onthe loan taken which ts utilized for giving advancesto the sister concerns te., M/s.Diamond Districtand M/s.Platinum City. 18.In view of the aforesaid observations and|discussion, we find that when the appeal is withoutany merit and even if too lenient view is taken onthe aspect of delay, though it is strongly resisted bythe learned counsel for the assessee to condonesuch long delay of more than 2500 days, delay 1scondoned but as the main appeal as per reasonsrecorded by us 1s meritless, the same is dismissed. ” 16| 17.We find that there is no perversity in the|finding of the Tribunal in allowing the appeal of theassessee so far as the deduction of the interest onthe loan taken which ts utilized for giving advancesto the sister concerns te., M/s.Diamond Districtand M/s.Platinum City. 18.In view of the aforesaid observations and|discussion, we find that when the appeal is withoutany merit and even if too lenient view is taken onthe aspect of delay, though it is strongly resisted bythe learned counsel for the assessee to condonesuch long delay of more than 2500 days, delay 1scondoned but as the main appeal as per reasonsrecorded by us 1s meritless, the same is dismissed. ” 16| 5.As such, since the order passed by theTribunal is common and separate present appeal ispreferred in connection with each Assessment year andthe present appeal for 2000-01, in our view, for thereasons recorded in the above referred decision, thepresent appeal would have the same fate viz., thefinding recorded by the Tribunal cannot be said to beperverse and question would stand answered againstthe revenue and in favour of the assessee and the'appeal consequently would be lable to be dismissed. 6. As the appeal deserves for dismissal on|merits, we find that even if too lenient view is taken onthe aspect of delay, though it is strongly resisted by thelearned counsel appearing for the assessee|interaliaOT)|the ground that when earlier appeal in ITA 29/2013 was_preferred, the revenue could have preferred the presentappealsimultaneouslybut|TEVENUEfiled reviewapplication and aiter review is decided, the present 1/| appeal has been preferred. Whereas Mr.Aravind,learned counsel appearing for the revenue contendedthat there was justifiable ground for preferring review. —In our view, we need not address ourselves nor anyconclusion required to be recorded, more particularly,when the main appeal itself deserves dismissal on merit. |Hence, the delay is condoned. Main appeal ITA 9006/2014 is dismissed. Prs* Sd/-|JUDGE Sd/-. JUDGE