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2015 (12) TMI 359 - ITAT KOLKATA

2015 (12) TMI 359 - ITAT KOLKATA - TMI - Disallowance of interest claim by assessee u/s 24(b) - CIT(A) deleted the addition made by AO by observing that interest paid on any fresh loan taken to repay the earlier loan is fully covered u/s 24(b) - Held that:- The subsequent loan taken by assessee to repay his original loan is very much covered for claim the deduction u/s. 24(b) of the Act. It is also important to note that assessee has taken a loan from SBM and same loan from the same bank was enh .....

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business activities carried on by assessee-company - CIT(A) allowed claim - Held that:- AO has disallowed the conversion of the capital asset into stock-in-trade on the ground that there was no business activities carried on by assessee-company during the relevant previous year and Ld. CIT(A) has rejected the claim of the AO on the ground that Sec.45(2) of the Act provides the assessee to convert the capital asset into stock-in-trade at any time during the year. There is no prohibition under the .....

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Shri Devkr Kothari, FCA & Shri Manohar Agarwal, Advocate ORDER Per Waseem Ahmed, Accountant Member This appeal by the Revenue is arising out of order of Commissioner of Income Tax (Appeals)-VIII, Kolkata in appeal No.163/CIT(A)-VIII/Kol/11-12 dated 17.10.2012. Assessment was framed by JCIT(OSD), Circle-8, Kolkata u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the Act ) vide his order dated 28.12.2011 for assessment year 2009-10. Revenue has raised following grounds:- 1. T .....

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₹ 97,80,772/- . 2. First ground regarding the issue is that Ld. CIT(A) has erred in deleting the addition made by Assessing Officer for an amount of ₹ 2,11,44,914/- on account of disallowance of interest claim by assessee u/s 24(b) of the Act. 3. Briefly stated facts are that assessee is a private limited company. It derives income in the form of rent besides income from investing in shares. The assessee is subsidiary of M/s Patton International Ltd. (MPIL in short). In the earlier .....

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for short) and this borrowing from SBM was utilized for repayment of loan to the holding company i.e. MPIL. During the financial year 2008-09 SBM reviewed the existing loan and sanctioned another loan of ₹ 20 crores on 19.08.2008 by closing the old loan where, a sum of ₹ 8.37 crores was lying in the account of assessee. The balance amount of loan was utilized for the repayment of earlier loan taken from holding company. On this new amount of loan, there was interest accrued for the r .....

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e the Ld. AR demonstrated that the order of the AO was erroneous. For the sake of clarity, we reproduce submission of the Ld. AR as under:- i) The Ld. A.O has also misinterpreted the decision of the Calcutta Bench of the Tribunal in the case of ITO v. Satya Co. Ltd. (1986) 19 ITD 596 (Cal-Tribunal). The brief fact of the case is that the assessee company purchased a house property out of borrowed money. Subsequently, the assessee repaid the said loan by taking loan from another party. Then it ag .....

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ond loan to which the provisions of section 24(1)(vi) was extended by this circular. But this could not be extended to subsequent loans, as contended by the assessee. In the instant case original loan was provided by M/s Patton International Ltd., (holding company) from time to time for the purpose of acquisition and construction of house property by its subsidiary company (Appellant). This is the original / first loan (first lender).Subsequently, the Appellant arranged from its banker, State Ba .....

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loan, was repaid to State Bank of Mysore and the balance amount of ₹ 11.60 crores was paid to the holding company as repayment of loan. The loan granted by State Bank of Mysore is the second subsequent loan (second lender). There are no other parties involved (as may be described as third or fourth) who have provided loan for repayment of earlier loan taken from State bank of Mysore. Therefore, the ratio of the decision of the above referred Tribunal Case is squarely applicable in the ins .....

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eleted. On the basis of submission made by assessee Ld. CIT(A) has deleted the addition made by AO by observing that interest paid on any fresh loan taken to repay the earlier loan is fully covered u/s 24(b) of the Act. 6. Now aggrieved, Revenue preferred appeal before the Tribunal. Shri Alok Nag, Ld. Departmental Representative appearing on behalf of Revenue and both Shri Devkr Kothari & Sri Manohar Agarwal Ld. Authorized Representative are appearing on behalf of assessee. 7. We have heard .....

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) ITO v. M.s Faith Real Estates P. Ltd. and others in ITA No. 5070 & 5181/Del/2011 dated 11.06.2011 c) ACIT v. Sunil Kr. Agarwal in ITA No.641/Luck/2010 (2011) 139 TTJ (Luck)(UO) 49 d) Realty Finance & Leasing (P) Ltd. v. ITO (2006) 5 SO 348 (Mumbai) From the aforesaid discussion, we find that the dispute is as to whether the assessee-company is entitled deduction for interest expenditure of ₹ 2,11,44,914/- from the income earned under the head house property u/s 24(b) of the Act. .....

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bmitted that the fresh loan taken to repay the original loan was within the ambit of law and accordingly Ld. CIT(A) has deleted the addition which made by AO. It is also observed that no material has been brought on record by Ld. DR to controvert the above finding of Ld. CIT(A). A plain understanding of section 24 (b) of the Act reads as under:- [Deductions from income from house property] 24. Income chargeable under the head Income from house property shall be computed after making the followin .....

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ital borrowed on or after the 1st day of April, 1999 and such acquisition or construction is completed [within three years from the end of the financial year in which capital was borrowed], the amount of deduction under this clause shall not exceed [two lakh rupees]. Explanation. - Where the property has been acquired or constructed with borrowed capital, the interest, if any, payable on such capital borrowed for the period prior to the previous year in which the property has been acquired or co .....

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for the purpose of such acquisition or construction of the property, or, conversion of the whole or any part of the capital borrowed which remains to be repaid as a new loan. Explanation - For the purposes of this proviso, the expression new loan means the whole or any part of a loan taken by the assessee subsequent to the capital borrowed, for the purpose of repayment of such capital.] From the aforesaid explanation, it is very much clear that the subsequent loan taken by assessee to repay his .....

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. The issue raised by Revenue in this appeal is that Ld. CIT(A) has erred in deleting the addition made by AO on account of treating Long Term Capital Loss (LTCG for short) as Short Term Capital Gains (STCG for short) as business loss. In this case, assesseecompany purchased 1.80 lakh share of premier Ltd. in the month of February, 2008 as investment for a total consideration of ₹ 2,06,48,950/- in the financial year 2007-08 and this investment in shares was shown as LTCG investment. Howeve .....

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; 53,03,228/-. As a result of sale, there was a business loss for an amount of ₹ 97,80,772/- and assessee-company claimed this loss as business loss in the FY 2008-09. However, AO has disregarded the above transactions by observing that assessee has never been a trader in share and neither purchase nor sold any other shares during the year under consideration. So the conversion into stock-in-trade done by the assessee-company was not in normal course of the business of assessee. Accordingl .....

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ssee can convert its capital assets in stock-intrade. The Ld. CIT(A) has made reference to the following judgments :- i) ACIT v. Jehangir T. Nagree (2008) 23 SOT 512 (Mumbai) ii) CIT v. Walfort Share And Stock Brokers P. Ltd. (2010) 326 ITR 1 (SC) iii) Union of India v. Azadi Bachao Andolan (2003) 263 ITR 796 (SC) 10. Now aggrieved with the order of Ld. CIT(A), Revenue is in appeal before the Tribunal. 11. We have heard rival parties and perused the materials available on record. Before us Ld. D .....

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