MUTHU DANIEL RAJAN,CHENNAI vs. CIT CORPORATE CIRCLE 1, CHENNAI

आदेश / O R D E R

PER G. MANJUNATHA, AM:

These two cross-appeals filed by the assessee as well as the Revenue

are directed against the order of the Commissioner of Income Tax

(Appeals)-2, Chennai, dated 07.03.2019, and pertains to assessment year

2013-14. The Revenue had also filed one more appeal for the AY 2014-15

against the order of the Commissioner of Income Tax (Appeals)-2, Chennai,

dated 07.03.2019. Since, the facts are identical and issues are common,

for the sake of convenience, these appeals were heard together and are

being disposed off, by this consolidated order.

ITA No.1675/Chny/2019 & ITA No.1727/Chny/2019

No.1675/Chny/2019 for the AY 2013-14:

In view of the above and in view of further grounds that may be advanced, as the circumstances may warrant, in the interest of deliverance of justice, during the course of hearings, it is prayed that the Honourable Commissioner of Income Tax (Appeals) may be pleased to grant suitable relief after considering all the evidences

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and explanations that the Assessee could produce before the Honourable Commissioner of Income Tax (Appeals), during the course of hearing on appeals, on the issues raised in the Assessment Order concerned.

No.1727/Chny/2019 for the AY 2013-14:

The order of the Ld. CIT(A) is contrary to law, facts and circumstances of the case.

1.1 The CIT(A) ought not to have allowed the claim of interest on housing loan in the absence of assessee showing the nexus between the settlement of loan of HDFC Bank with that of the borrowings made from Karvy Finance in respect of OMR property and that too at the rate of 14% per annum.

1.2 The CIT(A) erred in accepting the claim of the assessee and ignoring the fact that the sanctioned letter dated January 2012 of the Karvy Finance was a "Secured Business Loan".

1.3 The CIT(A) ought to have noticed that the sanctioned purpose as well as date of sanction of Karvy Loan is not related to the house property against which the same is being claimed as deduction.

2.1 The CIT(A) erred in accepting the rental agreement dated 28.10.2011 which was a new evidence presented before the CIT(A) during the course of appellate proceedings without affording an opportunity to AO which is in violation of Rule 46A.

2.2 The CIT(A) failed to appreciate that the assessee failed to prove the nexus of the loan with the investment in house with appropriate documentary evidences.

2.3 The CIT(A) erred in ignoring the sworn statement recorded u/s 131 of the Act from the assessee, which has got evidentiary value wherein it was stated by the assessee that he resided in the property in question.

2.4 The CIT(A) erred in relying on the nominal rent offered in the return of income for claiming huge interest as deduction without considering that the assessee was taking shelter u/s.24(b) in respect of the self-occupied property.

3.1 The CIT(A) erred in coming to conclusion that income received from Chennai Metro Rail which is compensation for acquiring the property of the assessee as business income instead of capital gains.

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3.2 The CIT(A) erred in ignoring the sworn statement recorded u/s 131 of the Act from the assessee, in which he had stated that the sale of land of Mudaliyar Kuppam was his personal asset and not business stock in trade. 3.3 The CIT(A) ought not to have allowed the assessee's claim since the assessee failed to furnish any evidence with regard to his business income during the course of assessment proceedings so as to prove his statement that he was in receipt of any business income. 3 .4 The CIT(A) erred in stating that the commission income received in earlier assessment years was accepted by the Assessing Officer, since the principle of res judicata does not apply to the Income Tax proceedings. 4. For these and other grounds that may be adduced at the time of hearing, it is prayed that the order of the Ld. CIT(A) be set aside and that of the AO restored.

filed his return of income for the AY 2013-14 declaring total income of

Rs.1,14,05,810/-, which consist of income from house property, income

from business and income from capital gains. The assessment has been

completed u/s.143(3) of the Act, on 30.03.2016 and determined total

income of Rs.6,03,43,840/- by making additions towards disallowance of

deduction u/s.54F of the Act, for Rs.2,60,54,377/-, disallowance of

deduction u/s.24(b) of the Act, towards interest paid on housing loan on

OMR property, on Besant Nagar property, and additions made under the

head ‘short term capital gains’, towards brokerage & commission received

amounting to Rs.62,94,736/-. The assessee carried the matter in appeal

before the First Appellate Authority, and the Ld.CIT(A) for the reasons

stated in their appellate order dated 07.03.2019, partly allowed appeal filed

by the assessee, where he has deleted additions made towards

disallowance of interest paid on housing loan u/s.24(b) of the Act, and also

additions towards ‘short term capital gains’. However, sustained the

additions made towards disallowance of deduction u/s.54F of the Act.

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Aggrieved by the order of the Ld.CIT(A), the assessee as well as the

Revenue are in appeal before us.

appeal is sustaining additions towards disallowance u/s.54F of the Act,

amounting to Rs.2,60,54,377/-. The fact with regard to the dispute are

that during the FY relevant to the AY 2013-14, the assessee had sold a

property at Kunnakkadu vide Sale Deed dated 07.01.2013, for a

consideration of Rs.3,63,50,450/- and computed long term capital gains of

Rs.2,60,54,377/-. The assessee had claimed deduction u/s.54F of the Act,

towards purchase of new residential house property at Besant Nagar vide

Sale Deed dated 14.10.2011, and claimed deduction for Rs.2,60,54,377/-.

The AO called upon the assessee to furnish necessary evidences to justify

computation of long term capital gains and also deduction claimed u/s.54F

of the Act. In response, the assessee submitted that he had entered into

an agreement to sale in favour of Mrs.S.Lalitha Lakshmi on 28.09.2012 and

has executed Sale Deed in favour of purchaser on 07.01.2013. Since, the

period between agreement to sale and purchase of new asset at Besant

Nagar on 14.10.2011, is less than one year before sale of original asset, he

has claimed exemption u/s.54F of the Act.

5.1 The AO, however, was not convinced with the explanation of the

assessee and according to the AO, deduction claimed u/s.54F of the Act, is

not in accordance with law, because, the assessee has purchased new

house property beyond one year from the date of sale of original asset.

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Although, the assessee claims to have entered into agreement to sale on

28.09.2012, but in the recitals of Sale Deed, there is no specific reference

to agreement to sale. Therefore, the AO opined that so called agreement

to sale is a make belief story to get benefit of deduction u/s.54F of the Act,

and thus, rejected the arguments of the assessee. The AO, further

observed that without prejudice to the above on perusal of the statement

of income filed for the AY 2012-13, it was noticed that the assessee had

already claimed the benefit of exemption u/s.54F of the Act, for residential

house at Besant Nagar and thus, claim of the assessee for the AY 2013-14,

once again, is to evade payment of tax. Therefore, rejected the arguments

of the assessee and disallowed deduction claimed u/s.54F of the Act,

amounting to Rs.2,60,54,377/-.

5.2 The Ld.Counsel for the assessee submitted that there is no dispute

with regard to the fact that the assessee had purchased a new house

property at Besant Nagar on 14.10.2011. It is also not in dispute that the

assessee had sold a property on 07.01.2013, and the same has been

agreed to sale to the purchaser vide agreement to sale dated 28.09.2012.

The AO disbelieved agreement to sale only on the ground that there is no

reference to agreement to sale in the Sale Deed without appreciating the

fact that the law does not mandate reference of any sale agreement in the

Sale Deed. He, further submitted that if you go by date of agreement to

sale and date of purchase of new asset, investment in purchase of new

house property is within one year from the date of sale of original asset and

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thus, the assessee is entitled for deduction u/s.54F of the Act. In this

regard, he relied upon the decision of the Hon’ble Supreme Court in the

case of Sanjeev Lal v. CIT reported in [2014] 365 ITR 389 (SC). As regards,

the observation of the AO with regard to multiple claim of deduction u/s.54F

of the Act, the Counsel submitted that if the claim is in accordance with law

and the amount paid for purchase of new property, is more than the amount

of sale consideration received for multiple properties, then the assessee

can claim the deduction u/s.54F of the Act, for multiple properties, but the

AO without appreciating the relevant facts, simply rejected the arguments

of the assessee and made addition.

5.3 The Ld.DR present for the Revenue supporting the order of the

Ld.CIT(A) submitted that so called agreement to sale filed before the

Ld.CIT(A), is a make belief story and the same was not filed before the AO.

Further, if you go by the recitals of agreement to sale, it seems that it was

not bona fide, because, there was no reference of agreement to sale in the

Sale Deed. Further, the assessee had already claimed deduction u/s.54F

of the Act, for the AY 2012-13, for purchase of property at Besant Nagar.

Therefore, once again claiming deduction u/s.54F of the Act, for very same

property, is not in accordance with law. The Ld.CIT(A) after considering

relevant submissions of the assessee, has rightly sustained the additions

made by the AO and their order should be upheld.

5.4 We have heard both the parties, perused the materials available on

record and gone through orders of the authorities below. There is no

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dispute with regard to the fact that the assessee had sold a property vide

Sale Deed dated 07.01.2013 for a consideration of Rs.3,63,50,450/-. It

was not in dispute that the assessee had purchased a new residential house

property at Besant Nagar on 14.10.2011. It was also not in dispute that

amount paid for purchase of property at Besant Nagar, is higher than the

amount of consideration received for sale of property. According to the AO,

the period between sale of original asset i.e. 07.01.2013 and purchase of

another residential property on 14.10.2011, is more than one year before

the sale of original asset at Kunnakkadu. The AO further was of the opinion

that the assessee had already claimed deduction u/s.54F of the Act, in

respect of sale consideration received towards property in the AY 2012-13,

for purchase of house property at Besant Nagar. Therefore, once again

claiming deduction u/s.54F of the Act, for very same property is not in

accordance with law.

5.5 We have given our thoughtful consideration to the reasons given by

the AO to deny the benefit of deduction u/s.54F of the Act, towards

purchase of residential house property at Besant Nagar and we ourselves

do not subscribe to the reasons given by the AO for simple reason that if

you go by date of purchase of new asset i.e. on 07.01.2013 and date of

agreement to sale for sale of property at Kunnakkadu i.e. on 28.09.2012,

then the period is less than one year before the date of sale of original asset

as prescribed u/s.54F of the Act, and the assessee is entitled for deduction.

In fact, the AO and the Ld.CIT(A) are not in dispute with regard to fact that

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if you go by date of purchase of new asset and date of agreement to sale

for property, it is less than one year before the date of sale of original asset.

However, the AO and the Ld.CIT(A) denied deduction claimed u/s.54F of

the Act, only on the ground that agreement to sale dated 28.09.2012, is

not bona fide. We find that the assessee has filed copy of deed of

agreement dated 28.09.2012, and agreed to sell in favour of Mrs.S.Lalitha

Lakshmi and we find that the parties have set out terms and conditions for

purchase of property. Further, the parties have acted upon the sale

agreement and executed a Sale Deed dated 07.01.2013 in favour of the

purchaser. From the above, what we understood are that the assessee had

entered into an agreement to sale with the buyer on 28.09.2012 and had

executed final Sale Deed on 07.01.2013. Therefore, we are of the

considered view that the AO and the Ld.CIT(A) is erred in not considering

the agreement to sale between the parties to allwo the benefit of deduction

u/s.54F of the Act.

5.6 In so far as the legal position with regard to deduction claimed

u/s.54F of the Act, is concerned, the Hon’ble Supreme Court in the case of

CIT v. Sanjeev Lal (supra) had considered a very similar issue and held that

transfer in relation to capital asset including extinguish of any rights therein

and it has been held that as execution of agreement to sale created a

transfer as defined u/s.2(47) of the Act. It has been adjudicated that the

date of sale agreement is effective date to be considered to enable the

assessee to get the benefit of deduction u/s.54F of the Act. In so far as

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reliance on the decision of the Hon’ble Supreme Court in the case of Suraj

Lamp & Industries Pvt. Ltd. v. State of Haryana & Another reported in

[2012] 340 ITR 1 (SC), we find that immovable property can be legally and

lawfully transferred/conveyed only by a registered deed of conveyance.

Further, as per the Stamps and Registration Act, the title and interest in

the property will not transfer to the buyer unless such transfer is by way of

a deed, as held by the Hon’ble Supreme Court. But, when it comes to the

beneficial provisions of Sec.54F of the Act, what is required to be seen is

whether the assessee has invested consideration for purchase of property

or not? In case, the assessee has satisfied conditions prescribed therein

and invested sale consideration for purchase of residential house property,

then even if some technical lapses like non-registration of agreement to

sale, etc., does not disentitle assessee to claim benefit u/s.54F of the Act,

in case, the assessee proves with evidences that finally he had registered

the property in his favour. In this case, although, the agreement to sale

was not registered, but the final Sale Deed executed in favour of purchaser,

has been registered as required under the law. Therefore, in our considered

view, when the assessee has filed evidences in the form of agreement to

sale and if the agreement to sale date is considered, then the period of

investment in new house property is less than one year before the date of

sale of original asset and thus, in our considered view, the assessee is

entitled for deduction u/s.54F of the Act.

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5.7 In so far as observation of the AO and the Ld.CIT(A) with regard to

multiple deductions in two assessment years, we find that the ITAT Delhi

Bench in the case of ACIT v. Mahinder Kumar reported in 84 taxmann.com

141 (Delhi-Trib.), has considered identical issue and held that capital gains

on sale of house property can be invested in construction/purchase of house

property more than once for same property, if cost of new property is less

than capital gains that arose to aassessee. In this case, on the basis of

details filed by the assessee, we find that amount paid for purchase of new

property at Besant Nagar is much more than the amount of sale

consideration received for transfer of original asset, including the asset sold

in AY 2012-13 and thus, in our considered view, the assessee can claim

deduction u/s.54F of the Act, as long as he or she satisfies other conditions.

Since, the assessee has satisfied all conditions prescribed therein, as per

provisions of Sec.54F of the Act, he is entitled to claim deduction towards

re-investment of sale consideration for purchase of residential house

property. Therefore, we direct the AO to allow deduction u/s.54F of the

Act, as claimed by the assessee and delete additions made towards

disallowance u/s.54F of the Act.

appeal is disallowance of interest claimed on OMR property u/s.24(b) of the

Act. The AO has disallowed interest claimed u/s.24(b) of the Act,

amounting to Rs.73,08,643/- on the ground that the assessee could not

establish nexus between borrowed funds and purchase of house property.

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It was the explanation of the assessee that he had purchased OMR property

for a consideration of Rs.11.52 Crs. and availed loan from HDFC Bank on

20.02.2008 amounting to Rs.11.68 Crs. The assessee further claimed that

he had availed loan from Karvy Finance for Rs.5.50 Crs. on 25.01.2012 to

pre-close HDFC Bank loan. Since, the loan borrowed from Karvy Finance

is for pre-closure of earlier loan availed from HDFC Bank for purchase of

property, interest paid on loan borrowed from Karvy Finance, is eligible for

deduction u/s.24(b) of the Act. In this regard, taken support from CBDT

Circular No.28 dated 20.08.1969.

6.1 The Ld.DR present for Revenue submitted that the Ld.CIT(A) ought

not to have allowed the claim of interest on housing loan claimed to have

received from Karvy Finance in the absence of assessee showing the nexus

between the settlement of loan of HDFC Bank with that of borrowings made

from Karvy Finance in respect of OMR property. The Ld.DR further referring

to loan sanction letter from Karvy Finance, submitted that loan availed from

said financial institutions is a secured business loan, which cannot be

considered as housing loan. The Ld.CIT(A) without appreciating the facts,

simply deleted the additions made by the AO.

6.2 The Ld.Counsel for the assessee referring to sanction letter from

Karvy Finance and also loan statement of HDFC Bank submitted that the

AO never disputed the fact that the assessee has availed loan from HDFC

Bank for purchase of OMR property. He further submitted that the assessee

has availed loan from Karvy Finance by mortgaging OMR property to re-

ITA Nos.1632, 1675 & 1727/Chny/2019 :: 13 ::

pay existing loan with HDFC Bank. The assessee further referring to a letter

from HDFC Bank dated 24.02.2012 submitted that the assessee has closed

loan with HDFC Bank upon receipt from Karvy Finance. The AO without

appreciating the relevant facts, simply made addition.

6.3 We have heard both the parties, perused the materials available on

record and gone through orders of the authorities below. There is no

dispute with regard to the fact that the assessee has availed loan from

HDFC Bank when he had purchased property at Kottivakkam, OMR,

Chennai. It was also not in dispute that the assessee has availed fresh loan

from Karvy Finance to pre-close the loan availed from HDFC Bank, which is

evident from documents submitted by the assessee, where loan proceeds

from Karvy Finance has been used to re-pay existing loan with HDFC Bank.

Since, there is a direct nexus between loan availed from HDFC Bank and

purchase of property at OMR, in our considered view, subsequent loan

taken from Karvy Finance to re-pay existing loan with HDFC Bank, satisfies

the conditions prescribed u/s.24(b) of the Act, and the assessee is entitled

for deduction towards interest paid on loan borrowed from financial

institution. In fact, the CBDT Circular No.28 dated 20.08.1969 has clarified

that if the second borrowing has really been used merely to re-pay the

original loan and this fact is proven to the satisfaction of the AO, the interest

paid on second loan would also be allowed as deduction u/s.24(1)(vi) of

the Act. In this case, the Ld.CIT(A) recorded categorical findings that the

assessee has used second loan from Karvy Finance to re-pay existing loan

ITA Nos.1632, 1675 & 1727/Chny/2019 :: 14 ::

borrowed from HDFC Bank and there is a nexus between loan borrowed

from purchase of property and thus, the assessee is entitled for deduction

towards interest paid on second loan. The findings of facts recorded by the

Ld.CIT(A) is uncontroverted. Hence, we are inclined to uphold the findings

of the Ld.CIT(A) and reject the ground taken by the Revenue.

appeal is disallowance of interest paid on loan borrowed for purchase of

property at Besant Nagar. The AO has disallowed interest claimed

u/s.24(b) of the Act, in respect of house property at Besant Nagar, on the

ground that said property has been used by the assessee for self-

occupation purpose. According to the AO, as per Inspector Report obtained

during the course of assessment proceedings, the assessee was residing at

Besant Nagar property and thus, he had restricted deduction claimed

towards interest to the extent of Rs.1,50,000/- and disallowed balance

amount of Rs.75,60,327/-. On appeal, the Ld.CIT(A) has deleted the

additions made by the AO by holding that the assessee has let out the

property for a monthly rental income of Rs.60,000/- to

Mr.L.Mohansundaram and has also offered rental income for the impugned

assessment year. Therefore, interest if any paid on loan borrowed from

bank for purchase of property is allowable as deduction.

7.1 The Ld.DR submitted that the Ld.CIT(A) erred in appreciating the fact

that the rental agreement dated 28.10.2011, which was a new evidence

presented before the Ld.CIT(A) was not filed before the AO and thus,

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admission of new evidence before the Ld.CIT(A) without providing an

opportunity to the AO, is violation of Rule 46A of Income Tax Rules, 1962.

The Ld.DR further submitted that the Ld.CIT(A) failed to appreciate the fact

that the assessee failed to prove the nexus of loan with the investment in

house property with appropriate documentary evidence. Therefore, the AO

has rightly disallowed interest paid on housing loan.

7.2 The Ld.Counsel for the assessee supporting the order of the Ld.CIT(A)

submitted that the Ld.CIT(A) has recorded categorical findings in light of

evidences filed by the assessee that house property at Besant Nagar was

let out and rental income from the said property has been offered under

the head ‘income from house property’. The Ld.Counsel for the assessee

further submitted that the assessee had also filed necessary evidences to

prove that he had borrowed loan from bank for purchase of property. In

fact, the AO never disputed the fact that the assessee has availed loan from

bank for purchase of property. However, disallowed interest claimed

u/s.24(b) of the Act, only on the ground that house property was self-

occupied, but was not let. The Ld.CIT(A) after considering relevant facts

has rightly deleted the additions made by the AO and their orders should

be upheld.

7.3 We have heard both the parties, perused the materials available on

record and gone through orders of the authorities below. The Ld.CIT(A) had

recorded categorical findings in his appellate order at Para No.4.3.1 that

the assessee had furnished a rental agreement dated 28.10.2011 entered

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into with Mr.L.Mohansundaram, in connection with Besant Nagar property

to prove that the property was in fact let out during the previous year

relevant to the AY 2013-14. The Ld.CIT(A) further noted that as per recitals

on rental agreement, the assessee had let out impugned property for

monthly rent of Rs.60,000/- and has also offered rental income for the AY

2012-13 itself. The assessee had also offered rental income for the AY

2013-14. Therefore, the Ld.CIT(A) came to conclusion that when the

property has been let out and rental income is offered to tax, under the

head ‘income from house property’, then interest paid on loan borrowed for

acquisition of property should be allowed as deduction u/s.24(b) of the Act.

The Ld.CIT(A) further noted that the observation of the AO on the basis of

report of Inspector obtained in the course of the assessment proceedings

for the AY 2016-17, has no relevance to decide whether the property has

in fact let out for the AY 2013-14 or not. In our considered view, the

findings and facts recorded by the Ld.CIT(A) is uncontroverted with any

evidences except stating that there is a violation of Rule 46A of Income Tax

Rules, 1962. In our considered view, the assessee has placed all evidences

to prove that rental agreement was filed before the AO and also rental

income has been offered for earlier assessment years also. Therefore, we

are of the considered view that there is no error in the reasons given by

the Ld.CIT(A) to delete the additions made towards disallowance of interest

u/s.24(b) of the Act and thus, we are inclined to uphold the findings of the

Ld.CIT(A) and reject the ground taken by the Revenue.

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appeal is deletion of additions towards ‘short term capital gains’. The AO

has made addition of Rs.62,94,736/- on the ground that the assessee

claimed exemption on sale of his own land and thereby concluded that

business profit claimed by the assessee needs to be treated as ‘short term

capital gains’. It was the arguments of the assessee that, he was involved

in the business of commission & brokerage and therefore, income derived

from commission business has rightly offered to tax under the head ‘income

from business or profession’.

8.1 The Ld.DR submitted that the Ld.CIT(A) erred in coming to conclusion

that income received from Chennai Metro Rail which is compensation for

acquiring property of the assessee as ‘business income’ instead of ‘capital

gains’. The Ld.DR further submitted that the Ld.CIT(A) erred in ignoring

the sworn statement recorded u/s.131(1) of the Act, of the assessee in

which he had stated that the sale of land was a personal asset and was not

come under stock in trade. The Ld.CIT(A) without appreciating the facts

simply deleted the additions made by the AO.

8.2 The Ld.AR, on the other hand, supporting the order of the Ld.CIT(A)

submitted that the assessee is in the business of real estate and derived

commission & brokerage income. The assessee has offered commission &

brokerage income under the head ‘income from business’ even for earlier

assessment years and Department has accepted. However, the AO has

taken a different view for the impugned assessment year without there

ITA Nos.1632, 1675 & 1727/Chny/2019 :: 18 ::

being any change in facts for the current assessment year. The Ld.CIT(A)

after considering relevant facts has rightly concluded that commission &

brokerage income is assessable under the head ‘income from business’.

8.3 We have heard both the parties, perused the materials available on

record and gone through orders of the authorities below. There is no

dispute with regard to the fact that the assessee has admitted commission

income apart from real estate deals for the earlier assessment years and

the Department has accepted the claim of the assessee. The AO has taken

a different view for the impugned assessment year without there being any

change in facts and circumstances of the case. Therefore, we are of the

considered view that there is no error in the reasons given by the Ld.CIT(A)

to direct the AO to assess commission & brokerage income under the head

‘income from business and profession’ as against income assessed by the

AO under the head ‘short term capital gains’ and thus, we are inclined to

uphold the findings of the Ld.CIT(A) and reject the ground taken by the

Revenue.

No.1675/Chny/2019 for the AY 2013-14 is allowed & appeal filed by the

Revenue in ITA No.1727/Chny/2019 is dismissed.

ITA No.1632/Chny/2019 for the AY 2014-15:

ITA Nos.1632, 1675 & 1727/Chny/2019

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2.1 The Ld. CIT(A) erred in giving relief to the assessee by deleting the interest disallowed u/s 24(b) of the Act on his self-occupied property.

2.2 The CIT(A) erred in admitting fresh evidence viz., the rental agreement dt.05.12.2013 which was not produced during the course of assessment proceedings before the AO.

2.3 The CIT(A) erred in not appreciating the sworn statement recorded u/s 131 of the Act from the assessee on 31.12.2016 and the Inspector's enquiry report dt.20.12.2016 at the time of which the assessee had not produced the above rental agreement.

2.4 The CIT(A) erred in giving relief to the assessee by deleting the interest based on fresh evidence submitted for the first time before the CIT(A) without giving opportunity to the AO under Rule 46A of the Income tax Rules, for verifying the said claim of the assessee based on evidences filed afresh during appellate proceedings.

2.5 The CIT(A) failed to appreciate that the assessee had claimed a total payment of interest at Rs.1,90,37,045/- during the year under consideration and had claimed the entire interest payment as deduction u/s 24(b) on three different properties but had declared only Rs.6,47,44,374/- as the loan obtained from Federal Bank for the purpose of housing, the rest being business loan in his balance sheet.

2.6. The CIT(A) failed to appreciate that no TDS was deducted on the payment received of Rs.7,20,000/- as rental income, which goes to prove that the assessee had offered this notional income only to claim deduction u/s24(b) of the Act.

3.1 The CIT(A) erred in deleting the disallowance of interest claimed at Rs.1,15,70,736/- u/s 24(b) of the Act against the Kottivakkam (OMR) property merely relying on the Board's Circular, in the absence of proving any nexus between the borrowed capital and the let out property at OMR.

3.2 The CIT(A) erred in accepting new evidences claiming that the loan availed from HDFC was foreclosed and another loan from Karvy finance was availed without affording any opportunity to the AO.

3.3 The CIT(A) erred in giving relief to the assessee by deleting the interest based on fresh evidence submitted for the first time before the CIT(A) without giving opportunity to the AO under Rule 46A of the Income tax Rules, for verifying the said claim of the assessee based on evidences filed afresh during appellate proceedings.

3.4 The CIT(A) failed to appreciate that the assessee had claimed deduction u/s 24(b) of the Act in respect of rental income received from M/s. Maples ESM Technology located at Door No.284/1, OMR, Kandanchavadi, Perungudi, Chennai- 96 to the tune of Rs.57,85,368/-and from Trishla Apparels Private Limited located at Door No. 152, North Usman Road, T.Nagar, Chennai-17 to the tune of Rs.57,85,367/- and that these interests were paid to two parties in each case being Federal Bank and Karvy Finance.

3.5 The CIT(A) ought to have appreciated that the assessee in his balance sheet had stated that the loan received from Federal Bank only to be housing loan, the rest being business loan and therefore the claim of the assessee in taking shelter

ITA Nos.1632, 1675 & 1727/Chny/2019 :: 20 ::

u/s 24(b) in respect of the entire interest payment on different properties cannot be true. 4. For these and other grounds that may be adduced at the time of hearing, it is prayed that the order of the Ld. CIT(A) be set aside and that of the AO restored.

Nos.2.1 to 2.6 of the Revenue’s appeal is disallowance of interest u/s.24(b)

of the Act towards Besant Nagar property at Rs.74,66,310/-. We find that

an identical issue had been considered by us in ITA No.1727/Chny/2019 for

the AY 2013-14, where we have dealt with the issue of disallowance of

interest u/s.24(b) of the Act, in respect of Besant Nagar property and held

that the assessee was able to establish nexus between interest paid on loan

borrowed for purchase of property. The reasons given by us in the

preceding paragraph Nos.7 to 7.3 in ITA No.1727/Chny/2019 for the AY

2013-14 shall, mutatis mutandis, apply to this appeal, as well. Therefore,

for similar reasons, we are inclined to uphold the findings of the Ld.CIT(A)

and reject the ground taken by the Revenue.

Nos.3.1 to 3.5 of the Revenue’s appeal is disallowance of interest u/s.24(b)

of the Act, in respect of OMR property. We find that an identical issue had

been considered by us in ITA No.1727/Chny/2019 for the AY 2013-14,

where we have dealt with the issue of disallowance of interest u/s.24(b) of

the Act, in respect of OMR property and held that the assessee was able to

establish nexus between interest paid on loan borrowed for purchase of

property. The reasons given by us in the preceding paragraph Nos.6 to 6.3

ITA Nos.1632, 1675 & 1727/Chny/2019 :: 21 ::

in ITA No.1727/Chny/2019 for the AY 2013-14 shall, mutatis mutandis,

apply to this appeal, as well. Therefore, for similar reasons, we are inclined

to uphold the findings of the Ld.CIT(A) and reject the ground taken by the

Revenue.

for the AY 2014-15 is dismissed.

No.1675/Chny/2019 for the AY 2013-14 is allowed & appeal filed by the

Revenue in ITA No.1727/Chny/2019 is dismissed and appeal filed by the

Revenue in ITA No.1632/Chny/2019 for the AY 2014-15 is also dismissed.

Order pronounced on the 31st day of January, 2023, in Chennai.

Sd/- Sd/- (वी. दुगा� राव) (जी. मंजूनाथा) (G. MANJUNATHA) (V. DURGA RAO) लेखा सद�य/ACCOUNTANT MEMBER �याियक सद�य/JUDICIAL MEMBER चे�ई/Chennai, �दनांक/Dated: 31st January, 2023. TLN आदेश क� �ितिलिप अ�ेिषत/Copy to: 1. अपीलाथ�/Appellant 4. आयकर आयु�/CIT 2. ��यथ�/Respondent 5. िवभागीय �ितिनिध/DR 3. आयकर आयु� (अपील)/CIT(A) 6. गाड� फाईल/GF