TMI Blog2015 (7) TMI 242X X X X Extracts X X X X X X X X Extracts X X X X ..... GS 0122, First Floor, DLF Grand Mall, Gurgaon. It is also not denied that the property has not been actually used for the purpose of the assessee. All what has been contended is that it is kept as an alternative premise in view of the ceiling drive of residential premises by MCD at Delhi. No evidence has been led to support the aforesaid claim of the appellant. Mere assertion unsupported by any evidence cannot be accepted. On the contrary it has been found as a matter of fact that the said premises is used by M/s Origin Overseas, a sister concern and an internet search showed that the property is presently listed as the branch office of ‘Queens Furniture’ and ‘Affaire’ with the contact number of M/s Shikha Birla, spouse of the appellant. In such circumstances we are unable to accept the claim of assessee that property was an alternative premise. However, since the amount utilized for the purchase of property was ₹ 68,00,000/- therefore the CIT(A) was justified to direct the AO to re-compute the disallowance of interest expenses to the extent relatable to the utilization of interest bearing funds for the purchases of property i.e. ₹ 68,00,000/- out of total loan of S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sustaining the disallowance of ₹ 3,54,303/- under the said head and that too without appreciating the facts and circumstances of the case. 5 That in any case and in any view of the matter action of ld. CIT(A) in not reversing the action of ld. AO in making the impugned disallowances and framing the impugned assessment order, as the same is not sustainable on various legal and factual grounds and more so as the same has been passed by recording incorrect facts and finding and without giving adequate opportunity of hearing to the assessee. 3 The grounds raised by revenue are as under: 1 On the facts and on the circumstances of the case the ld. CIT(A) has erred in allowing the interest ignoring these facts that both the assets were not put to use as required as per provisions of section 36(1)(iii) of the Act. 2 On the facts and on the circumstances of the case the ld. CIT(A) has erred in holding that the loans were not entirely availed for acquisition of assets. 3 On the facts and on the circumstances of the case the ld. CIT(A) has erred in admitting the addition evidences under Rule 46A of the. T. I. Rule, 1962 without providing opportunity to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest paid on capital borrowed for acquisition of capital asset will not be allowable as deduction till the date the assessee is first put to use for business. Thus, it is clear that the assessee has failed to establish any connection between the business of the assessee and the above interest payments. Accordingly, the amount of ₹ 27,85,968/- on property loan payments is hereby disallowed and added to the total income of the assessee. 7 During the appeal proceedings it was submitted that assessee obtained a business loan of ₹ 1,25,00,000/- from HDFC Bank by offering collateral security of commercial property at DLF South Court Saket. It was further submitted that loan was received in Centurion Bank of Punjab A/c No. 113804000000940 on 5th May 2007 and the said loan was utilized by the assessee for its business purposes and assessee paid a sum of ₹ 22,61,250/- from its own sources from ABN AMRO Bank A/c No. 817903 to DLF Services Limited during the year for acquiring the aforesaid property.It was thus contended that borrowed funds have not been utilized for acquiring the property and entire interest payment is revenue expenditure. It was further submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shows that there are no payments from the said account towards the purchase of the property. Total payments in a current year of ₹ 22,61,250/- made towards the purchases are from the appellant‟s current account with ABN AMRO Bank, and there is no utilization of the loan of ₹ 1,25,00,000/- towards these payments. Hence, the payment of interest of ₹ 12,95,595/- on the loan account no. HCPL60110000416628 cannot be held to pertain to the purchase of office space at South Courtyard Saket. Thus while the said office space has not been proved to have been put to use for the business of the appellant either in the year under consideration, or in any later year, the disallowance of interest of ₹ 12,95,595/- on the loan availed on mortgage of this property cannot be upheld as the appellant has not utilized the interest bearing funds for its purchase. 4.1 However, the second loan account at No. HCPL 60110000175849, also of ₹ 1,25,00,000/- was sanctioned on 4.12.2006 by offering the security of shop No. GS 0122, First Floor, DLF Grand Mall, Gurgaon. The appellant has argued that the property was purchased vide agreement dated 4.12.2006 and the proviso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... property was purchased as ready to move alternative space and therefore in view of the judgment of the Hon ble Delhi High Court in the case of Capital Bus Service P. Ltd. vs CIT 123 ITR 404 disallowance made is untenable. On the other hand the learned DR supported the finding of the CIT(A) viz-a-viz the disallowance of interest of ₹ 14,90,373/- and further contended that CIT(A) has erred in allowing the interest ignoring the fact that both the assets were not put to use as required as per provisions of section 36(1)(iii) of the Act. 10 We have considered the rival submissions and perused the material on record. The issue of disallowance of interest comprises of ₹ 12,95,595/- and ₹ 14,90,373/- paid to HDFC Bank. As regards interest paid of ₹ 12,95,595/- to HDFC Bank, the conclusion of the CIT(A) is that borrowings raised on which interest has been paid of ₹ 12,95,595/- from Centurion Bank of Punjab has not been utilized for purchase of property. On the contrary the conclusion is that such borrowings have been utilized for the purpose of business. This factual finding has not been shown to be contrary to evidence on record by the ld. DR in the course ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce of ₹ 14,90,373/- to the extent relatable to amount invested in the property. Thus Grounds raised by assessee and revenue are rejected. 11 Ground No. 3 and 4 of departmental appeal relate to deletion of disallowance of ₹ 12,97,636/- being interest on service tax and contended to be penal in nature and therefore not allowable. 12 The CIT(A) noted that AO had disallowed sum of ₹ 55,14,034/- as being service tax penalty. However the assessee pointed out that it had made service tax payments on 30.4.2008 amounting to ₹ 55,14,034/- alongwith which interest payment amounting to ₹ 12,97,627/-. It was further submitted that payment of ₹ 12,97,627/- made by the assessee were towards interest charges and not towards penalty charges. It was stated that payments made against challan code of 0104440190 and 00440064 were towards other receipts being interest charges and copy of challans along with notification were furnished. Further vide order sheet entry dated 13.6.2011 the CIT(A) directed the assessee to furnish evidence that the service tax interest of ₹ 12,97,627/- was not penal in nature and in response thereof on 17.6.2011 it was submitt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... account of delay in payment of the provisional demand of tax is not a permissible deduction under s. 36(1)(iii) and s. 37 of the I. T. Act. The learned judges observed that the liability to tax, although arising out of a business activity, could not be said to be a liability related to the assessees' business. It is not necessary for us to express any opinion on the decision. The case is distinguishable because we are concerned with a particular statutory scheme enacted in ss. 3 and 4 of the Cess Act before us. Our attention has also been invited to Saraya Sugar Mills (P.) Ltd. vs Commissioner of Income-tax (1979) 116 Itr 387, where a Full Bench of the Allahabad High Court has held that the payment of interest under s. 3(3) of the U. P. Sugarcane Purchase Tax Act, 1961, is a penal liability which accrues on an infraction of the law. Section 3(3) of the U. P. Sugarcane Purchase Tax Act, 1961, does seem to be in pari materia with s. 3(3) of the Cess Act. But we think we should resist the blandishment to sit in judgment over that decision when it is not in appeal before us. We are concerned solely with the nature of the liability to pay interest under s. 3(3) of the Cess Act. A co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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