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Income Tax Appellate Tribunal, DELHI BENCH: ‘SMC’, NEW DELHI
Before: SH. H.S. SIDHU
The Assessee has filed the Appeal against the Order dated 01.9.2016 of the Ld. CIT(A)-35, New Delhi pertaining to assessment year 2012-13 on the following grounds:- i) On the facts of the circumstances of the case and in law the authorities below have erred in confirming addition of 1
Rs. 6,39,301/- on account of interest paid to bank. The action of authorities below is wrong, unjustified, bad at law and deserves to be quashed. ii) The appellant craves the right to add/ alter/ amend all or any of the ground of appeals during or before the hearing of appeal.
The brief facts of the case are that assessee filed return of income on 30.9.2012 declaring income of Rs. 4,29,899/-. The case of the assessee was selected for scrutiny and notice under section 143(2) of the Income Tax Act, 1961 (in short “Act”) dated 20.9.2013 was issued.
Notice u/s. 142(1) of the Act alongwith questionnaire was issued on 17.11.2014. Again notice u/s. 142(1) dated 11.12.2014 issued due to change in office of incumbency.
In response to these notices, the AR of the assessee attended the proceedings from time to time and filed the requisite details. In this case the assessee is the Director in M/s Hi-Reach Construction and Proprietor of M/s Sunrise Engineering System. AO observed that as per computation of income and statement of affairs, the total income from other sources has been disclosed at Rs. 6,39,301/-. AO further observed that the assessee company has received interest from M/s Hi-Reach Construction Equipment Pvt. ltd. at Rs. 6,39,301/- and TDS has also been deducted thereon. The AO observed that assessee has not disclosed interest income in the return and accordingly concealed the particulars of income from interest is liable to be added to the total income as undisclosed income and directed the assessee that copy of account in the company M/s Hi- Reach Construction Pvt. Ltd. for the year under reference and also to one preceding year and to succeeding assessment year also to be filed. In compliance thereto the AR of the assessee filed written reply stating that the same amount of Rs. 6,39,301/- has been paid as interest expense to HSBC Bank. Since the net effect being NIL, it has not been reflected in the computation of income statement. The plea of the assessee company was examined with reference to statement of affairs and also debit balance of M/s Hi-Reach Construction Equipments Pvt. Ltd. and found that the interest at the end of the year has been credited in the account of the assessee company but in the statement of affairs the original amount of loan has only been disclosed which clearly means that the assessee was having assets more than the liabilities as on 31.3.2012 by a sum of Rs. 6,39,301/- Hence, the interest of Rs. 6,39,301/- was disallowed and added to the total income of the assessee by assessing the income at Rs. 10,29,200/- vide order dated 26.03.2015 passed u/s. 143(3) of the Act. Against the said assessment order, assessee appealed before the Ld. CIT(A), who vide his impugned order dated 01.9.2016 has dismissed the appeal of the assessee. Aggrieved with the impugned order, assessee is in appeal before the Tribunal.
During the hearing, Ld. counsel for the assessee has stated that Ld. CIT(A) has wrongly confirmed the addition of Rs. 6,39,301/- on account of interest paid to bank and relied upon the decision of the Hon’ble Supreme Court of India in the case of CIT, WB III vs. Rajendra Prasad Moody, Calcutta (1978) 115 ITR 519.
On the other hand, Ld. DR relied upon the order of the Ld. CIT(A) and stated that he has passed a well reasoned order, which does not need any interference.
I have heard both the parties and perused the records especially the impugned order as well as the case law cited by the Ld. Counsel for the assessee. I note that the assessee has made payment of Rs. 6,39,301/- to HSBC Bank and has also charged the same amount of interest from M/s Hi Reach Construction Equipment Pvt. Ltd. However, the interest has been paid for Housing Loan.
The sanction order of HSBC Bank dated 30.11.2011 mentions the loan as sanctioned for purchase of house property against security of another property. It is noted that the tenure of loan has been mentioned at 225 months at floating rate of interest. It is a Housing Loan, eligible for lower rates of interest which has been diverted to the 5 company in which the appellant is a Director. Since, the interest payment is on housing loan and loan taken was to be used for purchase of property, it cannot held that the interest payment was wholly and exclusively incurred for earning interest income from the company. In fact no interest income has been earned as the amount has been claimed to have been diverted at the same interest. Such an act also raises ethical questions of misuse of concessional loans for housing purpose which are given at lower rate than the business loans and personal loans.
Moreover, as per Statement of Affairs, total housing loans are of Rs. 3.37 crores, while investment in two houses is at Rs. 2.8 crores. That leaves a balance of only Rs. 54 lakhs against the claim of the assesse that the entire housing loan was diverted as investment in the company. In view of these facts the deduction of interest paid cannot be given as the interest payment has been made for amount borrowed for acquisition / purchase of property Deduction of interest on housing loans is governed by section 24b and not section 36(1)iii or section 57. It is also noted that the case law cited by the Ld. counsel for the assessee is distinguished on facts. Consequently, the addition made by the AO was rightly confirmed by the Ld. CIT(A), which does not need any interference on my part, hence, I uphold the action of the Ld. CIT(A) on the issue of dispute and reject the ground raised by the assessee.
In the result, the Appeal of the Assessee is dismissed.