Shri Madanlal F.Jain, Surat V. The Dy.CIT.,Circle-3, Surat

ITA 1379/AHD/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 1127 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 2 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-07-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Next Hearing Date: 08-06-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 10-05-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: PARAS M BAFNA

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER ./ ITA.NO.1379/AHD/2013 / ASSTT. YEAR: 2008-2009 SHRI MADANLAL F. JAIN C/O.CA PARAS M. BAFNA 5014, TRADE HOUSE OPP: FIRE BRIGADE STN. RING ROAD, SURAT 395 002. VS DCIT, CIR.3 SURAT. ! / (APPELLANT) '# ! / (RESPONDENT) ASSESSEE BY : SHRI PARAS M. BAFNA REVENUE BY : SHRI KAMLESH MAKWANA, SR.DR / DATE OF HEARING : 08/06/2016 / DATE OF PRONOUNCEMENT: 14/07/2016 $%/ O R D E R THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL AGAIN ST THE ORDER OF THE LD.CIT(A)-IV, SURAT DATED 27.02.2013 PASSED FOR THE ASSTT.YEAR 2008-09. 2. IN THE FIRST GROUND OF APPEAL, THE ASSESSEE HAS PLEADED THAT THE LD.CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF R S.1,24,952/-. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HA S FIELD HIS RETURN OF INCOME ON 19.1.2009 DECLARING TOTAL INCOME AT RS.2, 87,580/-. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMENT AND N OTICE UNDER SECTION 143(2) OF THE ACT WAS ISSUED ON 31.8.2009 WHICH WAS DULY S ERVED UPON THE ASSESSEE. ON SCRUTINY OF THE ACCOUNTS, IT REVEALED THAT THE A SSESSEE HAS TAKEN LOAN FROM ICICI BANK. IT HAS CLAIMED DEDUCTION OF INTEREST E XPENDITURE OF RS.1,24,952/- IN THE CAPITAL ACCOUNT FOR THE PERIOD ENDING ON 31. 3.2008. THE LD.AO HAS DIRECTED THE ASSESSEE TO EXPLAIN AS TO HOW IT IS AD MISSIBLE TO THE ASSESSEE. IN ITA NO.1379/AHD/2013 2 RESPONSE TO THE QUERY OF AO, THE ASSESSEE HAS FILED WRITTEN SUBMISSION. IT READS AS UNDER: DURING THE PREVIOUS YEAR A RESIDENTIAL PROPERTY K NOWN AS BUNGLOW NO2- DEEP MANGAL SOCIETY, ATHWALINE, SURAT HAS BEEN PURC HASED BY THE ASSESSES AS A CO-OWNER. THE DOCUMENTS OF THE SAID PROPERTY AS WEL L AS LOAN STATEMENT FROM ICICI BANK HAVE ALREADY BEEN SUBMITTED. SINCE IT IS AN OLD BUNGLOW WITH COMPLETED CONSTRUCTION, INTEREST OF RS.124952/ - ON CAPITAL BORROWED FOR THE SAID PURPOSE, IS ALLOWABLE U/S.24(B). NO RENT O R ANY OTHER BENEFITS HAVE BEEN DERIVED FROM THE SAID PROPERTY AS IT HAS BEEN FOR THE P[ART OF THE PREVIOUS YEAR ONLY. IT IS, THEREFORE, REQUESTED TO TAKE THE NET ANNUAL VALUE AT NIL AND KINDLY ALLOW THE INTEREST BY CONSIDERING TH E FACTS OF THE CASE. 4. THE LD.AO HAS OBSERVED THAT THE ASSESSEE HAS SH OWN RENTAL INCOME FROM SHIVALI HEIGHTS. AS PER COMPUTATION OF INCOME , THE INTEREST EXPENDITURE CANNOT BE ALLOWED AGAINST THE RENTAL INCOME OF THIS PROPERTY, BECAUSE, THE BORROWED FUND HAS NOT BEEN INVESTED IN THIS PROPERT Y. ACCORDINGLY, HE DISALLOWED THE INTEREST EXPENDITURE OF RS.1,24,952/ -. 5. APPEAL TO THE LD.CIT(A) DID NOT BRING ANY RELIEF TO THE ASSESSEE. 6. WITH THE ASSISTANCE OF THE LD.REPRESENTATIVES, I HAVE GONE THROUGH THE RECORD CAREFULLY. BEFORE EMBARKING UPON AN INQUIRY ON THE FACTS OF THE PRESENT CASE, I DEEM IT APPROPRIATE TO TAKE NOTE OF SECTIONS 22, 23 AND 24 OF THE INCOME TAX ACT. THEY READ AS UNDER: SECTION 22. THE ANNUAL VALUE OF PROPERTY CONSISTIN G OF ANY BUILDINGS OR LANDS APPURTENANT THERETO OF WHICH THE ASSESSEE IS THE OWNER, OTHER THAN SUCH PORTIONS OF SUCH PROPERTY AS HE MAY OCCUP Y FOR THE PURPOSES OF ANY BUSINESS OR PROFESSION CARRIED ON BY HIM THE PROFITS OF WHICH ARE CHARGEABLE TO INCOME-TAX, SHALL BE CHARGEABLE TO IN COME-TAX UNDER THE HEAD 'INCOME FROM HOUSE PROPERTY'. SECTION 23. (1) FOR THE PURPOSES OF SECTION 22, THE ANNUAL VALUE OF ANY PROPERTY SHALL BE DEEMED TO BE (A) THE SUM FOR WHICH THE PROPERTY MIGHT REASONABLY BE EXPECTED TO LET FROM YEAR TO YEAR; OR ITA NO.1379/AHD/2013 3 (B) WHERE THE PROPERTY OR ANY PART OF THE PROPERTY IS LET AND THE ACTUAL RENT RECEIVED OR RECEIVABLE BY THE OWNER IN RESPECT THEREOF IS IN EXCESS OF THE SUM REFERRED TO IN CLAUSE (A), THE AM OUNT SO RECEIVED OR RECEIVABLE; OR (C) WHERE THE PROPERTY OR ANY PART OF THE PROPERTY IS LET AND WAS VACANT DURING THE WHOLE OR ANY PART OF THE PREVIOUS YEAR AND OWING TO SUCH VACANCY THE ACTUAL RENT RECEIVED OR R ECEIVABLE BY THE OWNER IN RESPECT THEREOF IS LESS THAN THE SUM R EFERRED TO IN CLAUSE (A), THE AMOUNT SO RECEIVED OR RECEIVABLE : PROVIDED THAT THE TAXES LEVIED BY ANY LOCAL AUTHORI TY IN RESPECT OF THE PROPERTY SHALL BE DEDUCTED (IRRESPECTIVE OF THE PREVIOUS YEAR IN WHICH THE LIABILITY TO PAY SUCH TAXES WAS INCURRED BY THE OWNER ACCORDING TO THE METHOD OF ACCOUNTING REGULARLY EMP LOYED BY HIM) IN DETERMINING THE ANNUAL VALUE OF THE PROPERTY OF THAT PREVIOUS YEAR IN WHICH SUCH TAXES ARE ACTUALLY PAID BY HIM. EXPLANATION.FOR THE PURPOSES OF CLAUSE (B) OR CLAU SE (C) OF THIS SUB-SECTION, THE AMOUNT OF ACTUAL RENT RECEIVED OR RECEIVABLE BY THE OWNER SHALL NOT INCLUDE, SUBJECT TO SUCH RULES AS M AY BE MADE IN THIS BEHALF, THE AMOUNT OF RENT WHICH THE OWNER CAN NOT REALISE. (2) WHERE THE PROPERTY CONSISTS OF A HOUSE OR PART OF A HOUSE WHICH (A) IS IN THE OCCUPATION OF THE OWNER FOR THE PURPO SES OF HIS OWN RESIDENCE; OR (B) CANNOT ACTUALLY BE OCCUPIED BY THE OWNER BY REA SON OF THE FACT THAT OWING TO HIS EMPLOYMENT, BUSINESS OR PROFESSIO N CARRIED ON AT ANY OTHER PLACE, HE HAS TO RESIDE AT THAT OTHER PLACE IN A BUILDING NOT BELONGING TO HIM, THE ANNUAL VALUE OF SUCH HOUSE OR PART OF THE HOUSE SHALL BE TAKEN TO BE NIL. (3) THE PROVISIONS OF SUB-SECTION (2) SHALL NOT AP PLY IF (A) THE HOUSE OR PART OF THE HOUSE IS ACTUALLY LET DURING THE WHOLE OR ANY PART OF THE PREVIOUS YEAR; OR (B) ANY OTHER BENEFIT THEREFROM IS DERIVED BY THE O WNER. (4) WHERE THE PROPERTY REFERRED TO IN SUB-SECTION ( 2) CONSISTS OF MORE THAN ONE HOUSE (A) THE PROVISIONS OF THAT SUB-SECTION SHALL APPLY ONLY IN RESPECT OF ONE OF SUCH HOUSES, WHICH THE ASSESSEE MAY, AT H IS OPTION, SPECIFY IN THIS BEHALF; (B) THE ANNUAL VALUE OF THE HOUSE OR HOUSES, OTHER THAN THE HOUSE IN RESPECT OF WHICH THE ASSESSEE HAS EXERCISED AN O PTION UNDER CLAUSE (A), SHALL BE DETERMINED UNDER SUB-SEC TION (1) AS IF SUCH HOUSE OR HOUSES HAD BEEN LET. ITA NO.1379/AHD/2013 4 SECTION 24. INCOME CHARGEABLE UNDER THE HEAD 'INCOM E FROM HOUSE PROPERTY' SHALL BE COMPUTED AFTER MAKING THE FOLLOW ING DEDUCTIONS, NAMELY: (A) A SUM EQUAL TO THIRTY PER CENT OF THE ANNUAL VA LUE; (B) WHERE THE PROPERTY HAS BEEN ACQUIRED, CONSTRUCT ED, REPAIRED, RENEWED OR RECONSTRUCTED WITH BORROWED CAPITAL, THE AMOUNT OF ANY INTEREST PAYABLE ON SUCH CAPITAL: PROVIDED THAT IN RESPECT OF PROPERTY REFERRED TO IN SUB-SECTION (2) OF SECTION 23, THE AMOUNT OF DEDUCTION SHALL NOT EX CEED THIRTY THOUSAND RUPEES : PROVIDED FURTHER THAT WHERE THE PROPERTY REFERRED T O IN THE FIRST PROVISO IS ACQUIRED OR CONSTRUCTED WITH CAPITAL BORROWED ON OR AFTER THE 1ST DAY OF APRIL, 1999 AND SUCH ACQUISITION OR CONSTRUCTION IS COMPLETED WITHIN [THREE] YEARS FROM THE END OF THE FINANCIAL YEAR IN WHICH CAPITAL WAS BORROWED, THE AMOUNT OF DEDUCTION UNDER THIS CLAUSE SHALL NOT EXCEED [TWO LAKH RUPEES]. EXPLANATION.WHERE THE PROPERTY HAS BEEN ACQUIRED O R CONSTRUCTED WITH BORROWED CAPITAL, THE INTEREST, IF ANY, PAYABL E ON SUCH CAPITAL BORROWED FOR THE PERIOD PRIOR TO THE PREVIOUS YEAR IN WHICH THE PROPERTY HAS BEEN ACQUIRED OR CONSTRUCTED, AS REDUC ED BY ANY PART THEREOF ALLOWED AS DEDUCTION UNDER ANY OTHER PROVIS ION OF THIS ACT, SHALL BE DEDUCTED UNDER THIS CLAUSE IN EQUAL INSTAL MENTS FOR THE SAID PREVIOUS YEAR AND FOR EACH OF THE FOUR IMMEDIATELY SUCCEEDING PREVIOUS YEARS: PROVIDED ALSO THAT NO DEDUCTION SHALL BE MADE UNDER THE SECOND PROVISO UNLESS THE ASSESSEE FURNISHES A CERTIFICATE , FROM THE PERSON TO WHOM ANY INTEREST IS PAYABLE ON THE CAPITAL BORROWE D, SPECIFYING THE AMOUNT OF INTEREST PAYABLE BY THE ASSESSEE FOR THE PURPOSE OF SUCH ACQUISITION OR CONSTRUCTION OF THE PROPERTY, OR, CO NVERSION OF THE WHOLE OR ANY PART OF THE CAPITAL BORROWED WHICH REMAINS T O BE REPAID AS A NEW LOAN. EXPLANATION.FOR THE PURPOSES OF THIS PROVISO, THE EXPRESSION 'NEW LOAN' MEANS THE WHOLE OR ANY PART OF A LOAN TAKEN B Y THE ASSESSEE SUBSEQUENT TO THE CAPITAL BORROWED, FOR THE PURPOSE OF REPAYMENT OF SUCH CAPITAL. 7. THE ASSESSEE HAS PLACED ON RECORD COMPUTATION OF INCOME ON PAGE NO.14 OF THE PAPER BOOK. THE RELEVANT PART OF THE COMPUTATION READS AS UNDER: ITA NO.1379/AHD/2013 5 STATEMENT OF TOTAL INCME INCOME FROM HOUSE PROPERTY: RENTAL INCOME FROM SHOP OF SHIVALIK HEIGHTS 45000 LESS: STANDARD DEDUCTION 13500 31500 NET ANNUAL VALUE OF DEEP MANGAL BUNGALOW NIL LESS: INTEREST ON CAPITAL BORROWED FROM ICICI BANK 124952 -124952 -93452 8. AT THIS STAGE, IT IS PERTINENT TO OBSERVE THAT T HE BUNGALOW HAS BEEN PURCHASED ON 18.12.2007 FOR THE PURPOSE OF ASSESSEE S OWN RESIDENCE. NO RENT OR OTHER BENEFIT OF THIS PROPERTY HAS BEEN DER IVED BY ANY OF THE CO-OWNERS AS NECESSARY RENOVATION WAS BEING CARRIED OUT IN TH E PROPERTY. IN THE LIGHT OF THE ABOVE FACTUAL SITUATION, LET US EXAMINE PROVISI ON OF THE ACT. A BARE PERUSAL OF SECTION 22 WOULD INDICATE THAT ANNUAL VA LUE OF THE PROPERTY CONSISTED OF ANY BUILDING, LANDS APPURTENANT THERET O, EXCLUDING ANY PART BEING USED FOR THE PURPOSE OF BUSINESS OR PROFESSION CARR IED OUT BY THE ASSESSEE WHOSE PROFITS ARE CHARGEABLE TO INCOME TAX, UNDER T HE HEAD INCOME FROM HOUSE PROPERTY. IN OTHER WORDS, IF AN ASSESSEE I S AN OWNER OF BUILDING OR LAND WHICH WAS NOT OCCUPIED FOR THE PURPOSE OF ANY BUSINESS OR PROFESSION, THEN, INCOME TAX WILL BE CHARGEABLE UNDER THE HEAD INCOME FROM HOUSE PROPERTY ON THE ANNUAL VALUE. SECTION 23 CONTEMPLATES THE MANNER AS TO HOW ANNUA L VALUE WILL BE DETERMINED. SECTION 24 PROVIDES CERTAIN DEDUCTION S AGAINST HOUSE PROPERTY INCOME. NOW IN THE PRESENT CASE, THE ASSESSEE HAS NO INCOME FROM BUNGALOW NO.2 AT DEEP MANGAL SOCIETY. HIS INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY HAS ALSO NOT BEEN SHOWN. IF WE LOO K TO THE SCHEME OF SECTION 24(B) ALONG WITH TWO PROVISO, THEN IT WOULD REVEAL THAT IF THE ASSESSEE HAD GIVEN A CHOICE FOR SELF-OCCUPIED PROPERTY WITH REGA RD TO THE BUNGALOW NO.2, AND THEN UNDER FIRST PROVISO HE COULD CLAIM DEDUCTI ON TO THE EXTENT OF RS.30,000/-, AND IF IT ESTABLISHES FULFILLMENT OF C ONDITIONS PROVIDED IN SECOND PROVISO, THEN TO THE EXTENT OF RS.2.00 LAKHS. THE ASSESSEE HAS TO PROVE THAT ITA NO.1379/AHD/2013 6 THIS BUNGALOW WAS PURCHASED WITH BORROWED FUNDS. BU T NEITHER THE BUNGALOW WAS READY FOR SELF-OCCUPATION NOR THE ASSESSEE HAS GIVEN A CHOICE. THUS, UNDER THIS HEAD ALSO THE ASSESSEE IS NOT ENTITLED F OR DEDUCTION OF AN INTEREST EXPENDITURE. IN VIEW OF THE ABOVE DISCUSSION, I AM OF THE VIEW THAT UNDER BOTH THE FOLD OF PROPOSITIONS, THE ASSESSEE IS NOT ENTITLED FOR THE DEDUCTION OF INTEREST EXPENDITURE. 9. IN THE NEXT GROUND OF APPEAL, THE GRIEVANCE OF T HE ASSESSEE IS THAT THE LD.CIT(A) HAS ERRED IN CONFIRMING THE ADHOC DISALLOWANCE OF RS.60,370/-. 10. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE H AD CLAIMED EXPENDITURE OF RS.3,01,843/- AGAINST COMMISSION INCOME OF RS.4.00 LAKHS. THE AO HAS DISALLOWED A SUM OF RS.1.00 LAKH OUT OF THE TOTAL C LAIM MADE BY THE ASSESSEE. THE LD.AO HAS OBSERVED THAT THE EXPENDITURE INCURRE D BY THE ASSESSEE RELATES TO CAR AND HE WAS NOT MAINTAINING ANY LOG BOOK. TH E LD.CIT(A) CONCURRED WITH THE VIEW OF THE AO, BUT SCALED DOWN THE EXPEND ITURE TO 20% AS AGAINST 33% MADE BY THE AO. AFTER GOING THROUGH THE RECORD CAREFULLY, I AM OF THE VIEW THAT THE ASSESSEE FAILED TO ESTABLISH THAT THE EXPENDITURE WAS EXCLUSIVELY INCURRED FOR THE PURPOSE OF BUSINESS OR PROFESSION. POSSIBILITY OF USER OF CAR FOR PERSONAL PURPOSE CANNOT BE RULED. THEREFORE, ADHOC DISALLOWANCE MADE BY THE AO AND CONFIRMED BY THE LD.CIT(A) IS JUSTIFI ED, AND I UPHOLD THE SAME. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DI SMISSED. ORDER PRONOUNCED IN THE COURT ON 14 TH JULY, 2016 AT AHMEDABAD. SD/- (RAJPAL YADAV) JUDICIAL MEMBER AHMEDABAD; DATED 14/07/2016