What did the Tribunal hold?

The Tribunal remitted both issues back to the AO. The assessee was directed to provide evidence regarding the property litigation compromise and the utilization of loan funds for property acquisition.

The assessee did not offer rental income from a property due to litigation. The Assessing Officer (AO) brought this rent to tax. The assessee also claimed interest on loans for property acquisition, which was disallowed by the AO for lack of utilization proof.

What were the issues?

Whether rental income from a disputed property should be taxed, and whether interest on loans for property acquisition is deductible without sufficient proof of utilization.

V.Geethalakshmi vs ITO | ITAT Chennai 2017

Income Tax Appellate Tribunal, C/“SMC” BENCH, CHENNAI

Before: SHRI CHANDRA POOJARI

Hearing: 07.11.2017

आदेश / O R D E R

PER CHANDRA POOJARI, ACCOUNTANT MEMBER:

This appeal is filed by the assessee, aggrieved by the order of the Learned Commissioner of Income Tax(A)-4, Chennai dated 19.10.2016 pertaining to assessment year 2010-11.

The first ground in her appeal is with regard to considering the rental income from house property at MKN road, Guindy, Chennai at `4,33,440/-.

The facts of the issue are that the property at MKN road was let out to Helix Seating. Since the property was under dispute, the assessee had not offered the rental income for taxation. However, the AO brought the rent into tax.

3.1 Before us, the ld.A.R submitted that the said property is subject to litigation and the case was finally compromised with the assessee vide order of Principal District Munsif at Alandur in RCOP No.82/2008 dated 7th day of August, 2009. Consequent to the order of Court, the assessee has not received any rent from the said premises.

3.2 The ld.D.R submitted that the assessee has not placed the compromised petition before the Assessing Authority, hence, the AO does not know exact agreement made between the parties.

I have heard both the parties and perused the material on record. As rightly pointed out by the ld.D.R, the assessee has to place on record the compromise petition filed before Principal District Munsif at Alandur while pursuing the case. Accordingly, I remit the issue to the file of ld. Assessing Officer with a direction to the assessee to place necessary evidence before the ld. Assessing Officer to show the exact nature of the compromise and thereafter, the AO decide the issue afresh. Accordingly, the issue in dispute is remitted back to the file of ld. Assessing Officer with the above direction.

The second ground in her appeal is with regard to disallowance of interest money obtained by mortgaging the land at Kalaimagal Nagar at `7,27,015/- and disallowance of interest paid to India Bulls company at ` 14,87,217/-.

I have heard both the parties and perused the material on record. In my opinion, the assessee claimed the above interest while computing income under the head “income from house property”. The same was disallowed on the reason that the assessee has not demonstrated the utilization of said loan for acquisition of the purchase of the house property. Before me, the assessee made a plea that one more opportunity may be given to place necessary evidence before the lower authorities. Considering the request of the assessee, I remit this issue also to the file of ld. Assessing Officer with a direction to assessee to place necessary evidence for utilization of loan and on utilizing the said loan for the purpose of purchase or acquisition of house property, which is subject to income from house property, the interest to be allowed as a deduction from income. Accordingly, this issue is remitted to the file of ld. Assessing Officer for fresh consideration.

In the result, the appeal of assessee is partly allowed for statistical purposes. Order pronounced on 07th November, 2017.

V.GEETHALAKSHMI,CHENNAI vs. ITO, CHENNAI

What did the Tribunal hold?

What were the facts?

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