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IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 22ND DAY OF SEPTEMBER, 2021
PRESENT
THE HON’BLE MRS.JUSTICE S.SUJATHA
AND
THE HON’BLE MR. JUSTICE RAVI V. HOSMANI
I.T.A.No.377/2018
BETWEEN :
SMT.RAJAGOPAL PRATHIBA #293, ‘JAI NILAYA’, 19TH MAIN, 6TH BLOCK, KORAMANGALA, BENGALURU-560095. PAN:AMBPP4524H
...APPELLANT
(BY SRI A.SHANKAR, SENIOR COUNSEL A/W SRI BHAIRAV KUTTAIAH, ADV. FOR SRI M.LAVA, ADV.)
AND :
THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-4(3)(1), BMTC BUILDING, 80 FEET ROAD, KORAMANGALA, 6TH BLOCK, BENGALURU-560095.
…RESPONDENT
(BY SRI K.V.ARAVIND, ADV.)
THIS INCOME TAX APPEAL IS FILED UNDER SECTION 260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED 17.01.2018 PASSED IN ITA No.1257/BANG/2017 FOR THE ASSESSMENT YEAR 2012-2013 [VIDE ANNEXURE-A], PRAYING TO (A) TO FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED ABOVE AND ANSWER THE SAME IN FAVOUR OF THE APPELLANT. (B) TO ALLOW THE APPEAL AND SET ASIDE THE FINDINGS THEREIN TO THE EXTENT
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AGAINST THE APPELLANT IN THE ORDER PASSED BY THE INCOME-TAX APPELLATE TRIBUNAL, 'C' BENCH, BENGALURU IN ITA NO.1257/BANG/2017 DATED 17.01.2018 FOR THE ASSESSMENT YEAR 2012-2013 [VIDE ANNEXURE-A].
THIS APPEAL COMING ON FOR HEARING, THIS DAY, S. SUJATHA, J., DELIVERED THE FOLLOWING:
J U D G M E N T
This appeal is filed by the assessee under Sec.260A of the Income Tax Act, 1961 (for short, ‘the Act’) assailing the order of the Income Tax Appellate Tribunal, ‘C’ Bench, Bengaluru, dated 17.01.2018 relating to the assessment year 2012-13.
The appeal was admitted on 17.12.2018 to consider the following question of law:
“Whether the Tribunal was justified in law in denying deduction under Section 57(iii) of the Act for a sum of Rs.38,18,047/- being interest paid to the bank without considering all the materials placed by the appellant and consequently passed a perverse order on the facts and circumstances of the case?
The assessee is an individual and derives income from house property and from other sources as
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well which includes income from furniture, fittings, fixtures and other equipments fitted in the property. Relating to the assessment year in question, the assessee filed return of income amounting to Rs.14,59,863/- as income from the house property and Rs.8.54,866/- as income from other sources. The return was processed under Section 143 (1) of Act. The case having been selected for scrutiny assessment, an assessment order under Section 143 (3) of the Act was passed on 25.3.2015 by the assessing officer disallowing expenditure incurred from other sources under Section 57 (iii) of the Act to the extent of Rs.38,12,047/-. The assessing officer also disallowed deduction claimed under Section 24 (b) of the Act in relation to income from house property. Being aggrieved, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals)-4, Bengaluru.
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Learned Commissioner of Income Tax (Appeals) allowed the appeal in part granting the relief of deduction claimed by the assessee Under Section 24 (b) of the Act, however, denying the relief insofar as the deduction disallowed u/s 57 (iii) of the Act. Being aggrieved, the appellant-assessee as well as the Revenue preferred appeals before the Tribunal.
The Tribunal, after haring parties, passed a common order upholding order of the Commissioner of Income Tax (Appeals)-4, dismissing the appeals of both the appellant and the Revenue. Being aggrieved by the said order, assessee has preferred this appeal.
Learned counsel senior counsel for the assessee submitted that the Tribunal dismissed the appeal of the assessee mainly on the ground that no details of the furniture and fixtures, electrical installations, etc. were provided by the assessee dehors clause 1.1 of the agreement dated 5.12.2007 and clause
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(B) of the agreement dated 21.5.2008 which reflects the annexures and the schedule appended thereto. Learned senior counsel made an attempt to demonstrate that the details of furniture and fixtures were made available to the authorities and the Tribunal as well, but fairly submitted that the annexure referred to in the agreement dated 05.12.2007 and the schedule to the agreement dated 21.05.2008 were not furnished.
Learned counsel for the respondent-Revenue justifying the impugned orders, submitted that no exception can be found with the order of the Tribunal since no evidence was placed on record to claim the deduction under Section 57 (iii) of the Act being the interest paid to Karnataka Bank.
We have carefully considered the rival submissions of the parties and perused the material on record.
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It is apparent that the assessee was called upon to substantiate the expenditure incurred and how it is correlated with the earning of rental income inasmuch as the furniture and fixtures are concerned. No required documents referred to in the agreements dated 5.12.2007 and 21.5.2008 were made available either before the authorities or before the Tribunal. The Tribunal has extracted the relevant paragraphs of the agreement entered into between the assessee and the lessee with respect to furniture and fittings and the same reads thus:
Clause 1.1 of the agreement dated 05.12.2007 “In consideration of the hire charges herein reserved and the covenants herein contained, the Lessor does hereby agree to demise unto the Zinnov, by way of hire, the Fittings and Fixtures provided in the Schedule Property and as at Annexure A TO HOLD the same unto the Zinnov, for a period of Nine (9) Years from the Hire Commencement Date and to expire after a period of 9 (Nine) years there from, PAYING THEREFOR, an aggregate monthly hire charges
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of Rs.2,00,000/- (Rupees Two Lakhs Only) and subject to the enhancement as agreed upon and further subject to TDS as per applicable. In the event of any delay in the payment of the hire charges, in such an event the Zinnov shall be liable to pay the same together with interest thereon @ 1.5% per month or part thereof.”
Sl. No. B of the agreement dated 21.5.2008 “B. The owner has agreed to give on hire to the Hirer for use exclusively other Leased Premises, certain furniture, fittings and fixtures which belong to the Owner absolutely and are available at the Leased Premises more fully enumerated in the Schedule I and hereinafter referred to as ‘Hired Utilities’ for ao period of 5 (five) years commencing on 1st June, 2008 and terminating on 31st May, 2013 and thereafter renewable as per clause 1.2 of this agreement.”
In the absence of the relevant Annexure and the Schedule I description referred to in the agreements, the Tribunal has opined that the assessee has failed to prove the nexus of the expenditure incurred by it with
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the borrowed funds and confirmed the disallowance of the claim made in this regard.
The arguments of the learned counsel that even in the absence of the Annexure/Schedule mentioned in the agreements, the other material available on record ought to have been considered by the Tribunal for adjudicating upon the claim made by the assessee, does not hold water, as the documents mentioned in the agreements being relevant. At this juncture, learned senior counsel representing the assessee requested for an opportunity to furnish the said particulars referred to, in the agreements dated 05.12.2007 and 21.05.2008 to establish the nexus for claiming the deduction under Section 57(iii) of the Act with the borrowed funds.
It is discernable that the Tribunal has dismissed the appeal solely on the ground that the Annexure/Schedule mentioned in the agreements
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placed on record by the assessee were not made available to decide the issue of deduction under Section 57 (iii) of the Act. As such, we are of the considered opinion that providing one more opportunity to the assessee to furnish the details would not prejudice the rights of the Revenue. Given the circumstances, we set aside the order impugned and remand the matter to the Assessing Officer to provide an opportunity to the assessee to furnish the Annexure/Schedule mentioned in the agreements in support of her claim made, without answering the substantial questions of law raised.
For the reasons aforesaid, we pass the following ORDER
i) The appeal is allowed in part. ii) The impugned order dated 17.01.2018 passed in ITA No.1257/Bang/2017 by the Income Tax Appellate Tribunal, Bengaluru Bench ‘C’, Bengaluru, is set aside.
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iii) The matter is remanded to the Assessing Officer for reconsideration keeping open all the rights and contentions of the parties. iv) The assessee is at liberty to place Annexure – A referred to, in the agreement dated 05.12.2007 at Sl.No.1.1 and the details of the Schedule – I mentioned at Sl.No.B of the agreement dated 21.05.2008 in support of her claim made towards deduction under Section 57(iii) of the Act for a sum of Rs.30,49,372/- being interest paid to the Karnataka Bank. The Assessing Officer shall consider the same and pass appropriate orders in accordance with law in an expedite manner.
Sd/- JUDGE
Sd/- JUDGE
VGH