MANGESH RAMESH ANNACHHATRE,,PUNE vs. DEPUTY COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE -1 (1),, PUNE

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ITSSA 108/PUN/2019Status: DisposedITAT Pune16 January 2023AY 2016-177 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal dismissed Ground No. 1 concerning the Jangli Maharaj Road property. The Tribunal noted that while the assessee claimed the property was partly used for professional purposes and received rent, the specific portion used as an office was not clearly demarcated before the AO, CIT(A), or the Tribunal. The total area of the house was also not specified. Given that the property was partly self-occupied, the CIT(A) rightly restricted the deduction under section 24(b) to Rs. 2,00,000/-, which is the maximum allowable for self-occupied property acquired with borrowed capital after April 1, 1999. The Tribunal allowed Ground No. 2 concerning the Sudatta Sankul property. The Tribunal agreed with the assessee's interpretation of the 'pre-construction period' as defined by the CBDT, which ends on March 31 immediately prior to the date of acquisition. Since possession was received in December 2015, the preceding March 31 was March 31, 2015. Therefore, the assessee was rightly entitled to claim the full interest amount of Rs. 4,24,363/- with reference to this property. The appeal was partly allowed.

What were the facts?

The assessee, Mangesh Ramesh Annachhatre, filed an appeal against the order of the CIT(A)-11, Pune, dated May 17, 2019, which stemmed from an assessment order passed by the AO on December 18, 2018, under section 143(3) r.w.s 153A for Assessment Year 2016-17. The assessee, a Cost Accountant, received consultation fees and office rent from Worldwide Oilfield Machine INC, USA. The dispute concerns the disallowance of housing loan interest. For a property at Jangli Maharaj Road, Pune, the assessee claimed Rs. 2,43,480/- as interest, stating it was partly used for professional purposes and partly for self-occupation. The AO treated the rent as business income. The CIT(A) allowed interest deduction up to Rs. 2,00,000/-. For a property at Sudatta Sankul, Sinhagad Road, Pune, possession was received in December 2015. The assessee claimed Rs. 4,24,363/- as interest for the full financial year 2015-16, treating it as deemed let out. The AO treated it as self-occupied, and the CIT(A) allowed deduction for December 2015 to March 2016 on a proportional basis, treating the rest as pre-construction interest.

What were the issues?

1. Whether the CIT(A) erred in disallowing part of the housing loan interest (Rs. 43,480/- out of Rs. 2,43,480/-) claimed for the property at Jangli Maharaj Road, Pune, when the assessee claimed it was partly used for professional purposes and partly for self-occupation, and therefore, the full interest should be allowed as deduction. - Assessee's contention: The property was partly used for professional purposes, and rent was received, entitling the assessee to deduct the entire interest paid on the housing loan. - Revenue's contention: Relied on the orders of the lower authorities. 2. Whether the CIT(A) erred in treating interest paid for the property at Sudatta Sankul, Sinhagad Road, Pune, during April 1, 2015, to December 8, 2015, as pre-construction period interest and allowing only one-fifth of it, instead of the total interest paid for the period, given that the pre-construction period, as per the explanation to Section 24, ends on March 31, 2015. - Assessee's contention: The pre-construction period ends on March 31, 2015, as per the explanation to Section 24 and CBDT FAQs, and thus the full interest paid for the period April 15th to December 8th, 2015, should be allowed. - Revenue's contention: Relied on the orders of the lower authorities.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 153A,Section 24(b)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, PUNE BENCHES “A” :: PUNE

Before: SHRI S.S.GODARA & DR. DIPAK P. RIPOTE

For Respondent: Shri Deepak Garg – DR
Hearing: 20/10/2022Pronounced: 16/01/2023

आयकर अपीलीय अिधकरण “ए” �ायपीठपुणेम�। IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCHES “A” :: PUNE BEFORE SHRI S.S.GODARA, JUDICIAL MEMBER AND DR. DIPAK P. RIPOTE, ACCOUNTANT MEMBER आयकरअपीलसं. / IT(SS)A No.108/PUN/2019 िनधा�रणवष� / Assessment Year : 2016-17 Mangesh Ramesh Annachhatre, The DCIT, Central Circle- 1206/13/B, Sarswati Sadan, V 1(1), Pune. Muncipal Colony, J.M.Road, s Pune – 411004. PAN: AAWPA 8999 E Appellant/ Assessee Respondent /Revenue Assessee by Shir Sandeep J.Sathe – AR Revenue by Shri Deepak Garg – DR Date of hearing 20/10/2022 Date of pronouncement 16/01/2023 आदेश/ ORDER PER DR. DIPAK P. RIPOTE, AM: This appeal filed by the Assessee is directed against the order of ld.Commissioner of Income Tax(Appeals)-11,Pune dated 17.05.2019 emanating from assessment order of Assessing officer dated 18.12.2018 under section 143(3) r.w.s 153Aof the I.T.Act, 1961 for the A.Y.2016-17. The Assessee has raised the following grounds of appeal: “1. Learned CIT(A) erred in disallowing part amount of Rs.43,480/- of housing loan interest paid(out of total Interest paid Rs.2,43,480/-) for house property at Jangli Maharaj Road, in spite of the facts that Assessee is staying at this place and part of the house was rented and getting rent for the same property. Under this circumstances, full interest claimed be allowed as deduction.

IT(SS)A No.108/PUN/2019 Mangesh Ramesh Annachhatre[A]

2.

The Learned CIT(A) has erred in treating interest paid for House Property at Sudatta Sankul, Sinhagad Road, Pune, during the period 01.04.2015 to 08.12.2015 as pre- construction period interest and allowing only One fifth interest instead of total interest paid for the period April 15th to 8th December 2015 and vide explanation to Section 24, preconstruction period ends on 31.03.2015. As per Explanation to section 24, preconstruction period is period prior to previous year in which property has been acquired or constructed. This view is also taken by income tax department though FAQ’s issued on this point.” 2. Brief facts: The assessee is a Cost Accountant and has received consultation fee of Rs.24,00,000/- from Worldwide Oilfield Machine INC, USA. Assessee has also received office rent of Rs.37,500/- per month from Worldwide Oilfield Machine INC, USA. The assessee claimed that part of his residential house which is at Jangli Maharaj Road, Pune was exclusively used for the professional purposes and remaining house was used for residential purpose. Accordingly, assessee calculated income from house property and claimed deduction of interest amount of Rs.2,43,480/- on account of interest paid on housing loan. The Assessing Officer(AO) treated the receipt of income of rent of Rs.37,500/- per month as business income. The ld.CIT(A) accepted assessee’s contention partly and held that since the property is also used for self-occupation, the interest was allowed as deduction as per section 24(b) up to Rs.2,00,000/-. Aggrieved by the same, assessee has filed appeal before this Tribunal i.e. the first ground of appeal.

IT(SS)A No.108/PUN/2019 Mangesh Ramesh Annachhatre[A] 2.1 Assessee also owns a property at Sinhgad Road, Pune. The assessee received possession of the property on December, 2015. The assessee has claimed interest amount of Rs.4,24,363/- as deduction on account of interest paid on borrowed capital. The assessee also offered deemed rent for the said property for the period December, 2015 to March, 2016. The AO treated this property as self-occupied property and accordingly, calculated the deduction under section 24 of the Act. Aggrieved by the same, the assessee filed appeal before the ld.CIT(A).

3.

The ld.CIT(A) held that the AO was wrong in treating the property at Sinhagad Road, Pune as self-occupied. However, since the possession of the said property was received in December, 2015 ld.CIT(A) directed the AO to allow the interest as deduction under section 24 of the Act for the period December, 2015 to March, 2016 on proportional basis. The remaining amount was treated as pre- construction loan and 1/5th of it was allowed as deduction. Aggrieved by the same, the assessee filed appeal before this Tribunal.

4.

The ld.AR submitted that the property at 1206,-13B, Saraswati Sadan, Jangli Maharaj Road, Pune - 411004 was also used for professional purpose and assessee has show rent of Rs.37,500/- per month, the assessee was entitled for deduction of entire interest paid

IT(SS)A No.108/PUN/2019 Mangesh Ramesh Annachhatre[A] on housing loan of Rs.2,43,280/-. The ld.Authorised Representative(ld.AR) of the assessee submitted that the other property at i.e. Sudatta Sankul, Flat No.602, Sinhagad Road, Pune – 411030 was shown as deemed let out for the period December, 2015 to March, 2016. Assessee claimed interest on housing loan for the entire year F.Y. 2015-16 of Rs.4,24,363/- as deduction under section 24 of the Act. The ld.AR relied on the guidance note issued by CBDT regarding computation of Income from House Property. The ld.AR read out the relevant portion to explain the meaning of the word “pre-construction period”.

5.

The ld.DR relied on the orders of Lower Authorities.

6.

We have heard both the parties and perused the records. Ground No.1 : It is observed that as per the terms of the letter issued by M/s.Worldwide Oilfield Machine INC, USA which is at page no.14 of the paper book filed by the assessee. The Worldwide Oilfield Machine INC, USA had appointed assessee as consultant. It is specifically mentioned in the said letter that assessee would be working from his home for which he is expected earmark a specific portion of his own house. As per the said letter assessee was entitled to receive consultation fee of Rs.2,00,000/- per month, office rent of Rs.37,500/- per month and Car rent of Rs.15,000/- per month + reimbursement of expenses. Accordingly, the assessee has shown

IT(SS)A No.108/PUN/2019 Mangesh Ramesh Annachhatre[A] income from house property with reference to the house at 1206,- 13B, Saraswati Sadan, Jangli Maharaj Road, Pune – 411004, treating the said premises as partly self-occupied and partly rented. However, neither before the AO nor before the ld.CIT(A), the assessee has specifically pointed out how much portion of the total area of the house was used as office. Even before us, assessee has not specifically mentioned how much of the area is occupied as office. Even the total area of the house has not been specified anywhere. In these facts and circumstances, ld.CIT(A) has restricted the claim of the assessee for interest on borrowed capital to Rs.2,00,000/- which is allowable for self-occupied house property out of total interest of Rs.2,43,280/-. It is a fact that assessee has partly occupied the premises as self-occupied house property and partly for the purpose of his occupation. As per section 24(b), where the property has been acquired, constructed, repaired with borrowed capital and the property is self-occupied, the deduction shall not exceed Rs.2,00,000/-, where the capital borrowed was after 01.04.1999. In this case, assessee claimed total interest of Rs.2,43,280/- as deduction. However, since the specific sq.fts for which rent has been charged has not been explained by the assessee, in these facts, since remaining part of the house property was self- occupied, the ld.CIT(A) has rightly restricted the deduction under

IT(SS)A No.108/PUN/2019 Mangesh Ramesh Annachhatre[A] section 24(b) to Rs.2,00,000/-, accordingly, the Ground No.1 of the assessee is dismissed.

Ground No.2 : The possession of the Property at i.e. Sudatta Sankul, Flat No.602, Sinhagad Road, Pune – 411030was received in December, 2015 assessee had claimed interest on housing loan for the full year of Rs.4,24,363/-. The assessee has relied on the CBDT guideline note to interpret the word “pre-construction period”. The word “pre-construction period” has been explained by the CBDT as under : “Pre-construction period is the period commencing from the date of borrowing of loan and ends on earlier of the following:  Date of repayment of loan; or  31st March immediately prior to the date of completion of the construction/acquisition of the property.” Thus, CBDT has explained pre-construction period means 31st March immediately prior to the date of completion of the construction/acquisition of the property. In this case, the possession of the property was received in December, 2015. Therefore, 31st March immediately prior to the date of acquisition, in this case, acquisition was in December, 2015, will be 31st March, 2015. Therefore, the assessee has rightly claimed deduction of interest amount of Rs.4,28,363/- with reference to the house property at i.e. Sudatta Sankul, Flat No.602, Sinhagad Road, Pune – 411030. Thus, the Ground No.2 of the appeal is allowed.

IT(SS)A No.108/PUN/2019 Mangesh Ramesh Annachhatre[A]

7.

In the result, appeal of the Assessee is Partly Allowed.

Order pronounced in the open Court on 16th January, 2023.

Sd/- Sd/- (S.S.GODARA) (DR. DIPAK P. RIPOTE) JUDICIAL MEMBER ACCOUNTANT MEMBER पुणे / Pune; �दनांक / Dated : 16th Jan, 2023/ SGR* आदेशक��ितिलिपअ�ेिषत / Copy of the Order forwarded to : अपीलाथ� / The Appellant. 1. ��यथ� / The Respondent. 2. 3. The CIT(A), concerned. 4. The Pr. CIT, concerned. 5. िवभागीय�ितिनिध, आयकर अपीलीय अिधकरण, “ए” ब�च, पुणे / DR, ITAT, “A” Bench, Pune. गाड�फ़ाइल / Guard File. 6. आदेशानुसार / BY ORDER, // TRUE COPY // Senior Private Secretary आयकर अपीलीय अिधकरण, पुणे/ITAT, Pune.

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