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Income Tax Appellate Tribunal, KOLKATA ‘B’ BENCH, KOLKATA
Before: Shri P.M. Jagtap, Vice- & Shri Satbeer Singh Godara
Per Shri P.M. Jagtap, Vice-President: This appeal filed by the assessee is directed against the order of ld. Commissioner of Income Tax (Appeals)-7, Kolkata dated 25th February, 2019 and the solitary issue involved therein relates to the disallowance of Rs.1,23,398/- and Rs.28,89,337/- made by the Assessing Officer out of various expenses claimed by the assessee.
The assessee in the present case is a Company, which filed its return of income for the year under consideration on 28.09.2012 declaring total income of Rs.39,05,690/-. In the said return, rental income
I.T.A. No. 918/KOL/2019 Assessment Year: 2012-2013 RKA Realtors Pvt. Limited
amounting to Rs.2,00,16,719/- received during the year under consideration was shown by the assessee and after claiming deductions, net income of Rs.85,09,355/- was declared under the head “income from house property”. Under the head “Profit & Gains of Business or Profession”, gross income of Rs.28,20,349/- was disclosed by the assessee and net loss of Rs.46,03,670/- was declared after claiming the following expenses aggregating to Rs.72,23,342/-:- (i) Rs.25,98,822/- Employee benefit expenses (ii) Establishment charges Rs. 7,20,000/- (iii) Professional charges Rs. 3,02,347/- (iv) Repairing to others Rs. 29,665/- (v) Miscellaneous Rs. 1,28,891/- expenses (vi) Interest paid to Body Rs.34,43,617/- Corporate
According to the Assessing Officer, the assessee-company having earned only 12.35% of its total revenue from the business activities, the large portion of the expenses incurred was not related to the business activities but the same was related to income from house property for which standard deduction under section 24 was separately claimed by the assessee. He accordingly estimated 40% of the total expenses of Rs.72,23,342/- claimed by the assessee under the various heads as related to income from house property and disallowance to the extent of Rs.28,89,337/- was made by him. He also made a further disallowance of Rs.1,23,398/- on account of interest separately claimed by the assessee for loan taken from M/s. Kalakar Commercial Pvt. Limited and M/s. Darshan Consultant Pvt. Limited as the said loan had been used for registration and other miscellaneous cost related to the house property. The Assessing Officer held that the said expenditure incurred on interest was of capital nature.
I.T.A. No. 918/KOL/2019 Assessment Year: 2012-2013 RKA Realtors Pvt. Limited
The disallowances of Rs.28,89,337/- and Rs.1,23,398/- made by the Assessing Officer were challenged by the assessee in the appeal filed before the ld. CIT(Appeals) and since the submission made by the assessee in support of its case on this issue was not found satisfactory by him, the ld. CIT(Appeals) proceeded to confirm the said disallowance made by the Assessing Officer. Aggrieved by the order of the ld. CIT(Appeals), the assessee has preferred this appeal before the Tribunal.
We have heard the arguments of both the sides and also perused the relevant material available on record. As submitted on behalf of the assessee before the ld. CIT(Appeals) as well as before the Tribunal, the interest expenditure of Rs.1,27,398/- was admittedly incurred by the assessee in respect of the loans which had been used for registration and other miscellaneous cost related to the house property and the same, therefore, was allowable as deduction under section 24(b) of the Act while computing the income of the assessee under the head “income from house property”. He has submitted that similarly interest paid to Body Corporate amounting to Rs.34,43,617/- was allowable as deduction under section 24(b) of the Act, but the deductibility of the same under the said provision was not considered either by the Assessing Officer or by the ld. CIT(Appeals). He has invited our attention to clause(b) of section 24, which provides that where the property has been acquired, constructed, rebate, renewed or re-constructed with borrowed capital, the amount of any interest payable on such borrowings is allowable as deduction while computing the income of the assessee chargeable to tax under the head “income from house property”. The ld. D.R. in this regard has submitted that the claim of the assessee for deduction on account of interest under section 24(b) was not specifically made by the assessee before the Assessing Officer and since the same was made for the first time before the ld. CIT(Appeals), the Assessing Officer did not get any opportunity to verify the same. She has contended that this issue may, therefore, be sent back to the Assessing Officer for giving him such opportunity. The ld.
I.T.A. No. 918/KOL/2019 Assessment Year: 2012-2013 RKA Realtors Pvt. Limited
Counsel for the assessee has also not raised any objection for sending the matter back to the Assessing Officer for such verification. He has contended that even the other expenses claimed by the assessee under the various heads, going by their very nature are not relating to the income from house property and without verifying the exact nature of the said expenses, the Assessing Officer was not justified in making a disallowance of 40% of such expenses by treating the same as the expenses related to the income earned from house property. A perusal of the assessment order passed by the Assessing Officer also shows that not a single instance was pointed out by the Assessing Officer to show that any of the expenses claimed by the assessee under the various heads was related to house property income nor any basis was given by him to estimate such expenses to the extent of 40% as related to the income earned by the assessee from house property. We, therefore, set aside the impugned order passed by the ld. CIT(Appeals) confirming the disallowance of Rs.1,27,398/- and Rs.28,89,337/- made by the Assessing Officer on account of various expenses and restore the matter to the file of the Assessing Officer for deciding the same afresh after verifying the exact nature of expenses claimed by the assessee under the various heads and after verifying the claim of the assessee for deduction on account of interest expenditure under section 24(b) of the Act.
In the result, the appeal of the assessee is treated as allowed for statistical purposes. Order pronounced in the open Court on January 17, 2020.
Sd/- Sd/- (Satbeer Singh Godara) (P.M. Jagtap) Judicial Member Vice-President Kolkata, the 17th day of January, 2020
Copies to : (1) RKA Realtors Pvt. Limited, 14, Netaji Subhas Road, 1st Floor, Kolkata-700001
I.T.A. No. 918/KOL/2019 Assessment Year: 2012-2013 RKA Realtors Pvt. Limited
(2) Deputy Commissioner of Income Tax, Circle-4(2), Kolkata, Aayakar Bhawan, P-7, Chowringhee Square, Kolkata-700069
(3) Commissioner of Income Tax (Appeals)-7, Kolkata, (4) Commissioner of Income Tax , (5) The Departmental Representative (6) Guard File By order
Assistant Registrar, Income Tax Appellate Tribunal, Kolkata Benches, Kolkata Laha/Sr. P.S.