ITO 5(1)(3), MUMBAI V. CRIMSON PROPERTIES PVT. LTD., MUMBAI

ITA 2234/MUM/2016

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 4492 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 6 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-10-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2010-2011
• Appeal Filed On: 06-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SANJAY KAPADIA
• Keywords: Revised return
• Section: 148

Judgement Text

P A G E | 1 ITA NO. 2234/MUM/2016 A.Y 2010 - 11 ITO, WARD - 5(1)(3) VS. CRIMSON PROPERTIES PVT. LTD. IN THE INCOME TAX APPELLATE TRIBUNAL ' H ' BENCH, MUMBAI BEFORE SHRI MANOJ KUMAR AGGARWAL , ACCOUNTANT MEMBER AND SHRI RAVISH SOOD, JUDICIAL MEMBER ITA NO. 2234/MUM/2016 (ASSESSMENT YEAR: 2010 - 11 ) I.T.O. WARD - 5(1)(3), ROOM NO. 569, 5 TH FLOOR, AAYAKAR BHAVAN, MUMBAI - 400 020 VS. CRIMSON PROPERTIES PVT. LTD. 3 RD FLOOR, SUNAMA HOUSE, KEMPS CONER, OPP. SHALIMAR HOTEL, MUMBAI - 400 036 PAN AAACC2206R ( APPELLANT ) ( RESPONDENT ) APPELLANT BY: SHRI MANOJ KUMAR SINGH, D .R RESPONDENT BY: SHRI SANJAY KAPADIA , A .R DATE OF HEARING: 10 .09 .2018 DATE OF PRONOUNCEMENT: 26 .10.2018 O R D E R PER RAVISH SOOD, JM THE PRESENT APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A) - 10, MUMBAI, DATED 21.12.2015 , WHICH IN TURN ARISES FROM THE ORDER PASSED BY THE A.O UNDER SEC.143(3) R.W.S. 147 OF THE INCOME TAX ACT, 1961 (FOR SHORT ACT), DATED 31.12.2013 FOR A.Y 2010 - 11. THE REVENUE ASSAILING THE ORDER OF THE CIT(A) HAS RAISED BEFORE US THE FOLLOWING GROUND OF A PPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DIRECTING THE A.O TO ALLOW THE CLAIM OF INTEREST U/S 24 (B) OF INCOME TAX ACT AGAINST THE RENTAL INCOME FROM DHANWATAY HOUSE EVEN THOUGH THE SAME WAS NOT MADE EITHER IN THE ORIGINAL RETURN OF INCOME OR IN THE RETURN FILED IN RESPONSE TO NOTIC E U/S 148 OF ACT. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DIRECTING THE A.O . TO ALLOW THE CL AIM OF INTEREST U/S 24 (B) OF I. T ACT AGAINST THE RENTAL INCOME FROM DHANWATAY P A G E | 2 ITA NO. 2234/MUM/2016 A.Y 2010 - 11 ITO, WARD - 5(1)(3) VS. CRIMSON PROPERTIES PVT. LTD. HOUSE WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAD NOT RECEIVED ANY THE RENT FROM THE TENANTS BUT IT WAS DEPOSITED IN THE BANK ACCOUNT OF AOP NAMELY M/S. M.D. DHANWATAY & OTHERS AS THE PROPERT Y WAS IN DISPUTE AND THE SUIT FOR PARTITION OF THE PROPERTY AMONGST THE ORIGINAL CO - OWNERS AND RESTRAINING THE CO - OWNERS FROM INTERMEDDLING THE SUIT PROPERTY IS PENDING IN THE HON BLE BOMBAY HIGH COURT. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, LD. CIT(A) ERRED IN NOT FOLLOWI NG THE RATIO OF DECISION OF HON BLE SUPREME COURT IN THE CASE OF GOETZE (INDIA) LTD. VS. C.I.T. (284 ITR 323) WHEREIN IT WAS HELD THAT THE CLAIM OF DEDUCTION CANNOT BE ENTERTAINED OTHERWISE THAN BY FILING REVISED RETURN OF INCOME. THE APPELLANT PRAYS THAT THE ORDER OF THE LD. CIT(A) ON THE ABOVE GROUNDS BE SET ASIDE AND THE ORDER OF THE A . O BE RESTORED. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER A NY GROUND AND/OR ADD ANY OTHER GROUNDS WHICH MAY BE NECESSARY. 2. BRIEFLY STATED, THE ASSESSEE COMPANY HAD FILED ITS RETURN OF INCOME FOR A.Y 2010 - 11 ON 30.09.2010, DECLARING TOTAL INCOME OF RS.12,34,630/ - . THE RETURN OF INCOME WAS PROCESSED AS SUCH UNDER SEC.143(1) OF THE ACT. SUBSEQUENTLY, THE CASE OF THE ASSESSEE WAS REOPENED UNDER SEC. 147 TO VERIFY THE CORRECTNESS OF DEDUCTION UNDER SEC. 24(B) OF THE ACT, AS A SIMILAR DISCREPANCY OF CLAIMING OF EXCESS DE DUCTION WAS NOTICED WHILE CONCLUDING THE ASSESSMENT FOR A.Y 2009 - 10 AND THE SAME WAS BROUGHT TO TAX IN THE SAID YEAR. THE ASSESSEE IN COMPLIANCE TO THE NOTICE ISSUED UNDER SEC. 148 FILED ITS RETURN OF INCOME DECLARING TOTAL INCOME OF RS.13,98,758/ - . 3. TH E ISSUE INVO L VED IN THE PRESENT APPEAL LIES IN A NARROW COMPASS. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS , IT WAS NOTICE D BY THE A.O THAT THE ASSESSEE IN ITS ORIGINAL RETURN OF INCOME HAD NOT SHOWN ANY INCOME FROM DHANWATAY HOUSE PROPERTY. HOWEVER , IN THE RETURN FILED BY THE ASSESSEE IN RESPONSE TO NOTICE ISSUED UNDER SEC. 148, IT HAD SHOWN RENT FROM DHANWATAY HOUSE PROPERTY OF RS. ,34,464/ - AND AFTER CLAIMING DEDUCTION UNDER SEC. 24(A) SHOWN THE INCOME OF RS. 1,64,125/ - . IT WAS OBSERVED BY THE A.O THAT THE ASSESSEE HAD CLAIMED DEDUCTION UNDER SEC. 24(B) OF RS. 1,04,51,564/ - AGAINST INCOME FROM HOUSE PROPERTY, NAMELY, DHAPLA HOUSE. HOWEVER, IT P A G E | 3 ITA NO. 2234/MUM/2016 A.Y 2010 - 11 ITO, WARD - 5(1)(3) VS. CRIMSON PROPERTIES PVT. LTD. WAS THE CONTENTION OF THE ASSESSEE THAT IT HAD PAID INTEREST OF RS. 54,35,564/ - FOR DHAPLA HOUSE PROPERTY, AND INTEREST OF RS. 50,16,000/ - FOR DHANWATAY HOUSE PROPERTY. THE A.O BEING OF THE VIEW THAT THE ASSESSEE HAD IN ITS RETURN OF INCOME CLAIMED DEDUCTION OF INTEREST ONLY IN RESPECT OF THE DHAPLA HOUSE PROPERTY, THUS DECLINED TO ACCEPT THE CL AIM OF DEDUCTION OF INTEREST IN RESPECT OF THE DHANWATAY HOUSE PROPERTY. THE CLAIM OF THE ASSESSEE THAT A CONSOLIDATE CLAIM OF DEDUCTION OF INTEREST UNDER SEC. 24(B) WAS RAISED IN RESPECT OF BOTH OF THE AFOREMENTIONED PROPERTIES VIZ. (I) DHAPLA HOUSE PROPE RTY; AND (II). DHANWATAY HOUSE PROPERTY, DID NOT FIND FAVOUR WITH THE A.O. IN ORDER TO FORTIFY HIS AFORESAID OBSERVATION, THE A.O TOOK SUPPORT OF THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF GOETZE (INDIA) LTD. VS. CIT 284 ITR 323 (SC), AND OBSERVED THAT AS THE ASSESSEE HAD FAILED TO CLAIM DEDUCTION OF INTEREST UNDER SEC. 24(B) IN RESPECT OF THE DHANWATAY HOUSE PROPERTY IN ITS RETURN OF INCOME, THUS THE SAME COULD NOT BE ALLOWED. ALTERNATIVELY, IT WAS OBSERVED BY THE A.O THAT AS OBSERVED BY H IS PREDECESSOR WHILE FRAMING THE ASSESSMENT IN THE CASE OF THE ASSESSEE FOR A.Y 2009 - 10 , DUE TO DISPUTES AMONGST THE MEMBERS OF DHANWATAY FAMILY THE RENT RECEIVED FROM THE TENANTS WAS BEING DEPOSITED IN THE BANK ACCOUNT STANDING IN THE NAME OF M/S M.D DHAN WATAY & OTHERS, AOP. IT WAS THUS OBSERVED BY THE A.O, THAT AS THE FACTS DURING THE YEAR UNDER CONSIDERATION REMAINED THE SAME, THUS THE RENT RECEIVED BY THE AOP WAS LIABLE TO BE BROUGHT TO TAX IN ITS HANDS. ON THE BASIS OF HIS AFORESAID OBSERVATIONS, THE A .O REFERRING TO SEC. 67A OF THE ACT, OBSERVED THAT THE SHARE OF PROFIT IN THE FORM OF RENT IN THE HANDS OF THE ASSESSEE (AS A MEMBER OF THE AOP), AS PER SEC. 67A(2) WAS LIABLE TO BE ASSESSED UNDER THE HEAD INCOME FROM HOUSE PROPERTY. ON THE BASIS OF HIS AFORESAID OBSERVATIONS, THE A.O CONCLUDED THAT AS PER SEC. 67A(3), ANY INTEREST PAID BY A MEMBER ON CAPITAL BORROWED FOR INVESTING IN THE AOP WAS TO BE DEDUCTED FROM HIS P A G E | 4 ITA NO. 2234/MUM/2016 A.Y 2010 - 11 ITO, WARD - 5(1)(3) VS. CRIMSON PROPERTIES PVT. LTD. SHARE OF INCOME CHARGEABLE UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION . IT WAS THUS, IN THE BACKDR OP OF THE AFORESAID FACTS, OBSERVED BY THE A.O THAT NO DEDUCTION OF THE INTEREST EXPENDITURE WAS TO BE ALLOWED AGAINST THE SHARE OF INCOME OF THE ASSESSEE FROM THE AOP. FURT HER, THE A.O AFTER NECESSARY DELIBERATIONS RESTRICTED THE CLAIM OF DEDUCTION OF INTEREST IN RESPECT OF DHAPLA HOUSE PROPERTY TO AN AMOUNT OF RS. 40,15,572/ - AND ASSESSED THE INCOME AT RS. 83,84,750/ - . 4 . AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). THE ASSESSEE SUBMITTED BEFORE THE CIT(A), THAT IT HAD UTILISED ALL THE FUNDS FOR PURCHASE OF THE PROPERTY VIZ. ( I ).DHAPLA HOUSE PROPERTY; AND (II). DHANWATAY HOUSE PROPERTY OR ON ITS REPAIRS/MAINTENANCE OR FOR REPAYMENT OF OLD LOANS THAT WERE RAISED FOR THE AFORESAID PURPOSE. THE CIT(A) AF TER NECESSARY DELIBERATIONS OBSERVED THAT A SIMILAR ISSUE AS REGARDS THE ENTITLE ME NT OF THE ASSESSEE TOWARDS CLAIM OF DEDUCTION OF INTEREST EXPENDITURE UNDER SEC. 24(B) HAD EARLIER CAME UP BEFORE HIM, IN THE CASE OF THE ASSESSEE FOR A.Y 2008 - 09 AND A.Y 200 9 - 10. IT WAS OBSERVED BY THE CIT(A) THAT WHILE DISPOSING OFF THE SAID RESPECTIVE APPEALS, HE HAD NOTICED THAT THE NEXUS BETWEEN THE BORROWED FUNDS AND THEIR UTILISATION TOWARDS THE PROPERTIES UNDER CONSIDERATION WAS NOT PRO PERLY WORKED OUT. THUS, IN THE BA CKDROP OF THE SAID FACTS, HE HAD SUGGESTED A METHOD TO THE A.O TO WORK OUT THE NEXUS BETWEEN THE INTEREST BEARING BORROWED FUNDS AND THEIR UTILISATION TOWARDS THE SAID PROPERTIES VIZ. (I).DHAPLA HOUSE PROPERTY; AND (II). DHANWATAY HOUSE PROPERTY. THE CIT(A ) REFERRING TO HIS EARLIER VIEW, THUS DIRECTED THE A.O TO FOLLOW THE SAME METHOD FOR THE YEAR UNDER CONSIDERATION. STILL FURTHER, THE CIT(A) FOLLOWING THE VIEW TAKEN BY HIM WHILE DISPOSING OFF THE APPEAL OF THE ASSESSEE FOR A.Y 2008 - 09 AND A.Y 2009 - 10, OBS ERVED THAT AS THE DHANWATAY HOUSE PROPERTY WAS FULLY OWNED BY THE ASSESSEE COMPANY TO THE EXTENT OF ITS P A G E | 5 ITA NO. 2234/MUM/2016 A.Y 2010 - 11 ITO, WARD - 5(1)(3) VS. CRIMSON PROPERTIES PVT. LTD. SHARE OF AOP FROM A.Y 2010 - 11, THEREFORE THE SAID PROPERTY WOULD GET ALL THE BENEFITS AVAILABLE TO HOUSE PROPERTY INCOME IN LINE WITH THE BENEFIT AVAILA BLE TO DHAPLA HOUSE PROPERTY. IN TERMS OF HIS AFORESAID OBSERVATIONS, THE CIT(A) DIRECTED THE A.O TO ALLOW THE BENEFITS OF THE HOUSE PROPERTY IN RESPECT OF THE DHANWATAY HOUSE PROPERTY. HOWEVER, AS A WORD OF CAUTION, THE CIT(A) DIRECTED THE CIT(A) TO RESTR ICT THE ENTITLEMENT OF THE BENEFITS OF THE HOUSE PROPERTY OF DHANWATAY HOUSE PROPERTY, ONLY TO THE EXTENT OF THE SHARE OF AOP RECEIVED BY THE ASSESSEE COMPANY. 5 . THE REVENUE BEING AGGRIEVED WITH THE ORDER OF THE CIT(A) HAS CARRIED THE MATTER IN APPEAL B EFORE US. THE LD. D.R RELIED ON THE ORDER OF THE A.O. IT WAS AVERRED BY THE LD. D.R THAT AS THE ASSESSEE HAD NOT CLAIMED ANY DEDUCTION OF THE INTEREST EXPENDITURE UNDER SEC. 24(B) IN RESPECT OF THE DHANWATAY HOUSE PROPERTY, EITHER IN ITS ORIGINAL RETURN OF INCOME OR IN THE RETURN OF INCOME FILED IN COMPLIANCE TO NOTICE ISSUED UNDER SEC. 148 OF THE ACT, THUS THE CIT(A) HA D ERRED IN ALLOWING THE SAME. IN SUPPORT OF HIS AFORESAID CONTENTION THE LD. D.R RELIED ON THE JUDGMENT OF THE HONBLE APEX COURT IN THE CASE OF VIZ. GOETZE (INDIA) LTD. VS. CIT (2006) 284 ITR 323 (SC) . IT WAS AVERRED BY THE LD. D.R THAT NOW WHEN THE ASSESSEE HAD FAILED TO RAISE THE AFORE SAID CLAIM OF INTEREST EXPENDITURE, THEREIN THE ONLY RECOURSE AVAILABLE TO IT WAS TO HAVE RAISED THE SAME BY FI LING A REVISED RETURN OF INCOME . PER CONTRA, THE LD. A.R RELIED ON THE ORDER OF THE CIT(A). IT WAS SUBMITTED BY THE LD. A.R THAT THE CIT(A) HAD R IGHTLY FOLLOWED THE VIEW AS WAS EARLIER TAKEN BY HIM WHILE DISPOSING OFF THE APPEALS OF THE ASSESSEE FOR A.Y 2008 - 09 AND A.Y 2009 - 10. 6 . WE HAVE HEARD THE AUTHORISED REPRESENTATIVES OF BOTH THE PARTIES, PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT IT IS THE CLAIM OF THE ASSESSEE THAT IT P A G E | 6 ITA NO. 2234/MUM/2016 A.Y 2010 - 11 ITO, WARD - 5(1)(3) VS. CRIMSON PROPERTIES PVT. LTD. HAD IN ITS RETURN OF INCOME FILED IN COMPLIANCE TO NOTICE ISSUED UNDER SEC. 148 OF THE ACT, HAD NOT ONLY SHOWN ITS INCOME IN RESPECT OF THE DHANWATAY HOUSE PROPERTY , BUT HAD ALSO CLAIMED DEDUCTION OF THE INTEREST EXPENDITURE OF RS. 50,16,000/ - IN RESPECT OF THE SAID PROPERTY UNDER SEC. 24(B) OF THE ACT. FURTHER, IT IS THE CLAIM OF THE ASSESSEE BEFORE THE LOWER AUTHORITIES THAT A CONSOLIDATE CLAIM OF DEDUCTION IN RESPECT OF IN TEREST EXPENDITURE UNDER SEC. 24(B) AGGREGATING TO RS. 1,04,51,564/ - WAS CLAIMED IN RESPECT OF BOTH OF THE PROPERTIES VIZ. (I) DHAPLA HOUSE PROPERTY; & (II) DHANWATAY HOUSE PROPERTY. IT WAS SUBMITTED BY THE ASSESSEE THAT AS THERE WAS NO PROVISION FOR RAISI NG OF SEPARATE CLAIM OF DEDUCTION UNDER SEC. 24(B) IN THE RETURN OF INCOME FILED IN FORM V, THUS A CONSOLIDATE CLAIM OF DEDUCTION OF THE I NTEREST EXPENDITURE WAS RAISED. WE FIND THAT THE SAID CLAIM OF THE ASSESSEE WAS NOT ACCEPTED BY THE A.O FOR THE REASON THAT AS PER HIM THE ASSESSEE HAD CLAIMED DEDUCTION OF INTEREST EXPENDITURE UNDER SEC. 24(B) ONLY IN RESPECT OF THE DHAPLA HOUSE PROPERTY. THE A.O WAS OF THE VIEW THAT A S PER THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF GOETZE (INDIA) LTD. VS. CIT 284 ITR 323 (SC), HE REMAINED UNDER A STATUTORILY OBLIGATION TO RESTRICT THE ENTITLEMENT OF THE ASSESSEE TOWARDS DEDUCTION WHICH WERE RAISED BY HIM IN THE RETURN OF INCOME, AND WAS VESTED WITH NO JURISDICTION TO ALLOW ANY SUCH CLAIM WHICH HAD NOT BEEN RAISED BY THE ASSESSEE. HOWEVER, ON APPEAL THE CIT(A) OBSERVING THAT WHILE DISPOSING OFF THE APPEALS OF THE ASSESSEE FOR THE A.Y. 2008 - 09 AND A. Y. 2009 - 10, A SIMILAR ISSUE AS REGARDS THE ENTITLEMENT OF THE ASSESSEE TOWARDS THE CLAIM OF DEDUCTION IN RESPECT OF THE INTEREST EXPENDITURE PERTAINING TO THE AFOREMENTIONED PROPERTY, VIZ. DHANWATAY HOUSE PROPERTY, CAME UP BEFORE HIM. IT WAS OBSERVED BY THE CIT(A) THAT WHILE DISPOSING OF THE AFORESAID APPEALS IT WAS OBSERVED BY HIM THAT AS A PROPER NEXUS BETWEEN THE INTEREST BEARING BORROWED FUNDS AND UTILIZATION OF THE SAME TOWARDS P A G E | 7 ITA NO. 2234/MUM/2016 A.Y 2010 - 11 ITO, WARD - 5(1)(3) VS. CRIMSON PROPERTIES PVT. LTD. THE AFOREMENTIONED PROPERTIES WAS NOT WORKED OUT , HENCE HE H AD SUGGESTED A METHOD OF WORKING OUT THE NEXUS OF FUNDS AND THEIR UTILIZATION TOWARDS THE PROPERTIES. ON THE BASIS OF THE AFORESAID OBSERVATIONS THE CIT(A) DIRECTED THE A.O TO FOLLOW THE SAME METHOD FOR WORKING OUT THE NEXUS OF FUNDS AND THEIR UTILIZATION TOWARDS THE AFOREMENTIONED PROPERTIES, VIZ. (I) DHAPLA HOUSE PROPERTY; AND (II) DHANWATAY HOUSE PROPER TY. WE FIND THAT THE REVENUE IS AGGRIEVED WITH THE AFORESAID OBSERVATIONS OF THE CIT(A), WHICH THUS HAD ENTITLED THE ASSESSEE FOR CLAIM OF DEDUCTION OF T HE INTEREST EXPENDITURE UNDER SEC. 24(B) IN RESPECT OF THE DHANWATAY HOUSE PROPERTY , DESPITE THE FACT THAT NO SUCH INTEREST EXPENDITURE IN RESPECT OF THE SAID PROPERTY WAS CLAIM ED IN ITS RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION. WE ARE OF THE CONS IDERED VIEW THAT THE RELIANCE PLACED BY THE A.O ON THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE O F GOETZE (INDIA) LTD. VS. CIT 284 ITR 323 (SC) IS WELL IN ORDER, AND AS SUCH THE A.O IS RESTRAINED FROM ALLOWING ANY SUCH CLAIM OF DEDU CTION WHICH HAD NOT BEEN RAISED BY THE ASSESSEE IN ITS RETURN OF INCOME. HOWEVER, IN OUR C ONSIDERED VIEW , ON A PERUSAL OF THE AFORESAID JUDGMENT OF THE APEX COURT, IT CAN SAFELY BE GATHERED THAT THE S AID RESTRICTION IN NO WAY CONFINES THE POWERS OF THE A PPELLATE AUTHORITIES . OUR AFORESAID VIEW IS FORTIFIED BY THE JUDGMENT OF THE HONBLE HIGH COURT OF BOMBAY IN THE CASE OF CIT VS. PRUTHVI BROKER AND SHARE HOLDERS LTD (2012) 349 ITR 336 (BOM). THE HONBLE HIGH COURT IN ITS AFORESAID ORDER HAD OBSERVED THAT THOUGH AN A.O IN THE BACKDROP OF THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF GOETZE (INDIA) LTD. VS. CIT (2006) 284 ITR 323 (SC) CANNOT ENTERTAIN A CLAIM FOR DEDUCTION/RELIEF WHICH HAD NOT BEEN RAISED BY THE ASSESSEE IN ITS RETURN OF INCO ME, OTHERWISE THAN BY FILING A REVISED RETURN OF INCOME, HOWEVER, THE APPELLATE AUTHORITIES WERE VESTED WITH A JURISDICTION TO ENTERTAIN SUCH CLAIM AS LONG AS THE SAME WAS BORNE FROM THE FACTS AVAILABLE ON P A G E | 8 ITA NO. 2234/MUM/2016 A.Y 2010 - 11 ITO, WARD - 5(1)(3) VS. CRIMSON PROPERTIES PVT. LTD. RECORD . WE THUS, WITHOUT GOING INTO THE INTRICACIE S OF THE FACTS AS TO WHETHER THE CLAIM OF DEDUCTION OF INTEREST EXPENDITURE OF RS. 50,16,000/ - IN RESPECT OF DHANWATAY HOUSE PROPERTY , FORMED PART OF THE CLAIM OF DEDUCTION OF THE INTEREST EXPENDITURE OF RS. 1,04,51,564/ - THAT WAS RAISED BY THE ASSESSEE IN ITS RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION , ARE OF THE CONSIDERED VIEW THAT ON THE BASIS OF THE JUDGMENT OF THE HONBLE HIGH COURT OF BOMBAY IN THE CASE OF PRUTHVI BROKER AND SHARE HOLDERS LTD. (S UPRA), NO INFIRMITY DOES EMERGE FROM THE ORDER OF THE CIT(A) WHO REMAINING WELL WITHIN HIS JURISDICTION HAD DIRECTED THE A.O TO ALLOW DEDUCTION OF THE INTEREST EXPENDITURE UNDER SEC. 24(B) TO THE ASSESSEE ALSO IN RESPECT OF THE DHANWATAY HOUSE , AS PER THE METHOD WHICH WAS SUGGESTED BY HIM FOR ESTABLISHING A NEXUS BETWEEN THE INTEREST BEARING BORROWED FUN DS AND UTILIZATION OF THE SAME TOWARDS THE AFOREMENTIONED PROPERTIES, VIZ. (I) DHAPLA HOUSE PROPERTY; AND (II) DHANWATAY HOUSE PROPERTY . WE THUS FINDING OURSELVES TO BE IN AGREEMENT WITH THE VIEW TAKEN BY THE CIT(A), THUS DISMISSED THE GROUNDS OF APPEAL NO. (I) AND (III) RAISED BY THE REVENUE BEFORE US. 7 . WE HAVE FURTHER DELIBERATED ON THE OBSERVATIONS OF THE CIT(A) THAT THE ASSESSEE WOULD BE ENTITLE D FOR CLAIM OF DEDUCTION OF THE INTEREST EXPENDITURE UNDER SEC. 24(B) IN RESPECT OF THE DHANWATAY HOUSE PROPE R TY , TO THE EXTENT OF HIS SHARE OF INCOME FROM M/S M.D. DHANWATAY & OTHERS, AOP . WE FIND THAT AS PER SEC. 67A(2) OF THE ACT, THE SHARE OF INCOME IN THE HANDS OF A MEMBER OF AN AOP IS TO BE APPORTIONED UNDER THE VARIOUS HEADS OF INCOME , IN THE SAME MANNER IN WHICH THE INCOME OR LOSS OF THE ASSOCIATION OR BODY HAS BEEN DETERMINED UNDER THE SAID RESPECTIVE HEAD S OF INCOME. IN OUR CONSIDERED VIEW, IN TERM S OF THE AFORESAID MANDATE OF LAW, THE RENTAL INCOME RECEIVED BY THE ASSESSEE AS HIS SHARE OF INCOME FROM THE AFOREMENTIONED AOP WAS LIABLE TO BE ASSESSED UNDER THE HEAD INCOME P A G E | 9 ITA NO. 2234/MUM/2016 A.Y 2010 - 11 ITO, WARD - 5(1)(3) VS. CRIMSON PROPERTIES PVT. LTD. FROM HOUSE PROPERTY. TO THE SAID EXTENT, THERE IS NO CONTROVERSY BETWEEN THE REVENUE AND THE ASSESSEE. HOWEVER, THEREAFTER THE A.O BY TAKING SUPPORT OF SEC. 67A(3) HAD OBSERVED THAT ANY INTEREST PAID BY A MEMBER ON CAPITAL BORROWED BY HIM FOR THE PURPOSE OF INVESTMENT IN THE ASSOCIATION OR BODY SHALL, IN COMPUTING HIS CHARGEABLE UNDER THE HEAD PROFITS AND GAINS OF BUSINESS AND PROFESSION IN RESPECT OF A SHARE IN THE I NCOME OF THE ASSOCIATION IS TO BE DEDUCTED FROM HIS SHARE. ON THE BASIS OF THE AFORESAID OBSERVATIONS, THE A.O WAS OF THE VIEW THAT NOW WHEN SHARE OF INCOME OF THE ASSESSEE FROM THE AOP WAS TO BE ASSESSED UNDER THE HEAD INCOM E FROM HOUSE PROPERTY, THUS ITS CLAIM OF INTEREST EXPENDITURE UNDER SEC. 24(B) COULD NOT BE ACCEPTED. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE O BSERVATIONS OF THE A.O, AND UNABLE TO PERSUADE OURSELVES TO SUBSCRIBE TO THE INTERPRETATION OF SEC. 67A(3) SO ACCORDED BY HIM. ADMITTEDLY, THE INTEREST PAID BY A MEMBER ON CAPITAL BORROWED BY HIM FOR THE PURPOSE OF INVESTMENT IN THE AOP SHALL, IN COMPUTING HIS SHARE CHARGEABLE UNDER THE HEAD PROFIT AND GAINS OF BUSINESS OR PROFESSION IS TO BE DEDUCTED FROM HIS SAID SHARE OF INCOME. HOWEVER, IN CASE BEFORE US THE CLAIM OF INTEREST EXPENDITURE OF THE ASSESSEE, IS NOT IN CONTEXT O F ANY BORROWED CAPITAL WHICH HAD BEEN UTILIZED FOR MAKING OF AN INVESTMENT IN THE AOP . RATHER, THE AFORESAID INTEREST EXPENDITURE PERTAINS TO THE CAPITAL WHICH WAS BORROWED BY THE ASSESSEE FOR AN INVESTMENT IN THE PROPERTY , THE RENTAL INCOME OF WHICH ONLY PURSUANT TO A PENDING LITIGATION AMONGST THE MEMBERS OF THE DHANWATAY FAMILY BEFORE THE HONBLE HIGH COURT, WAS DEPOSITED IN THE BANK ACCOUNT STANDING IN THE NAME OF M/S M.D. DHANWATAY AND OTHERS, AOP. WE ARE OF THE CONSIDERED VIEW , TH AT THE AFORESAID INTEREST EXPENDITURE PERTAINING TO THE FUNDS WHICH WERE UTILIZED BY THE ASSESSEE IN RESPECT OF DHANWATAY HOUSE PROPERTY, CANNOT BE PLACED AT PAR WITH THE INTEREST ON CAPITAL WHICH WAS BORROWED BY THE ASSESSEE P A G E | 10 ITA NO. 2234/MUM/2016 A.Y 2010 - 11 ITO, WARD - 5(1)(3) VS. CRIMSON PROPERTIES PVT. LTD. FOR THE PURPOSE OF MAKING AN I NVESTMENT IN THE AOP. INTERESTINGLY, VIEWED FROM ANOTHER ANGEL, AS THE AFORESAID INTEREST BEARING FUNDS WERE UTILIZED IN RESPECT OF DHANWATAY HOUSE PROPERTY , MUCH PRIOR TO THE EXISTENCE OF THE AOP (WHICH CAME INTO EXISTENCE ONLY PURSUANT TO A DISPUTE AMONGST THE FAMILY MEMBERS ON THE ISSUE OF THE PARTITION OF THE PROPERTY), THUS, THE INTEREST PERTAINING TO SUCH BORROWED FUNDS , ON THE SAID COUNT ALSO CANNOT BE CONSTRUED AS INTEREST PERTAINING TO THE FUNDS BORROWED BY THE ASSESSEE FOR THE PURPOSE OF MAKING AN INVESTMENT AS A MEMBER IN THE AOP. WE THUS, IN TERMS OF OUR AFORESAID OBSERVATIONS ARE PERSUADED TO SUBSCRIBE OF THE VIEW TAKEN BY THE CIT(A) WHO IN OUR CONSIDERED VIEW HAD RIGHTLY CONCLUDED THAT THE SHARE OF PROFIT IN THE FORM OF RENT RECEIV ED BY THE ASSESSEE WAS LIABLE TO BE TAXED UNDER THE INCOME FROM HOUSE PROPERTY, AND THE ASSESSES WOULD BE ELIGIBLE TO CLAIM DEDUCTION OF THE INTEREST EXPENDITURE AGAINST THE SAID INCOME, THOUGH WITH A RIDER THAT SUCH DEDUCTION WAS NOT TO EXCEED THE SHARE OF INCOME OF THE ASSESSEE AS A MEMBER OF THE AOP. WE THUS, NOT FINDING ANY INFIRMITY IN THE AFORESAID OBSERVATIONS OF THE CIT(A), UPHOLD THE SAME. THE GROUND OF APPEAL NO. (II) RAISED BY THE REVENUE IS DISMISSED. 8 . THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRO NOUNCED IN THE OPEN COURT ON 26 /10/2018 SD/ - SD/ - ( MANOJ AGGARWAL ) (RAVISH SOOD) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; 26. 10.2018 PS. ROHIT KUMAR P A G E | 11 ITA NO. 2234/MUM/2016 A.Y 2010 - 11 ITO, WARD - 5(1)(3) VS. CRIMSON PROPERTIES PVT. LTD. / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI