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Income Tax Appellate Tribunal, MUMBAI BENCHES “B”, MUMBAI
Before: Shri Mahavir Singh & Shri Rajesh Kumar
O R D E R Per Mahavir Singh, Judicial Member
This appeal by assessee is arising out of the order of the CIT(A) – 30, Mumbai, in appeal No.CIT(A)-30/ACIT-19(3)/IT-396/09-10 dated 17.10.2011. The assessment was framed by the ACIT 19(3), Mumbai, for A.Y. 2006-07 vide his order dated 26.12.2008 u/s. 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’). Two interconnected issues in this appeal of the assessee are as regards to the order of the CIT(A) confirming the addition of rental income at Rs.6 lacs and consequential disallowance of interest expenses of Rs.5,19,746/-.
We have heard the rival contentions and have gone through the facts and circumstances of the case. Facts of the case are that the assessee has shown income from house property at Rs 6 lacs i.e. rent from godown premises at 132, SV Road, Khar (W). This property is rented out by the assessee to his wife. During the course of assessee’s wife’s assessment, her counsel vide letter dated 1.12.2008 submitted that the assessee has not received any interest from her husband on the amounts advanced and reason for not charging interest was also that the rent from the godown premises is charged at Rs. 6 lacs as against the actual rent of Rs.12 lacs. The relevant portion of the letter is produced in the assessment order, the same is again reproduced below for the sake of clarity:-
“Assessee has not received any interest from her husband Mr. Murlidhar T Tilwani or any other party. But majority of the loan is given to assessee’s husband. This is because assessee’s husband has given the godown premises at 132, S V Road, Khar (W), Mumbai - 400 052, to the assessee and takes the rent at Rs.6,00,000/-. Normally, the rent should have been approximately Rs.12,00,000/- but assessee has given Rs.6,00,000/- and also mutually agreed with her husband that she will not charge interest for loan given. Hence, the assessee has not received interest from her husband Mr. Murlidhar T Tilwani.”
The AO going by these facts made addition to the income from house property amounting to Rs. 6 lacs by treating the total rent as 12 lacs for the aforesaid premises.
Similarly, the AO has not allowed the claim of deduction of interest amounting to Rs.5,19,746/-. The CIT(A) also confirmed the action of the AO by stating the reason that the assessee has disclosed less rental income by a sum of Rs.6 lacs and he has also not allowed any consequential deduction u/s. 24 of the Act. Further, the interest disallowance was set aside to the file of the AO for verification of facts from records. Aggrieved against the action of the lower authorities the assessee has come in second appeal before the Tribunal.
Before us now the learned counsel for the assessee has conceded the addition of rental income in the hands of the assessee amounting to Rs.6 lacs but he requested for consequential deduction u/s. 24 of the Act. On query from the Bench, the learned Sr. DR fairly conceded that ‘yes’ the assessee is entitled for deductions u/s. 24 of the Act on the above addition because income is assessed as rent. In view of the above concession given by both the sides, we direct the AO to allow deduction u/s. 24 of the Act on the rental income and also consider the claim of deduction of interest from house property after verifying the evidences. The AO is directed accordingly.
In the result, the appeal is partly allowed for statistical purposes.
Order pronounced in the open court on this day of 8th June 2016.