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Income Tax Appellate Tribunal, DELHIBENCH ‘E’, NEW DELHI
Before: Dr. B. R. R. KumarSh. Yogesh Kumar US
Per Dr. B. R. R. Kumar, Accountant Member:
The present appeal has been filed by the Revenue against the order of ld. CIT(A)-36, New Delhi dated 17.01.2019.
Following grounds have been raised by the Revenue:
“1. The ld. CIT(A) was correct in allowing the claim of deduction u/s 24b without the assessee having met the condition precedent?
Whether the ld. CIT(A) was correct in admitting the additional evidence without according the opportunity to Assessing Officer which is mandate for Rule 46A of the Income Tax Rules, 1962.”
The assessee filed return of income on 29.03.2017 declaring total income of Rs. 2,23,76,530/-.
ITA No. 3457/Del/2019 2 Nirvan Agro Packaging Pvt. Ltd. 4. The AO found that the assessee has Rs.1,57,44,519/- outstanding as interest paid to "Others". As the assessee has not submitted any documents before the AO disallowed the "Interest paid to others" during the year amounting to Rs.1,57,44,519/-.
The ld. AR has submitted before the ld. CIT(A) that there is no other income. The assessee company derives income from house property only. The ld. AR of the assessee has stated before the ld. CIT(A) that as per the balance sheet the company has share capital of Rs.37.01 crore and had raised loan from the financial institution of Rs.148 crores. Out of the available funds of the assessee company has invested in the purchase of land and construction over the land of Rs.68,88,94,499/-. As per the profit and loss account the assessee company has paid interest of Rs.1,57,44,518/- out of which Rs.1,54,51,412/- has been paid on the loan raised for the purchase of land and construction of building. The balance amount of interest of Rs.2,93,106/- is interest on the amount of car loan. The AR has submitted before the ld. CIT(A) that as per the provision of section 24b the assessee company is entitled to deduction out of rental income of interest paid on the amount used for the purchase and construction of the building from where rental income is derived. The AR has submitted before the ld. CIT(A) that the assessee company is claiming interest only on the amount raised on loan for the purposes of building. The ld. CIT(A) held that the assessee company has only rental income as the source of income as per the computation filed with the return of income.
ITA No. 3457/Del/2019 3 Nirvan Agro Packaging Pvt. Ltd. 6. The assessee company received rent of Rs.4,24,63,020/- and out of which deduction u/s 24b of Rs.1,54,51,412/- was claimed besides statutory deduction on account of repairs etc.
Provisions of Section 24b reads as under:
“24. Income chargeable under the head "Income from house property" shall be computed after making the following deductions, namely:—
(a) a sum equal to thirty per cent of the annual value; (b) where the property has been acquired, constructed, repaired, renewed or reconstructed with borrowed capital, the amount of any interest payable on such capital:
Provided that in respect of property referred to in sub-section (2) of section 23, the amount of deduction shall not exceed thirty thousand rupees:
Provided further that where the property referred to in the first proviso is acquired or constructed with capital borrowed on or after the 1st day of April, 1999 and such acquisition or construction is completed within five 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 constructed, as reduced by any part thereof allowed as deduction under any other provision of this Act, shall be deducted under this clause in equal installments for the said previous year and for each of the four immediately succeeding previous years:
ITA No. 3457/Del/2019 4 Nirvan Agro Packaging Pvt. Ltd.
Provided also that no deduction shall be made under the second proviso unless the assessee furnishes a certificate, from the person to whom any interest is payable on the capital borrowed, specifying the amount of interest payable by the assessee 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.”
Before us the revenue raised a ground that the AO was not given an opportunity in accordance with Rule 46A of the Income Tax Rules, 1962.
We find that while the Assessment Order was Best Judgment Assessment u/s 144 and the ld. CIT(A) has not called for any remand report from the AO. The ld. CIT(A) adjudicated based on evidences which were not before the AO and the AO was not given an opportunity to examine the same. In view of the facts on record, we deem it fit to remand the matter to the file of the ld. CIT(A) directing to afford an opportunity to the Assessing Officer in accordance with the provisions of Rule 46A to furnish their comments and then take a decision in accordance with the provisions of Income Tax Act.
ITA No. 3457/Del/2019 5 Nirvan Agro Packaging Pvt. Ltd. 10. In the result, the appeal of the Revenue is allowed for statistical purpose. Order Pronounced in the Open Court on 18/01/2023.
Sd/- Sd/- (Yogesh Kumar US) (Dr. B. R. R. Kumar) Judicial Member Accountant Member Dated: 18/01/2023 *Subodh Kumar, Sr. PS* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR