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Income Tax Appellate Tribunal, MUMBAI BENCHES “E”, MUMBAI
Before: SHRI JOGINDER SINGH & SHRI ASHWANI TANEJA
O R D E R Per ASHWANI TANEJA, AM: These cross appeals have been filed against the order of Commissioner of Income-tax (Appeals)-23, Mumbai [hereinafter called CIT(A)] dated 16-12-2010 passed against the assessment order u/s 143(3) r.w.s. 254 dated 26-12-2006 for A.Y. 1997-98.
The assessee filed appeal on the following grounds:
1) “On the facts and circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals) - 23, Mumbai erred by partially upholding the disallowance of interest of 32,77,573/- even as the appellant had herself capitalized interest to the extent of Rs. 43,59,943/-. 2) Without prejudice to the above, your appellant further submits that the learned Commissioner of income Tax (Appeals) - 23 has ignored the inaccuracies pointed out in the calculation of the said amount of Rs. 32,77,573/-, as worked out by the Assessing Officer.”
3. The Revenue has filed the appeal on the following grounds: "1. On the facts and in the circumstances of the case and in law, ` the Ld. CIT(A) erred in directing the Assessing Officer to compute the interest disallowance on the net interest bearing fund amounting to Rs. 32,77,573/- used for investment in personal assets/interest free advances." 2. "On the facts and in the circumstances of the case and in Law, the Ld. CT(A) failed to appreciate the fact that the disallowance of interest of Rs. 32,77,573/- was made by the Assessing Officer since the interest payment on Loan borrowed for investment in personal asset to the tune of Rs. 2,56,93,269/- were not allowable expenditure u/s 37(1) as the same had not been expended wholly and exclusively for the purpose of business." 3. "On the facts and in the circumstances of the case and in Law, the Ld. CIT(A) has erred In observing the interest of Rs. 43,59,943/- capitalized by the assessee was not taken Into consideration by the A.O. white he made the disallowance of Rs. 32,77,573/-“. "The appellant prays that the order of the CIT(A) on the above ground(s) be set aside and that of the Assessing Officer be restored "
2. The solitary issue in both the appeals is about determining the correct amount of disallowance to be sustained on proportionate basis out of interest attributable to the investments made by the assessee for acquiring her personal assets.
During the course of hearing, it was stated at the outset by the Ld. Counsel of the assessee that in the impugned year dividend income was taxable under the head “Income from other sources”. The assessee had paid total interest of Rs.1,22,77,230 on various loans out of which a sum of Rs.43,59,943/- was disallowed and capitalised by the assessee herself on account of investment made in personal assets and balance amount of interest of Rs.79,79,287/- was claimed as allowable expenses. But, during the course of assessment proceedings, the AO made further disallowance of Rs.32,77,573.
Being aggrieved, assessee had filed an appeal before the Ld. CIT(A) and contended that assessee had correctly made voluntary disallowance of Rs.43,59,943/- and, therefore, AO has made incorrect disallowance on law and facts. Though, Ld. CIT(A) had agreed with the assessee in principle, but while passing the order, she made certain directions which have created confusion and misunderstanding and, therefore, no proper appeal effect has been given by the AO so far. Under these circumstances, he requested for modifying the directions of the Ld. CIT(A) for bringing better clarity in the order so as to help the AO in passing he appeal effect order in proper manner. 5. Per contra, the Ld. DR agreed in principle with the submissions of the assessee that only proportionate amount pertaining to the investment made in the personal assets can be disallowed and for this purpose, proper facts can be verified by the AO. 6. We have gone through the orders of the lower authorities and submissions made by both the sides before us. It is noted that on principle, none of the parties is aggrieved. Both the parties agreed that only that portion of the interest can be disallowed, which pertains to those investments which have been made in the personal assets. Perusal of the order of the Ld. CIT(A) reveals that she has also attempted to convey the same thing. But there seems to be some confusion in issuing the directions as facts were jumbled up in noting down the figures. Under these circumstances, we send this issue back to the file of the AO with the direction that the AO should find out the amount of investment, which is relatable to the investment made in the personal assets by the assessee. If the amount so worked out by the AO is less than the amount voluntarily disallowed by the assessee in its return, then no further disallowance needs to be made. If the amount so worked out by the AO is more than the amount voluntarily disallowed by the assessee, then, the amount so worked out by the AO shall be disallowed after giving credit for the disallowance made by the assessee.
The assessee shall furnish all requisite details and documentary evidences in support of her claim, for which adequate opportunity shall be given by the AO. The AO shall decide this issue afresh after considering the entire material brought on record. Thus, both the appeals may be treated as partly allowed for statistical purposes.
Order was pronounced in the open court on the conclusion of the hearing.