TMI Blog2011 (9) TMI 1097X X X X Extracts X X X X X X X X Extracts X X X X ..... me Tax (Appeals) erred in upholding the action of the Assessing Officer in not granting claim of deduction in respect of property tax amounting to ₹ 17,05,911/- (out of total property tax amounting to ₹ 43,62,235/- claim for ₹ 26, 56,324/- is withdrawn) while computing income from house property. 3. The learned Commissioner of Income Tax (Appeals) erred in upholding the action of the Assessing officer in not considering the loss under the head Profit or gains of business or profession and consequently not adjusting business loss amounting to ₹ 4,48,453/- while determining the taxable income of the appellant. The Revenue has raised the ground as under: 1. On the facts and in the circumstances of the case and in law, the Ld. CIT (A) erred in restricting the disallowance to ₹ 70,00,000/- as against ₹ 4,21,92,011/- u/s 24(b) of the Income Tax Act, 1961 and not considering the various sections invoked by the Assessing Officer though the Assessing Officer has conclusively proved that the assessee has violated SEBI regulations and made the excess interest payment to reduce its tax liability. 3. Ground No.1 of assessee s as well as the R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t on processing charges then in the absence of any material to show that the assessee under any obligation or liability to pay such processing charges, the assessee had no liability to pay such interest / charges. Thus, the assessee as well as Revenue challenged the order of the learned CIT (A) before us. The assessee is aggrieved by the disallowance of ₹ 70,00,000/- paid to as processing charges of debenture issue whereas the Revenue has challenged the relief granted by the learned CIT (A) by allowing the claim of interest of ₹ 3,51,92,011/- u/s 24(b) of Income Tax Act. 4. Before us the learned AR of the assessee has submitted that HDFC Property Fund was established as a Trust under the Indian Trust Act, 1882. The Trust deed has been registered under the Registration Act, 1908. The Trust was subsequently registered under the Securities and Exchange Board of India (SEBI), as a Venture Capital Fund (VCF), Regulations. He has referred the copy of SEBI approval. The learned AR further pointed out that HDFC Ltd. settled the fund which was set up to float schemes that would raise funds from various investors. Thus, HDFC Ltd. and the Fund are two identities. The HDFC has m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dment of definition of interest u/s 2(28A) reported in 105 of ITR (statute) Page 24. The learned AR thus contended that the processing fee for issue of debenture comes under the definition of interest. He has relied upon the order of Pune Bench of this Tribunal in case of Chintamani Hatcharies (P) Ltd. 75 ITD 116. He has also relied upon on the order of Delhi Benches of this Tribunal in case of Gujarat Guardian Ltd. vs. JCIT, 114 TTJ (Del) 565. The learned AR has also relied upon the decision of Hon ble Supreme Court in case of India Cements Ltd. vs. CIT, 60 ITR 552. The learned AR then referred the definition of debenture u/s 2(12) of the Companies Act and submitted that the debenture is an instrument issued by the Company for acknowledging the indebtness. The debenture constitutes a charge on undertaking of the company therefore, the debenture is only an instrument of debt and any expenditure incurred in connection with debenture is the expenditure for borrowing the funds. As such, the processing charges paid by the assessee are for borrowing the funds used for purchase of the property. The learned AR has further submitted that even when the lumsum premium paid in lieu of reducin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceived or accruing on transfer of a capital asset is less than the value of stamp duty. Therefore, the said deeming provision of sec. 50C is applicable only for the purpose of computation of capital gain and in the cases where the consideration received is found less than the value adopted by the stamp valuation authority. The scope of the deeming provision cannot be extended other than the purpose of computation of capital gain and particularly in respect of consideration received on transfer of capital asset. Therefore, the action of the Assessing Officer in adopting the market value of the properties in question by applying the deeming provision is highly misconceived and unwarranted. The Assessing Officer has not conducted any enquiry or investigation to find out the actual prevailing market price of the properties in question. Accordingly, we hold that the action of the Assessing Officer is contrary to the provisions of law and hence, we do not find any error or illegality in the order of the Ld. CIT (A) so far as the issue of allowing the interest u/s 24(b) of the Income Tax Act. 8. However, it is pertinent to note that the funds raised by the assessee through issue of deb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the deduction to the extent of ₹ 26,56,324/-. Thus, the effective claim of the assessee regarding property tax was only for a sum of ₹ 17,05,911/-. The Assessing Officer disallowed the claim of the assessee in the absence of any proof for payment. On appeal the Ld. CIT (A) confirmed the disallowance by observing that the assessee has not substantiated his claim and liability as well as actual payment of this tax. Before us the learned counsel for the assessee has submitted that the assessee paid the property tax ₹ 13,19,588/- whereas balance amount of ₹ 3,86,323/- was paid by HDFC on behalf of the assessee and the assessee has repaid the amount to the HDFC. He has referred the details of the payment made by the assessee as well as by the HDFC at Page Nos. 135,137,138 156 of the paper book. He has also referred the details and statement of accounts whereby the assessee has repaid the amount to HDFC. On the other hand, the learned DR has relied upon the order of the lower authorities and submitted that when the assessee failed to prove the actual payment of the property tax then the deduction u/s 23 cannot be allowed. 13. We have considered the rival con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DR has relied upon the orders of the lower authorities and submitted that when the assessee has not carried out any business during the period under consideration then the claim of the assessee as a business loss not allowable. He has further contented that against the income from house property whatever expenditure is allowable has been prescribed u/s 23 24 of the Income Tax Act and therefore, there is no scope of any other expenditure to be allowed. 16. We have considered the rival contentions and relevant record. It is not disputed that the expenditure claimed by the assessee has been incurred for maintaining the status of the company and for discharging the statutory obligation by the company. The Hon ble Calcutta High Court in the case of CIT vs. Ganga Properties Ltd (supra) has held in the similar facts and circumstances as under: In out view, a limited company, even if it does not carry on business but it derives income from other sources has to maintain its establishment for complying with statutory obligations so long it is in operation and its name is not struck off the register or unless the company is dissolved which means cessation of all corporate activit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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