M/S.KERALA FEEDS LTD,THRISSUR vs. ITO, TRICHUR

This appeal is against the order of CIT(A), National Faceless Appeal Centre (NFAC), Delhi, for the Assessment Year 2015-16. The assessee raised the following grounds: In most of the cases the land is being owned by the spouse. 1) Interest on borrowed funds invested in properties owned by wife/minor children is deductible as per the decisions of Hon'ble High Court of Madras in the case of S.M.A Siddique v. CIT 148 ITR 307 (Mad).

The assessee is a Government of Kerala Public Sector undertaking manufacturing cattle feeds. An inspection was conducted on 22.01.2016 to verify the TDS compliance. Accordingly, the ITO(TDS) issued a show cause notice for lesser deduction of tax regarding certain employees with regard to housing loan interest. The AO passed order under section 201(1) of the Income Tax Act, 1961 (hereinafter called ‘the Act’) raising a demand of Rs.92,883/- treating the assessee as an assessee in default.

Aggrieved, the assessee filed an appeal before the CIT(A). The assessee submitted the factual details pertaining to the various employees who have submitted interest on housing loan details to the assessee along with the reasons before the CIT(A). On factual verification, the CIT(A) upheld the decision of the AO by holding that Page 3 of 6 “4.5 It is for the appellant to provide the factual details with documentary evidences to show that the interest claim so restricted by the AO is factually or legally wrong. During the course of appeal, the appellant has once agains filed a written submission averring that the property in question was owned by spouses / mother of the employees. These are disputes of fact and nothing prevented the appellant from submitting the details before the AO at the time of spot verification or even thereafter till assessment was completed. Even now, only mere submissions have been made which are not capable of being independently verified. Since no new facts have been brought on record by the appellant to show that the case laws cited are squarely applicable to its case, action of the AO which is based on pure finding of facts, does not warrant any interference and is therefore, fully confirmed. Appellant's Ground No.2 and 3 on the issue is accordingly dismissed.”

The learned AR submitted that the assessee has given a detailed submission before the CIT(A) explaining the various provisions based on which the interest on housing loan was claimed and considered for the purpose of TDS by the assessee. However, the CIT(A) has though admitted that the claim of the assessee needs factual examination, concluded the assessment without examining the facts of the case and rejected the appeal of the assessee. The learned DR relied on the order of the CIT(A). 5. We heard the rival submissions and perused the material on record. The AO has raised the demand under section 201(1) with regard to short deduction of tax at source in respect of the following employees along with the reasons thereon:

From the above, the main reasons for contending that the interest on housing loan has been wrongly considered as a deduction Page 5 of 6 by the assessee for the purpose of TDS is that the property is not in the name of the employee or the property is jointly owned by the employee and the spouse. The CIT(A) rejected the appeal by stating that the assessee has not submitted the factual details before the AO at the time of spot verification and till the completion of assessment and these submissions are not capable of being verified before him (A). In view of this, in our view, the submissions of the assessee with regard to the facts in the case of each of the employees have not been examined by the lower authorities. We therefore remit the issue back to the AO to factually verify the ownership of the asset against which the housing loan interest have been claimed by the employees and accordingly decide in accordance with law.

In the result, appeal is allowed for statistical purposes . Pronounced in the open court on the date mentioned on the caption page.