SMT. RENU GUPTA,MUZAFFARNAGAR vs. ITO, MUZAFFARNAGAR

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ITA 2078/DEL/2016Status: DisposedITAT Delhi10 January 2017AY 2008-093 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal restored the matter to the Assessing Officer to re-examine the allowability of the interest deduction in light of the Supreme Court's decision in Chennai Properties and Investments Ltd.

What were the facts?

The assessee claimed a deduction for interest paid, which the Assessing Officer disallowed. The CIT(A) allowed a partial deduction. The assessee argued the interest was deductible under Section 36(1)(iii) as it related to their property rental business.

What were the issues?

Whether the interest paid by the assessee is allowable as a business expenditure under Section 36(1)(iii) or as per Section 24, and whether the reassessment proceedings were valid.

Which sections of the Income-tax Act were involved?

Section 147,Section 143(3),Section 24,Section 36(1)(iii)

AI-generated summary — verify with the full judgment below

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Income Tax Appellate Tribunal, DELHI BENCH “SMC-I”, NEW DELHI

Before: SHRI S.V. MEHROTRA

For Appellant: Shri K. Sampat, Adv
For Respondent: Shri Rajesh Kumar, Sr.DR

This is an appeal filed by the assessee against the order dated 29.01.2016 passed by the Commissioner of Income Tax (Appeals), Muzaffarnagar, u/s 147/143(3) of the Income Tax Act, 1961 (in short “the Act”) relating to assessment year 2008-09. The assessee has taken following grounds of appeal :-

“On the facts and in the circumstances of the case and in law the Ld. CIT(A) erred in confirming the following actions of the Assessing Officer: 1. in initiating proceedings u/s 147 of the Income-tax Act, 1961 (the Act) which was without jurisdiction and is based on vague and invalid reasons; 2. in making an addition in a sum of Rs.6,95,506/- on account of interest paid by treating the same as not relating to the income earned. Both the above actions being arbitrary, erroneous and unjust must be quashed with directions for relief.”

2.

At the time of hearing, ld. counsel for the assessee has not pressed the ground of appeal no.1 and the same is being dismissed as not pressed.

3.

Brief facts of the case are that notice u/s 148 was issued on 25.05.2012, in response to which, assessee filed return of income declaring total income of Rs.1,12,951/-. The Assessing Officer determined the total income at Rs.27,15,707/-, inter-alia, disallowing a sum of Rs.8,45,506/- observing as under :-

“(ii) The assessee had claimed deduction of Rs.845506/- being interest paid. The interest paid, if any can only be deducted from taxable income from said asset. Hence, deduction of Rs.845506/- is disallowed. Further the funds as shown to have been received as loan has been held as belonging to the assessee being not proved. The assessee has not proved nexus of said loans with any Rs.845506.00” earning source of income.

4.

Ld. CIT(A) allowed the interest to the extent of Rs.1,50,000/- u/s 24 of the Act.

5.

Ld. counsel for the assessee submitted that the assessee is in the business of purchasing property and renting the same on rent. Therefore, the interest paid by assessee is allowable u/s 36(1)(iii) of the Act and not u/s 24, as the assessee was carrying on business. He relied on the decision of the Hon’ble Supreme Court in the case of Chennai Properties and Investments Ltd. vs. CIT (2015) 373 ITR 673 (SC). He submitted that the matter can be restored back to the file of the Assessing Officer to examine the assessee’s contentions in the light of decision in case of Chennai Properties and Investments Ltd. (supra). Ld. DR did not object to assessee’s request.

6.

I have considered the submissions of both the parties and have perused the record of the case. As agreed by both parties, I restore this matter back to the file of the Assessing Officer to examine this issue de novo in the light of the decision of the Hon’ble Supreme Court in the case of Chennai Properties and Investments Ltd. (supra).

7.

In the result, the appeal of the assessee is partly allowed for statistical purposes. Order pronounced in the open court on this 10th day of January, 2017.

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