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Income Tax Appellate Tribunal, “A”
Before: SHRI S.S.GODARA & DR. DIPAK P. RIPOTE
आयकर अपीलीय अिधकरण “ए” "ायपीठ पुणेम"। IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, PUNE BEFORE SHRI S.S.GODARA, JUDICIAL MEMBER AND DR. DIPAK P. RIPOTE, ACCOUNTANT MEMBER आयकर अपीलसं. / ITA No.75/PUN/2020 िनधा"रण वष" / Assessment Year : 2014-15 Michelle Yohan Poonawalla, The Dy.CIT, Circle-7, Pune. 16/B-1, Sarosh Bhavan, 2nd Vs Floor, Dr.Ambedkar Road, . Opp.NIV, Pune – 411001. PAN: AANPV 5236 G Appellant/ Assessee Respondent /Revenue Assessee by Shri Bharat Patel – AR Revenue by Shri S P Walime & Shir Arvind Desai – DR Date of hearing 24/06/2022 Date of pronouncement 28/07/2022 आदेश/ ORDER PER DR. DIPAK P. RIPOTE, AM: This is an appeal filed by the Assessee is directed against the order of ld.Commissioner of Income Tax(Appeals)-8, Pune dated 31.12.2019for the A.Y.2014-15.The Assessee has raised the following grounds of appeal: “The following grounds are taken without prejudice to each other - On facts and circumstances of the case and in law, 1] The learned CIT(A) failed to appreciate the fact that - a. In order to arrive at actual rent as defined U/sec.23(1)(d) in case of let out property, expenditure incurred for earning such rent shall be deducted at threshold level itself. b. Principles of real income are ignored while denying deduction of interest paid by appellant for acquiring possession of property (i.e. Flat No.11, Breach Candy Garden, Mumbai) from statutory tenant. 2] The learned CIT(A) failed to appreciate that payment of ITA No.75/PUN/2020 for A.Y. 2014-15 Michelle Y. Poonawalla Vs. DCIT (A)
consideration (with aid of borrowed funds) has direct nexus with acquisition of possession of impaired property from the statutory tenant. 3] The learned CIT(A) failed to appreciate the fact that - a. Appellant purchased a tenanted flat and by paying compensation to the statutory tenant appellant acquired possession of said flat after eleven years from the date of acquiring its title hence, interest on money borrowed for paying compensation to the statutory tenant was allowable U/sec. 24 of the Income Tax Act. b. Acquisition of property for the purposes of section 24 means not only the ownership of property but also getting possession simultaneously therefore, interest on borrowed money utilized for payment of compensation to the statutory tenant was allowable as deduction (if not U/sec.23) U/sec. 24 of the IT Act’1961. c. Borrowed money was utilized for acquiring another capital asset i.e. tenancy rights hence, assuming income from property is assessable U/sec.22/23 still, such interest is deductible U/sec.57(iii) of the Income Tax Act’ 1961. d. The ratio of the decision of ITAT in the case of Virendra Singh [104 ITD 365] is not comparable with the facts of the appellant & hence, its ratio is inapplicable to appellant’s case.” 2. Brief facts of the case related to the issue in dispute are that the assessee purchased flat No.11,Breach Candy Garden Mumbai on 06/09/2001 from Z.M. Investments and Traders Pvt. Ltd. and J.P. Hotels Pvt. Ltd for Rs.90,000/- . At that point of time, the said Flat was occupied by tenant Mr. Homi K. Erani and Mrs. Aban H. Erani who was protected by Bombay Rent Control Act. The assessee entered into Agreement for relinquishing / surrendering tenancy rights with Mr.Homi Erani and Mrs.Aban Erani on 5/4/2011. The assessee claimed to have paid Rs.9,99,00,000/- to the tenant Mr.HomiErani & Mrs.Aban Erani as per the said Agreement for relinquishing/ surrendering Statutory tenancy and took possession of ITA No.75/PUN/2020 for A.Y. 2014-15 Michelle Y. Poonawalla Vs. DCIT (A)
the impugned Flat No.11, Breach Candy Garden. It is important to mention here that the said agreement for relinquishing /surrendering statutory tenancy is unregistered and on a stamp paper of Rs.100/- only. The assessee claimed that she borrowed Rs.8,68,50,000/- from Reliance Home Finance to make the payment of Rs.9,99,00,000/-. However, as per the Loan Agreement which is reproduced in the assessment order, the assessee has borrowed the amount of Rs. 9.01 Crores as “TOP UP” loan and the said loan is borrowed in joint name by assessee with Intervalve India Ltd. In the loan Agreement the property mentioned is Flat No.12 and Garage No.12G, Breach Candy Garden House, Mumbai. This fact has been accepted by the assessee in her submission which is reproduced in the ld.CIT(A)’s order, the assessee has stated that initially the appellant had borrowed funds for purchase of Flat No.12 in the same building from Reliance Home Finance . She further stated that since the Reliance Home Finance was willing to give TOP UP loan , she availed the TOP UP loan and utilized that amount to make payment to the tenant Mr. Homi Erani and Mrs. Aban Erani .The assessee claimed the interest paid to Reliance Home Finance as deduction u/s.24(b) of the Act. The assessing officer disallowed the said claim and Commissioner of Income Tax (Appeal) upheld the disallowance. Aggrieved by the same, the assessee filed appeal before this Tribunal.
ITA No.75/PUN/2020 for A.Y. 2014-15 Michelle Y. Poonawalla Vs. DCIT (A)
The Ld.AR reiterated the submission made before the lower authorities. The Ld.AR filed paper book. The Ld.AR took us through the tenancy relinquishing agreement to establish that the loan was taken for making payment to the statutory tenant.
Ld.Departmental Representative relied on the order of lower authorities. The Ld.DR brought to our notice that this issue is decided by Hon’ble ITAT in assessee’s own case against the assessee.
We have heard both the parties. Studied the records. It is an admitted fact that the assessee had borrowed funds from Reliance Home Finance. In the said loan agreement in the, “property column”, property mentioned is Flat No.12 and Garage No.12 G, Breach Candy Garden House, Mumbai. The same Flat No.12 and Garage No.12G has been mortgaged to Reliance Home Finance. However, the assessee has claimed deduction under section 24(b) for the property Flat No.11, Breach Candy Garden House Mumbai. Thus, the property appearing in the Loan Document and the property for which deduction u/s 24(b) is claimed are different. It is also observed that said Loan is classified as “TOP UP” Loan. The loan amount is Rs.9.1 crores but assessee had claimed that assessee had paid Rs.8,68,50,000/-to the statutory tenant of Flat No.11. Before
ITA No.75/PUN/2020 for A.Y. 2014-15 Michelle Y. Poonawalla Vs. DCIT (A)
discussing further the section 24 as applicable for the A.Y. 2014-15 is reproduced here as under: Section 24 of the Act is reproduced here 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 26[within three years from the end of the financial year in which capital was borrowed], the amount of deduction under this clause shall not exceed 26a[one lakh fifty thousand 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 instalments for the said previous year and for each of the four immediately succeeding previous years:] 27[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.] 6. Thus the Section 24(b) have two components, one the property should have been acquired/constructed with borrowed capital and the Assessee has to submit a certificate from the lender specifying the ITA No.75/PUN/2020 for A.Y. 2014-15 Michelle Y. Poonawalla Vs. DCIT (A)
interest payable on the capital borrowed for the purpose of such acquisition.
In this case it is a fact that as per the Loan document (sanction letter dated 07/03/2011) the loan has been borrowed for Flat No.12 and garage 12G which are different from the Flat No.11 for which the assessee has claimed deduction u/s.24(b) of the Act. The deduction u/s.24(b) is available for the property which has been acquired by borrowed capital and for the said property assessee has offered income from house property. In this case the impugned property is Flat No.11 but the Loan is for the Flat No.12 & Garage No.12G which are different. Thus, the loan was not borrowed for the impugned Flat No.11. Assessee had claimed that the loan was used for making payment to the Tenants of Flat No.11, but mere oral recital does not hold good against the written document of loan which mentions Flat No.12 and garage 12G. Therefore, we are of the opinion that the loan was not for the impugned Flat No.11, hence the assessee is not eligible for deduction u/s.24(b) of the Act for the interest paid on the amount borrowed from Reliance Home Finance. Also, the Flat No.11 was acquired in September 2001 by the assessee. The impugned loan was availed in 2011. Therefore, on this ground also the assessee is not eligible for deduction u/s.24(b) of ITA No.75/PUN/2020 for A.Y. 2014-15 Michelle Y. Poonawalla Vs. DCIT (A)
the Act. Therefore, it is held that the assessee is not eligible for deduction u/s 24(b) of the Act.
The Hon’ble Punjab and Haryana High Court has held in the case of Vijay Agrawal Vs. CIT [2016] 65 taxmann.com 16 (Punjab & Haryana)/[2016]as under : Quote, “ 9. A plain reading of the above provision shows that an assessee is entitled to deduction on the amount of any interest payable on the capital borrowed for the purposes of acquiring, constructing, repairing, renewing or reconstructing the said property. In other words, the property is required to be acquired, constructed, repaired, renewed or reconstructed with the borrowed capital. It is concurrently recorded by the authorities that the property was purchased by the assessee in November, 2005 whereas the loan was taken from ICICI Bank on 31.12.2005. Thus, the loan was taken subsequent to the purchase of the property and cannot be said that the same was utilized for acquiring the property. In such circumstances, the Assessing Officer, the CIT(A) and the Tribunal were justified in declining the benefit of Section 24(b) of the Act. Equally, once it is held that the assessee had not borrowed any capital for the purchase of the property, the assessee was not entitled to any deduction under Section 80C(1) read with 80C(2)(xviii) of the Act.” Unquote.
It is observed that Ld. Co-ordinate bench in ITA No.667/PUN/2018 for AY 2013-14 in assessee’s own case has decided this issue against the assessee. The Ld. Co-ordinate bench has held as under :
ITA No.75/PUN/2020 for A.Y. 2014-15 Michelle Y. Poonawalla Vs. DCIT (A)
Quote, “In the present case, as discussed above the agreement at Page No. 42 clearly shows that the assessee purchased the said property in the year 2001 and the relinquishment agreement at Page 56 shows that the assessee as “landlord”, therefore, as rightly pointed by the PCIT, the claim of the assessee is not entitled to claim interest as deduction u/s. 24(b) of the Act.” Unquote.
The Ld.Co-ordinate bench has held in the said order that amount of Rs.9,9,00,000/- paid to the tenant was for bettering title. Hence the interest paid on it is not eligible for deduction u/s 24(b) of the Act.
Respectfully following the said decision we hold that the assessee is not eligible for deduction u/s 24(b) of the act for the interest paid on the amount borrowed from Reliance Home Finance. Accordingly, grounds of appeal raised by the assessee are dismissed.
In the result, appeal of the Assessee is dismissed. Order pronounced in the open Court on 28th July, 2022. (S.S.GODARA) JUDICIAL MEMBER पुणे / Pune; "दनांक / Dated : 28th July, 2022/ 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. िवभागीय"ितिनिध, आयकर अपीलीय अिधकरण, “ए” ब"च, 5. पुणे / DR, ITAT, “A” Bench, Pune. गाड"फ़ाइल / Guard File. 6. ITA No.75/PUN/2020 for A.Y. 2014-15 Michelle Y. Poonawalla Vs. DCIT (A)
आदेशानुसार / BY ORDER, //// Senior Private Secretary आयकरअपीलीयअिधकरण, पुणे/ITAT, Pune.