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Facts
The assessee claimed a deduction for interest on a home loan, partly under Section 24(b) and the balance (Rs.39,43,516) under Section 57. Additionally, commission expenses of Rs.11,59,536 were claimed under Section 57. The Assessing Officer disallowed the Section 57 interest, asserting the loan was for house property, and the commission expenses due to lack of genuineness and inability to produce recipients.
Held
The Income Tax Appellate Tribunal upheld the orders of the lower authorities, confirming the disallowance of the interest claimed under Section 57, as it was not incurred to earn income from other sources but for house property. The tribunal also confirmed the disallowance of the non-genuine commission expenses, finding no infirmity in the CIT(A)'s findings.
Key Issues
1. Whether interest on a house property loan, beyond the Section 24(b) limit, can be claimed as a deduction under Section 57. 2. Genuineness of commission payments claimed as expenditure under Section 57 without adequate supporting evidence or production of payees.
Sections Cited
143(2), 142(1), 24(b), 57, 24, 131
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH ‘F’: NEW DELHI
(Assessment Year: 2013-14) Vivek Sheel Aggarwal, vs. DCIT, Circle 23 (1), D – 107, Anand Niketan, New Delhi. New Delhi – 110 021. (PAN : ADQPA3242B) (APPELLANT) (RESPONDENT) ASSESSEE BY : None REVENUE BY : Ms. Harpreet Kaur Hansra, Sr. DR Date of Hearing : 12.02.2025 Date of Order : 09.04.2025 O R D E R
PER S.RIFAUR RAHMAN,AM:
This appeal has been filed by the assessee against the order of ld. Commissioner of Income-tax (Appeals)-8, New Delhi dated 17.01.2019 for the Assessment Year 2013-14.
We observed that the case was filed by the assessee on 28.02.2019 and since the date of listing of the appeal on several occasions, the ld. AR of the assessee has taken adjournments. We observed that the matter is being listed for 14 times earlier and filed in the year 2019. Accordingly, we proceeded to hear the case with the assistance of ld. DR of the Revenue.
Brief facts of the case are, the return of income was filed on 03.08.2013 declaring total income of Rs.52,64,650/-. The case was selected for scrutiny and notices u/s 143(2) and 142(1) of the Income-tax Act, 1961 (for short ‘the Act’) along with questionnaire were issued and served on the assessee. In response, ld. AR of the assessee attended and filed the requisite informations and documents.
During assessment proceedings, Assessing Officer observed that assessee has claimed loss of house property u/s 24(b) of the Act to Rs.1,50,000/- being interest paid on loan taken for self occupied house property situated at D-107, Anand Niketan, New Delhi. The AO asked the assessee to give the complete details of loan taken for the aforesaid property along with necessary documents pledged with the bank at the time of sanction of the loan. The assessee furnished a copy of home loan sanctioned letter. AO observed from the sanctioned letter that the loan of Rs.4,00,00,000/- was sanctioned by the bank on 28.09.2011 at interest 10.75% with floating rate for 185 months EMI. He further observed that during the year under consideration, the assessee paid interest totaling to Rs.40,93,5l6/-. He further observed that out of total interest paid, Rs.1,50,000/- has been 24(b) of the Act and the balance amount of Rs.39,43,516/- was claimed as deduction u/s 57 of the Act.
AO further noted that as per provision of section 24, the assessee can claim interest on self occupied house property to the extent of Rs1,50,000/- only and in the instant case, the assessee not only claimed Rs.1,50,000- as interest being house property loss but also claimed a further deduction of Rs.39,43,516/- u/s 57 of the Act. He observed that this treatment of the assessee is against the intention of the law and the deduction u/s 57 is allowable in the cases where the expense has been made to earn income in the nature of income of other sources.
In response, the assessee submitted the justification of his claim. However, AO observed that assessee failed to give any documentary evidence which can prove that the loan taken was not utilized for the construction of the house property for which house property loss u/s 24(b) has been claimed and assessee also not furnished any supporting documents which can prove that the purpose of such loan was to earn income and not for the purpose of construction of the property. The act of the assessee in itself is an evidence that the loan was taken for the construction of the house and deduction u/s 24(b) has rightly been claimed thereon. However, it is not admissible to claim the balance amount of interest on home loan u/s 57. In view of the above, the interest 57 amounting to Rs.39,43,5l6- is disallowed and added to the total income of the assessee.
AO observed that the assessee is a director of Shri Parasram Holdings Pvt. Ltd. and getting salary therefrom. He observed that besides this, during the year, he worked as commission agent and received commission from General Insurance Company Limited amounting to Rs.17,69,548/-. Out of the total commission received, he has claimed payment of commission amounting to Rs.11,59,536/- to 8 persons. From the details of commission paid to 8 persons, AO observed that assessee transferred major amount of commission to two persons i.e. Dushyant and Sumit Hooda of Rs.6,12,891/- & Rs.3,83,752/- respectively. Accordingly, AO asked the assessee to produce the above said two persons for further examination regarding the genuineness of the claim of having paid the amount. In response, assessee submitted letter dated 20.01.2016 stating that he is trying to obtain the details of present addresses and copy of PAN card and confirmations from the persons to whom commission has been paid and the same will be submitted at the time of next date of hearing. Besides the above statement, AO observed that no supporting documents in support of commission paid to any of the aforesaid parties have been furnished. On 28.01.2016, ld. AR of the assessee showed his inability to produce the aforesaid persons for examination. Accordingly, summons u/s 131 was issued to the aforesaid two persons. In response to the summons, Shri Sumit Hooda appeared on 08.02.2016 and recorded his statement. AO further issued summons u/s 131 on 29.01.2016 on the other person, Shri Dushyant but he did not appear and the assessee also showed his inability to produce him. In view of the above, AO observed that it is established that the transaction shown to have made by the assessee in respect of payment of commission with the aforesaid parties are not genuine, hence he disallowed and added the same to the total income of assessee. Accordingly, he assessed the income at Rs.1,03,67,702/- by making additions of Rs.39,43,516/- u/s 57 of the Act and disallowance of payment of commission amounting to Rs.11,59,536/-claimed as expenditure u/s 57 of the Act.
Aggrieved with the above order, assessee preferred an appeal before the ld. CIT (A)-8, New Delhi. Assessee filed written submissions before the ld. CIT (A). After considering the written submissions of the assessee, ld. CIT (A) confirmed the order of the AO by observing as under :- “4. DECISION : The contention of the Appellant has been considered and the order of AO has also been perused. It is seen from the order of the AO that during the course of assessment proceedings, the AO observed that the appellant had claimed allowance of interest expense us 24(b) of Rs 1,60,000/- as well as Rs, 39,43,516/ u/s 67 of the Act during the year under consideration, In order to ascertain the true nature of the said deduction and its evaluation on merits, the assessee was asked to produce relevant documentary evidence(s) In support of its claim vide notice u/s 142(1) of the Act dated 30-12-2016, wherein various details were submitted by the appellant and which in his view were sufficient to prove the and purpose of the loan taken from Axis Bank. However, the AO after 57 of the Act of Rs.39,43,516/-.
4. During the course of appellate proceedings, the appellant had filed all the documents which were field with the AO as well. These documents have been examined below :- S.No. Nature of document Observation of the undersigned 1 Loan sanction letter of The purpose of loan is ‘Refinacne Axis Bank Property’. The category of loan is ‘Power Home’. The rate of interest is one which is applicable to home loans only, which is one of the cheapest loans in the category of various types of loans. The co-applicant’s name is “Shri Paras Ram Holding Pvt. Ltd. 2 Certificate issued by Axis Axis Bank has issued a certificate which Bank, showcasing the bifurcates principal and interest principal and interest payments and also entities the borrower payments made for the to take requisite deductions u/s 24(b) and complete Financial Year 80C of the Act. under consideration. 3 The amount of loan The appellant has only submitted the received by the appellant money trail, i.e. movement of loan in one bank account money received from Axis Bank to bank which is transferred out to account of the co-applicant. the account of the co- applicant. It is interesting to note here that the sanction letter only mentions the name of the co-applicant and it nowhere states that the co-applicant in the present case, is or will be empowered to utilize the loan amount as per its own convenience or in its Own business. Had there been such a scenario, then the Axis Bank, in all probabilities would have a loan which was either Loan Against Property' 'Commercial Loan', 'Business Loan', or any other loan (by whatever name called). 4.2 What all the appellant had not submitted: The appellant had not submitted the following information: The copy of the board resolution as passed / recorded in the minutes book of the company, as fund raising has to be considered within the permissible borrowing limits as per the relevant provisions of the Companies Act, 1956 and / or Companies Act, 2013 and their relevant rules made thereunder.
The appellant had not submitted the copy of the loan application form as submitted to the Axis Bank. It is a common practice of the bankers, to include additional names as co-applicants, So that the chances of recoveries in the event of any default / NPA are better. In the absence of the loan applicant form, it is presumed that the co-applicant (.e. the company in which the appellant is a director) is merely for name sake and has no say in taking a call with regard to the utilization money. The appellant did not submit the utilization certificate which is generally Submitted to the bankers, within a stipulated time frame and upon disbursement of the complete loan amount. Further, reference is also drawn to the relevant provisions of section 24(b) of the Act, which are reproduced below: “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 capitol the amount of any interest payable on such capital: ….. ….. ….. 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 capitol 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 o loan taken by the assessee subsequent to the capital borrowed, for the purpose of repayment of such capital." A plain reading of the section makes it amply clear that any allowance of interest is permissible only if the rented out property has been acquired / constructed with the loan on which such interest is being paid. Especially, the third proviso to section 24(b) also puts a bar on any allowance on account of interest expense in the absence of a specific certificate from lender that 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. Here, since, the Axis Bank has already issued a certificate in this regard, it cannot be said that the said loan was not utilized by the appellant for the intended purpose (purpose applied for by the applicant in the initial loan application). On the contrary, the appellant has not been able to submit a single correspondence with the Axis Bank, which proves the purpose of the loan received was to advance it to the company / sister concern. More importantly, the appellant had claimed a deduction u/s 24(b) of the Act amounting to Rs.1,50,000/- on account interest payment. If the submission of the appellant is accepted then, the appellant would not have claimed such deduction in his ITR filed. The action of the appellant itself shows that the appellant has availed a home loan facility, and that cannot be used for any other commercial of business purposes. To sum up, it is stated that the appellant had availed a home loan against the security of the property situated at Anand Hiketan, New Delhi. The said money though has been advanced further to the group company, however, the corresponding interest claimed u/s 67 could not be allowed in the light of the submissions made above It is for the appellant / in the hands of the appellant to utillze the loan money either for the purpose of home loan or for onward funding to a group company Therefore, I hold that the action of the AO is correct in disallowing the interest u/s 57 of the Act, as claimed by the appellant in the ITR. ……………… 4.5 The next Issue is regarding disallowance of commission expense claimed against the commission received from GIC Ltd, The AO vide detailed discussions made in the order on page 3 to 7 of his order has established that the payment of commission is not genuine and disallowed the same. During the course of appellate proceedings, the AR of the appellant has submitted that the learned Assessing officer has erred in rejecting the total commission expenditure amounting to Rs.11,59,536/- on the statement of Mr, Sumit Hooda as It does not concludes that all other commission payments are also wrongly claimed. Just on the basis of statement of one recipient i.e. Mr Sumit Hooda, the conclusion of the Assessing officer that all transactions shown to have been made by the assessee in respect of payment of commission with all parties are not genuine is highly exaggerated, without any foundation, uncalled for and unjustified. The contentions of the AR has been considered and the order of the AO has been perused, It is mentioned on page 7 of the order of the AO that the summons were issued to the other party Shri Dushyant. However, he failed to appear, Even in respect of other party, Shri Sumit Hooda, detailed statement was recorded which Is reproduced on page 5 and 6 of the order. The conclusions drawn are produced on page 4 of the AO's order. Shri Sumit Hooda has stated that he was salaried employee of Reliance General Insurance Ltd. and hence he was not supposed to receive any commission. He denied having given any confirmation letter to the appellant and further stated that his signatures on the confirmation are not made by him. Therefore, considering the facts and circumstances of the case, the action of the AO appears to be correct and the addition of Rs.11,59,536/- made by the AO is hereby upheld”
Aggrieved with the above order, assessee is in appeal before us against the additions of Rs.39,43,516/- u/s 57 of the Act and disallowance of payment of commission amounting to Rs.11,59,536/- claimed as expenditure u/s 57 of the Act 10. Considered the submissions of the ld. DR of the Revenue and material available on record. We have gone through the elaborate findings of the ld. CIT (A) and we do not find any infirmity in the findings of the ld. CIT(A). Accordingly, we are not inclined to interfere with the order of ld. CIT (A) and affirmed the orders of the lower authorities, hence the grounds taken by the assessee are dismissed.
In the result, the appeal filed by the assessee is dismissed. Order pronounced in the open court on this 9th day of April, 2025.