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Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI
Before: SHRI SAKTIJIT DEY
Aforesaid appeals have been filed by the assessee challenging two separate orders passed by the learned Commissioner (Appeals)– 44, Mumbai, for the assessment years 2012–13 and 2013–14.
The only common issue raised in both the appeals relates to disallowance of interest expenditure claimed under section 24(b) of the Income Tax Act, 1961 (for short “the Act”).
Brief facts, which are common for both the assessment years under appeal, are the assessee is an individual deriving income by way of remuneration from a partnership firm as well as rental income from various properties. For the assessment year 2012–13, the assessee filed his return of income on 31st March 2013, declaring total income of ` 10,23,339. Similarly, for assessment year 2013–14, he filed his return of income on 30th March 2014, declaring total income of ` 11,11,460. During the assessment proceedings, the Assessing Officer while verifying the computation of total income filed for assessment year 2012–13 noticed that against the rental income shown of `. 18,83,568 the assessee has claimed deduction of ` 10,89,832, under section 24(b) of the Act towards interest on borrowed capital. Similarly, he found that in assessment year 2013–14, the assessee has claimed deduction of ` 9,05,352, under section 24(b) of the Act
3 Shri Manharlal B. Mehta against rental income shown of ` 11,00,559. Therefore, the Assessing Officer called upon the assessee to justify the deduction claimed under section 24(b) of the Act. Though, the assessee made submissions justifying its claim of deduction by stating that he along with three other co–applicants have obtained overdraft facility from Punjab National Bank against future lease rentals which was transferred to a partnership firm and which in turn were used for construction of a Mall and other properties, however, the Assessing Officer did not find merit in the submissions of the assessee. He observed, in the relevant previous year the assessee had not acquired, constructed, repaired, renewed or re–constructed the property from which he has earned rental income. He observed, the overdraft facility / loan obtained was against future rentals only. Accordingly, he held that the deduction claimed under section 24(b) of the Act in both the assessment years cannot be allowed. Being aggrieved with such disallowances, the assessee preferred appeals before the first appellate authority.
The learned Commissioner (Appeals), however, also sustained the disallowances made by the Assessing Officer.
When the appeals were called for hearing, none was present on behalf of the assessee to represent the case. Even, there is no application by the assessee seeking adjournment. As could be seen from the order sheet entries, the assessee was well aware of the fact
4 Shri Manharlal B. Mehta that date of hearing of appeal is fixed today. Therefore, keeping in view the aforesaid facts, I proceed to dispose off the appeals ex–parte qua the assessee after hearing the learned Departmental Representative and on the basis of material available on record
I have heard the learned Departmental Representative and perused material on record. The dispute in the present appeals arises out of disallowance of assessee’s clam of deduction under section 24(b) of the Act in respect of interest paid on borrowed capital. The Assessing Officer has disallowed assessee’s claim on the reasoning that the overdraft facility / loan obtained by the assessee was not utilized for construction of the building. Whereas, from the submissions made by the assessee before the learned Commissioner (Appeals), it appears that the specific pleading of the assessee before the learned Commissioner (Appeals) that a part of the overdraft facility / loan was utilized for purchase of fixed assets which includes the property from which the assessee has shown rental income. In my considered opinion, the aforesaid claim of the assessee requires consideration. If the assessee through proper documentary evidences can establish the fact of utilization of overdraft facility / loan obtained from Bank in construction / purchase of the property from which rental income has been shown, then assessee’s claim of deduction under section 24(b) of the Act has to be allowed. Thus, for enabling the 5 Shri Manharlal B. Mehta assessee to prove such fact through proper documentary evidences, I am inclined to restore the issue arising in both the assessment years to the Assessing Officer for de novo adjudication after due opportunity of being heard to the assessee. Grounds are allowed for statistical purposes.
In the result, both the appeals are allowed for statistical purposes. Order pronounced in the open Court on 11.01.2019
SD/– SAKTIJIT DEY JUDICIAL MEMBER