SANDEEP OMPRAKASH KOYATE,,AHMEDNAGAR vs. DEPUTY COMMISSIONER OF INCOME-TAX,,

The assessee has raised the following grounds of appeal:- 1. The learned Deputy Commissioner of Income Tax, Ahmednagar Circle, Ahmednagar has erred in disallowing loss house property of Rs.1,50,000/- and the Commissioner of Income tax (Appeals) 2, Pune has erred in confirming the same. 2. The learned Deputy Commissioner of Income Tax, Ahmednagar Circle, Ahmednagar has erred in considering agricultural income of Rs.90,250/- as income from undisclosed sources and adding the same under the head of Income from other sources and the Commissioner of Income tax (Appeals) 2, Pune has erred in confirming the same. 3. The learned Deputy Commissioner of Income Tax, Ahmednagar Circle, Ahmednagar has erred in treating contribution of Rs.1,50,075/- by treating them as donations and by disallowing the deduction and the Commissioner of Income tax (Appeals) 2, Pune has erred in disallowing deduction of 50% of the contribution. 4. The learned Deputy Commissioner of Income Tax, Ahmednagar Circle, Ahmednagar has erred in disallowing an amount of Rs.19,47,835/- under the pretext of Section 14A of the Act and the Commissioner of Income tax (Appeals) 2, Pune has erred in disallowing the same. 5. The learned Deputy Commissioner of Income Tax, Ahmednagar Circle, Ahmednagar has erred in disallowance interest on advances made of Rs.29,589/- and the Commissioner of Income tax (Appeals) 2, Pune has erred in confirming the same.

The grounds of appeal No.2, 3 and 5 are not pressed and hence, the same are dismissed as not pressed.

The issue in ground of appeal No.1 is against the disallowance of loss from house property claimed at ₹ 1,50,000/- on account of interest paid on housing loan. The issue in ground of appeal No.4 is against the disallowance made under section 14A of the Act at ₹ 19,47,835/-.

Briefly, in the facts of the case, the assessee was a builder and promoter and was carrying on the activities under the name and style of „Surya Construction‟. The assessee had claimed loss under the head „Income from

The CIT(A) has upheld the order of Assessing Officer, against which the assessee is in appeal.

The claim of learned Authorized Representative for the assessee before the Tribunal is that the perusal of document at page 18 of Paper Book would show that ₹ 2.40 lakhs of loan account was transferred to capital account being utilized for residential purpose. Attention was drawn to page 37, wherein it is certified that the loan was against residential property.

The learned Departmental Representative for the Revenue however, placed reliance on the orders of authorities below.

On the perusal of record and after hearing both the learned Authorized Representatives, the issue which arises in the present appeal is in relation to

The issue in ground of appeal No.4 is against the disallowance made under section 14A of the Act. The Assessing Officer had noted that the assessee had made investments in mutual funds of ₹ 6,02,000/- investment in shares of ₹ 6,62,500/-, investment in agricultural land of ₹ 2,21,78,600/- and investment in PPF of ₹ 74,340/-, etc. aggregating to ₹ 2,35,17,440/- as shown in Schedule „D‟ under the head “Investments” to the Balance Sheet. Since the

The CIT(A) upheld the order of Assessing Officer, against which the present ground of appeal raised by the assessee.

The learned Authorized Representative for the assessee pointed out that there was no merit in the order of Assessing Officer as the income from agricultural land owned by the assessee is not exempt from tax. He pointed out that against the said agricultural land, NA permission was to be received and thereafter, development had to be carried out. In any case, the land was within the municipal limits and hence, the sale of agricultural land was also not exempt from tax. He thus, stressed that the investment in agricultural land needs to be excluded, as income arising therefrom was not exempt from tax. In respect of balance investment i.e. mutual fund of ₹ 6.02 lakhs, investment in shares of ₹ 6.62 lakhs and in PPF of ₹ 0.74 lakhs, the learned Authorized Representative for the assessee pointed out that funds owned by the assessee were to the extent of ₹ 56.79 lakhs as opening balance. Attention in this regard was drawn to page 19 of Paper Book. He further pointed out that no

The learned Departmental Representative for the Revenue on the other hand, placed reliance on the orders of authorities below.

On perusal of record and after hearing rival contentions and after verifying the contention of assessee, where the agricultural land is within municipal limits and hence, its sale is not exempt from tax and in case the said agricultural land receives NA permission and is taken for development, then also the income arising therefrom is not exempt from tax. Hence, the investment in agricultural land is not to be included for the purpose of computing disallowance under section 14A of the Act read with Rule 8D of the Rules. The Assessing Officer is thus, directed.

Now, coming to the balance investments made by the assessee in mutual funds, shares in PPF. The Balance Sheet of assessee clearly reflects that the own funds at ₹ 56.79 lakhs as opening on the start of the year. In such circumstances, where own funds were much more than the investments made, then there is no merit in disallowing any part of interest expenditure under Rule 8D(ii) of the Rules. Second part of disallowance was the administrative expenses under Rule 8D(iii) of the Rules, which shall stand reduced after excluding the investment in agricultural land. The Assessing Officer is thus, directed to re-work the disallowance under section 14A of the Act read with

In the result, appeal of assessee is partly allowed.