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Income Tax Appellate Tribunal, BENCH “E”, MUMBAI
Before: SHRI RAJENDRA & SHRI PAWAN SINGH
Assessee by : Sh. Prakash Jotwani with Ms. Mrugakshi K. Joshi Advocates Revenue by : Ms. Beena Santosh (DR) Date of hearing : 11.01.2017 Date of Pronouncement : 15.02.2017 Order Under Section 254(1) of Income Tax Act PER PAWAN SINGH, JM:
This appeal by assessee under section 253(1) of the Income Tax Act (‘Act’) is directed against the order of Commissioner (Appeals)-2, dated 30.11.2012 for Assessment Year 2008-09. The assessee has basically raised two grounds of appeal: (1) The learned Commissioner (Appeals) erred in confirming the denial of exemption under section 54F. In alternative the assessee raised ground The learned Commissioner (Appeals) failed to take into consideration that any addition made in this year, would amount to double taxation, since the appellant has already voluntarily offered the exempted income of AY 2008-09 in AY- 2011-12.
ITA No.7795/M/2012 Dr. Sanjay J. Mehta
(2) The learned Commissioner (Appeals) erred in disallowing Rs. 12,28,883/- on account of interest expenditure, as the loan is utilized for the purpose of earning income.
The brief facts of the case are that for relevant assessment year the assessee filed return of income on 25 October 2008 declaring total income at Rs. 26,49,878/-. The assessment was completed under section 143(3) on 23 December 2010. The Assessing Officer while passing assessment order besides the other addition and disallowance, disallowed the exemption of income claimed under section 54F of Rs.3,96,96,640/- and also disallowed a sum of Rs. 12,28,883/- on account of interest paid to ICICI home loan. On appeal before Commissioner (Appeals) both the disallowance were confirmed. Thus, further aggrieved by the order of Commissioner (Appeals) the assessee has filed present appeal before us.
We have heard the ld AR for the assessee and the ld DR for revenue and perused the material available on record. First ground of appeal
relates to denial of exemption under section 54F. The assessee in alternative raised the ground that assessee has already voluntarily offered the exempt income of assessment year 2008-09 to tax in assessment year 2011-12. The assessee offered the Long Term Capital Gain to tax in AY 2010-11, as assessee cancelled the agreement dated
10. September 2008 on 1. June 2010. The ld AR of the assessee argued that as per agreement dated 2nd April 2004, the assessee received a sum of Rs. 4.12 crore from Nicolas Piramal Ltd on account of Slump sale of his pathological business. On the sale of asset the assessee earned long-term capital gain of Rs.3,96,96,640/- the assessee invested the said amount on purchase of residential flat on 10.09.2008 and claimed exemption under section 54F. The actual amount of Rs.3,85,06,000/- was received ,as an amount of Rs.26,94,000/-was forfeited as per clause 3.1.2 of the agreement due to inadequate profit achievement. The Assessing Officer denied the exemption due to the inconsistency of dates in agreement to sale, by virtue of which the assessee purchased the residential flat. However, the assessee cancelled the agreement vide cancellation deed dated 1st June 2010. The assessee offered the Capital Gain for taxation in Assessment ITA No.7795/M/2012 Dr. Sanjay J. Mehta Year 2011-12 which has been accepted by the revenue. In support of his contention the ld AR of the assessee placed on record the copy of assessment order under section 143(3) dated 27th March 2014. The ld AR would argue that as the revenue has already taxed the same Long Term Capital Gain in Assessment Year 2011-12, thus, the same cannot be taxed twice. On the other hand the ld DR for the revenue supported the order of authorities below and would argue that the revenue is entitled to tax the income in the year of accrual.
We have considered the rival contention of the parties and gone through the orders of authorities below. The assessee is placed on record the copy of cancellation deed dated 1 June 2010 (page 27 to 30 of PB), cancelling the agreement to sale / transfer deed dated 10 September 2008, on the basis of which assessee claimed exemption under section 54F of the Act. We have seen that assessee has offered the Capital Gain for taxation in Assessment Year 2011- 12 and the same has been accepted by Revenue in Assessment Order passed under section 143(3) dated 27 March 2014. Thus, we accept the alternative ground of appeal
raised by assessee regarding voluntarily offering the Capital Gain for taxation in Assessment Year 2011-12. As the revenue has already accepted the Long-Term Capital Gain for taxing in Assessment Year 2011-12, hence, we direct the AO to verify the correctness of claim of assessee and grant appropriate relief. In the result, the alternative grounds of appeal raised by assessee in ground No. 1 is allowed.
5. Ground No.2 relates to disallowance of interest of Rs. 12,28,883/-. The ld AR of the assessee argued that the assessee has shown interest income of Rs.28,13,663/- under the head ‘income from other sources’ and claimed set off under section 57 of the Act. The assessee paid the interest of Rs. 19,89,771/-, which consist of interest to private parties of Rs.6,65,912/- and interest paid to ICICI home loan of Rs. 12,28,883/- with interest on ODs Rs. 57,215/- along with Bank charges of Rs. 37,761/-. The assessee paid interest to ICICI home loan of Rs. 12,28,883/-was disallowed by AO. The assessee explained to the AO as well as to ld Commissioner(Appeals) that assessee availed loan from ICICI bank for ITA No.7795/M/2012 Dr. Sanjay J. Mehta giving loan to the outsider on which the assessee earned interest of Rs.28,13,663/-. The AO presume that the assessee avails loan for purchase of flat. In fact the assessee took a loan from ICICI home loan against mortgage of his residential flat. There is no condition in the loan agreement that loan sanctioned by the bank should be utilized for the purpose of buying the residential flat only, the assessee was at liberty to use the money for whichever means as per the wishes of the assessee. The assessee availed the loan for earning interest income. On the other hand the ld DR for the revenue supported the order of authorities below.
6. We have considered the rival contention of the parties and gone through the order of authorities below. During the assessment AO notice that assessee claimed Rs. 12,28,883/- as interest paid to ICICI home loan and deducted from the ‘income from other sources’. The assessee was asked as to why such expenses should not be disallowed. The assessee filed his reply dated 20 February 2010 and contended therein that assessee had taken loan from ICICI home loan department against hypothecation of his residential house. The loan was availed for utilizing for the purpose of earning interest income. The reply of the assessee was not accepted by AO. The AO concluded that interest expenses on such loan may be allowed as deduction under section 24(b) of the Act, under the head ‘income from house property’ subject to the qualifying the other conditions and disallowed the claim of interest expenses. During first appeal the similar contention was urged before Commissioner (Appeals). The ld Commissioner (Appeals) observed that the assessee availed loan of Rs.1,50,00,000/- from ICICI Bank Ltd against his flat. After examining the details of the ICICI Bank loan ld CIT(A) concluded that out of the said loan the assessee advanced loan to 3 parties namely Manish K. Mehta, Dr. Varsha K. Mehta and Dr’s Analytical Laboratory. Out of the 3 parties the assessee received interest from 2 parties namely Manish K. Mehta (Rs.4,68,714/-) and Dr Analytical Laboratory (Rs.12,14,000/-). The ld CIT(A) further concluded that major part of loan ITA No.7795/M/2012 Dr. Sanjay J. Mehta