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Income Tax Appellate Tribunal, NAGPUR BENCH, NAGPUR
Before: SHRI SANDEEP GOSAIN & SHRI ARUN KHODPIA
PER SANDEEP GOSAIN, J.M.
The present appeal has been preferred by the assessee challenging the impugned order dated 23rd January 2017, passed by the Commissioner of Income Tax (Appeals)–1, Nagpur, [in short ―the learned CIT(A)‖] under section 250 of the Income Tax Act, 1961 (in short "the Act") for the assessment year 2011-12.
The assessee has filed this appeal on the following grounds:- 2.
―1. The order passed by Commissioner of Income Tax (Appeals)- 1, Nagpur is illegal, invalid and bad in law.
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On the facts and circumstances of the case the learned Commissioner of Income Tax (Appeals)- 1, Nagpur erred in confirming addition of Rs.1,12,37,579/- without considering the fact that new loan was taken from DCB with an intention to have lower rate of interest than the higher rate of interest charged by IBHFL. Therefore addition made is unjustified, unwarranted and excessive. 3. The learned Commissioner of Income Tax (Appeals)- 1, Nagpur erred in confirming addition of Rs.1,12,37,579/- without considering the fact that nexus of housing loan were clearly established within the meaning of Section 24 of the Income Tax Act. Therefore addition made is unjustified, unwarranted and excessive. 4. The learned Commissioner of Income Tax (Appeals)- 1, Nagpur erred in not accepting loan taken from bank as housing loan and not accepting interest paid to DCB bank amounting to Rs.1,12,37,579/-; Therefore addition made is unjustified, unwarranted and excessive. 5. The appellant seeks permission to add any other ground of appeal or amend or alter the aforesaid ground of appeal at the time of hearing of appeal.‖
The only issue that arose out of the aforesaid grounds of appeal by the assessee is, whether or not the learned CIT(A) was justified in in confirming addition of Rs.1,12,37,579/- on account of disallowance made by the Assessing Officer with respect of interest on loan.
Brief facts are, the assessee for the year under consideration 4. filed return of income on 24th February 2012, deriving income from Partnership Firm namely Shri S.K. Banerjee, M/s. S.A.S. Dev & Engg., M/s. Banerjee Brothers and M/s. Vidarbha Aua Equipment. The assessee has claimed loss on house property at Rs.2,12,48,762,
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stating home loan, repayment interest and principal of Rs.3,65,99,915. The Assessing Officer sought explanation from the assessee to furnish proper verification of the genuineness of the claim made by the assessee, the details with documentary evidences and justification thereof was also called for. The Assessing Officer also called for the details to prove with documentary evidences in respect of the loan taken as per claim of home loan taken were utilized for house property only. The propertywise details regarding receipts and expenditure thereto were also called for and justification thereof. In response, the assessee produced the documents which were placed on record before the Assessing Officer. The loan repayment interest certificates for the relevant period were also produced before the Assessing Officer. The Assessing Officer, however, in the light of the observations made in his order vide Para- 4 of his order was of the opinion that the claimed home loan interest repayment was not justified properly by the assessee. He held that even the direct nexus of use of the loan amount for acquiring the house property was not proved or explained. The Assessing Officer, therefore, added back the amount of Rs.1,13,87,579, and rejected the same as improper claim made by the assessee which was added to the income of the assessee. The assessee being aggrieved by the
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order so passed by the Assessing Officer, filed appeal before the first appellate authority.
The learned CIT(A) confirmed the order so passed by the 5. Assessing Officer by observing as under:-
―4.0 Appellant’s submissions along with assessment order and records have been considered carefully. It is seen that the appellant has paid amount of Rs.19,73,244, including interest of Rs.6,31,367, in respect of loan from HSBC for self occupied property at Mumbai. Interest claimed at Rs.1,50,000 u/s 24B has not been allowed by the AO by simply stating that interest certificate does not justify for home loan which is not found correct from perusal thereof. Further on 1.12.2007, the appellant has been sanctioned loan of Rs.9.80 crore from the India Bulls Housing Finance Ltd. against the residential property being Flat no.3502, 3603 (A,B,C) / 3601, 36049 (A&B), 35th Floor, Hiranandani Gardens, Mumbai. As per the appellant, loan from development Credit Bank (DCB) have been taken for repayment of this housing loan, however, from the separate loan certificates dt. 2.12.2013 of DCB, it is specifically mentioned that the borrower namely the appellant and Mrs. Subra Subir Kumar Banerjee have jointly being granted business loan of Rs.3,08,98,763, and Rs.3,56,84,749. The certificates have also been issued as ―Business Loan Interest Certificate‖. It is further seen that loan application no.029789 has been made by following, as mentioned in the letter dated 20.02.2010, of DCB:- i) Mr. S.K. Banerjee ii) Mrs. Surva Banerjee iii) M/s. SAS Developers and Engineers iv) M/s. SKB Constructions Pvt. Ltd. 4.1 The loan application has been made by the appellant along with his business concerns, the loan sanctioned is stated to be business loan by DCB and certificate issue by the DCB categorically mentioned is to be business loan certificate. According, the AO is found justified in making disallowance of interest totaling Rs.1,12,37,579, in case of appellant. However, appellant is found entitled for deduction of interest of Rs.1,50,000, in respect of HSBC housing loan for self occupied property. Therefore, addition of Rs.1,12,37,579, is hereby confirmed.‖ 4
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The assessee being aggrieved with the order so passed by the learned CIT(A), filed appeal before the Tribunal.
Before us, the learned Counsel, Shri Manoj G. Moryani 6. alongwith Shri Bhavesh M. Moryani, appearing for the assessee, submitted that the assessee has claimed interest on loan taken for acquiring let-out flats no.3603, 3502, 3601 and 3604 at Octavious, Pawai, Mumbai. The assessee had taken three loans from DCB Bank. These loans were taken by the assessee on 27th February 2010, for re-payment of housing loan taken from India Bulls Housing Finance Ltd. (IBHFL) for acquiring four flats in Octavious Building, Pawai, Mumbai. The housing loan taken from IBHFL was taken in the month of December 2007 at Rs.9.8 crore which is evident from the copy of the housing loan certificate which clearly speaks about home loan home equity from India Bulls Housing Finance Ltd. clearly mentions that the property financed by the loan are for the same four flats of Octavious Building, Pawai, Mumbai, copies of sanction letter dated 1st May 2007, copies of the same are placed at Page-4 of the Paper Book filed by the assessee and foreclosure receipts of IBHFL dated 27th February 2010 are submitted which is placed at Page-8 to 10 of the Paper Book filed by the assessee. Certificate of repayment of principal and interest were also submitted before the Assessing
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Officer as well as before the learned CIT(A) and the same was filed also during the present proceedings. In all these three certificates, the DCB Bank was wrongly given interest certificate as a business loan interest certificate. Though the aforesaid loan was for housing for acquiring four flats, the assessee has also submitted sanction letter of these loans which are placed at Page-5 to 7 of the Paper Book filed by the assessee clearly indicates type of loan as a home equity. The Assessing Officer as well as the learned CIT(A) disallowed the claim of the assessee only on the ground that the certificate do not justify for interest. Section 24(b) of the Act is reproduced below:-
―Deductions from income from house property. 24. Income chargeable under the head "Income from house property" shall be computed after making the following deductions, namely:— (a)……. 79(b) where the property has been acquired, constructed, repaired, renewed or reconstructed with borrowed capital, the amount of any interest payable on such capital:‖
The learned Counsel further submitted that that the 7. nomenclature of the loan does not effect the allowability of interest under section 24(b) of the Act. The learned Counsel further argued that on the basis of nomenclature of loans, the Assessing Officer as well as the learned CIT(A) has disallowed the interest without any justification and without any reason thereof. The learned Counsel further argued that the assessee had shown income under the head 6
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―Income From House Property‖. The assessee is also having business income had it been interest on business loan the assessee has right to claim it from business income and computed total income (loss) would have been the same. The learned Counsel further argued that there was a written loss of Rs.1,46,73,922 and the return of income was filed after the due date and the loss was not allowed to carry forward to the subsequent year. The assessee gained nothing in claiming such interest and there was no mala filed intention while claiming the interest. The interest was claimed only because it was a housing loan interest which was duly paid by the assesse during the previous year relevant to the assessment year 2011-12. The learned Counsel further submitted that the learned CIT(A) has allowed interest claimed u/s 24(b) of the Act at Rs.1,50,000 only and simply stating that the interest certificate does not justify for housing home loan which is not correct from the face of the record. The learned CIT(A) has admitted in Para-4 of the learned CIT(A) order that the assessee was sanctioned loan of Rs.9.8 crore from India Bull against residential property viz. flat no.3502, 3603 (A,B,C) / 3601, 3604 (A&B). The learned CIT(A) also given a finding that the assessee has taken loan from DCB Bank for repayment of this housing loan and stated that the borrower namely Mrs. Subra Subir Kumar Banerjee, have jointly been granted business loan. The learned Counsel
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submitted that as per the copy of the loan sanction letter, which is placed at Page-5 to 7 of the Paper Book and after receiving the said loan the amount were directly paid on 27th February 2010, by the DCB Bank to India Bull Housing Finance Ltd. Copy of certificates is placed at Page-8 to 10 of the paper book and the aforesaid loan were housing loan. The learned Counsel also submitted housing loan interest certificate in respect of each Flat which is placed at Page-11 to 13 of the Paper Book. The learned Counsel further brought to our knowledge that in the contention of both the authorities below are incorrect which is evident from the certificate which is placed at Page-5 to 7 of the Paper Book which says that the assessee and other members are co-applicant of the applicant the same was taken as a surety by the Bank which is also evident from interest certificate which placed at Page-11 to 13 of the Paper Book which clearly shows that the name of the borrower as ―Subir Kumar S. Banerjee‖ and other members are co-borrowers which has been used as a security purpose by the Bank. The entire repayment of loan has been made by Shri Subir Kumar S. Banerjee (the assessee herein). In support of the arguments of the learned Counsel for the assessee, following case laws were relied upon:-
i) M/s. Indraprastha Shelters Pvt. Ltd –Vs- DCIT [2021] 187 ITD 0306 (Bang-Trib);
Shri Subir Kumar Banerjee ITA No. 155/Nag./2017
ii) CIT –Vs.- Devendra Bros. & Co. [1993] 200 ITR 0146 (All. HC); iii) DLF Emporio Limited –Vs- Deputy Commissioner of Income Tax ITA No. 5654/Del/2014 dated 30/08/2017; iv) ITO –Vs.- Makrupa Chemicals (P) Ltd. [2007] 108 ITD 0095 (ITAT Mum.); v) Shri Akulu Nagaraj Gupta Subbaraju –Vs- ITO vide ITA No. 2282 To 2286/Bang/2016 dated 31/08/2017; vi) Circular of CBDT dated 20/08/1969 vide Circular No. 028 instruction regarding Section-24(1); vii) DCIT, Cricle-8, Kolkata vs. M/s. Patton Developers Pvt. Ltd. Kolkata ITA No. 1043/Kol/2014 dated 01/03/2017; viii) M/s. Mfar Developers Pvt. Ltd. & Others vs. ACIT vide ITA No. 1649/Bang/2017 dated 24/04/2019.
Accordingly, the learned Counsel prayed that keeping in view 8. the arguments made by him, appropriate relief be granted by allowing the grounds of appeal raised by him.
On the other hand, the learned Departmental Representative 9. relied on the order of the authorities.
We have heard the rival contentions perused the order of the 10. authorities below and the material available on record in the light of the case laws relied upon by the learned Counsel for the assessee. We find that the assessee claimed interest on loan taken for acquiring few let-out flats situated at Octavious building, Pawai, Mumbai, for which the assessee borrowed three loans from DCB Bank on 27th
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February 2010, for making re-payment of housing loan taken from India Bulls Housing Finance Ltd. (IBHFL) for acquiring the aforesaid flats in Octavious Building, Pawai, Mumbai. We also find that in the month of December 2007, a housing loan for an amount of Rs.9.8 crore was taken from IBHFL which is evident from the copy of the housing loan certificate, a copy of which is available at Page-4 of the Paper Book wherein it is evident that the home loan home equity loan from India Bulls were stated that the property financed by the loan is for the purpose of acquiring said four flats situated at Octavious Building (supra), copies of sanction letter is placed at Page-5 to 7 of the Paper Book, foreclosure receipts dated 27th February 2010, issued by India Bulls are placed at Page-8 to 10 of the Paper Book. It is also evident that the assessee had filed the certificate of repayment of principal and interest before the Assessing Officer as well as before the learned CIT(A) and the same are also available on record before us from which is evident that in all these three certificates, the DCB Bank has wrongly mentioned interest certificate as a business loan interest certificate instead of loan obtained for housing for acquiring four flats cited supra. It is also evident from the loan sanction letter issued by the lender of the loan which reflects the nature of loan as ―loan as a home equity‖ a copy of which is placed at Page-5 to 7 of the Paper Book. The Assessing Officer as well as the learned CIT(A)
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disallowed the claim of the assessee only on the ground that the certificate do not justify for interest. It was the argument of the learned Counsel for the assessee that the nomenclature of the loan does not effect the allowability of interest under section 24(b) of the Act. The find that the provisions of section 24(b) of the Act which state that ―(b) where the property has been acquired, constructed, repaired, renewed or reconstructed with borrowed capital, the amount of any interest payable on such capital‖ and in our view the Assessing Officer and the learned CIT(A) ought to have considered the claim of interest in lieu thereof. We further find that the ass has shown income under the head ―Income From House Property‖ and the assessee is also deriving income from business and we agree with the argument of the learned Counsel that had it been interest on business loan the assessee has right to claim it from business income and computed total income (loss) would have been the same. There was a returned loss of Rs.1,45,73,922 and the return of income was filed by the assessee after the due date and the loss was not allowed to carry forward to the subsequent year and the interest was claimed only because it was a housing loan interest which was duly paid by the assesse during the previous year relevant to the assessment year 2011-12. The aforesaid issue is also discussed and covered by the decision of the Co-ordinate Bench of the Tribunal, Bangalore Bench,
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in M/s. Indraprashta Shelters Pvt. Ltd. v/s DCIT, [2021] 187 ITD 306 (Bang.) cited by the learned Counsel, wherein it has been held as under:-
―On perusal of the provision of section 24(b) it is clear that the deduction allowed on account of interest paid on any borrowed capital which is used for the purpose of acquiring, construction, repairing, renewing or reconstruction of property. The expression used in section 24(b) is ―property‖ and not the residential or commercial property. Therefore, irrespective of the nature of theproperty whether it is residential or commercial deduction has to be allowed u/s 24(b) of the Act. As far as the third proviso to section 24(b) of the Act is concerned, all the provisions of section 24(b) of the Act deal with the property referred to in section 23(2) of the Act which refers to a residential property. The proviso only carves out an exception to section 24(b) of the Act, insofar as it relates to property used for residential purpose and does not deal with or curtail the right of an assessee to get the deduction on interest paid on loans borrowed for the purpose of constructing commercial property.‖
The other judicial pronouncements relied upon by the learned Counsel for the assessee also supports the case of the assessee, even on facts also, as per the evidences submitted by the learned Counsel. We do not find any justification in learned CIT(A) stating that he has allowed interest claimed under section 24(b) of the Act at Rs.1,50,000 for the reason that interest certificate does not justify for housing home loan whereas the learned CIT(A) himself has admitted that the assessee was sanctioned loan of Rs.9.8 crore from India Bull against residential property for the four flats cited supra. It is also evident from the findings of the learned CIT(A)’s order that the
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assessee obtained loan from DCB Bank for repayment of this housing loan and stated that the borrower namely Mrs. Subra Subir Kumar Banerjee, have jointly been granted business loan. In view of the forgoing discussions, we are of the considered opinion that the Assessing Officer as well as the learned CIT(A) ought to have accepted the claim of interest paid to DCB Bank by the assessee and consequently, we set aside the impugned order passed by the learned CIT(A) and direct the Assessing Officer to allow interest paid to DCB bank amounting to Rs.1,12,37,579/- by deleting the addition made in lieu thereof and the returned income is hereby directed to be accepted. Accordingly, grounds no.1 to 4, raised by the assessee are allowed.
In the result, assessee’s appeal is allowed. 20. Order pronounced in the open court on 28/04/2022
Sd/- Sd/- ARUN KHODPIA SANDEEP GOSAIN ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 28/04/2022
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Copy of the order forwarded to: (1) The Assessee; (2) The Revenue; (3) The CIT(A); (4) The CIT, Nagpur City concerned; (5) The DR, ITAT, Nagpur; (6) Guard file. True Copy By Order
Assistant Registrar ITAT, Mumbai