LEELA IMPEX, MUMBAI V. ITO 17(3)-3, MUMBAI

ITA 3579/MUM/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 1280 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-06-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2004-2005
• Appeal Filed On: 02-06-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: VIKRAM GAUR
• Keywords: Business income; Depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'A' BENCH, MUMBAI BEFORE SHRI D.K. AGARWAL, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO. 3579/MUM/2009 (ASSESSMENT YEAR: 2004-05) M/S. LEELA IMPEX INCOME TAX OFFICER - 17(3)-3 LANINA BUILDING, B BLOCK MUMBAI 3RD FLOOR, ST. XAVIERS STREET VS. BHPOWADA, PAREL, MUMBAI 400012 PAN - AAAFL 1351 K APPELLANT RESPONDENT APPELLANT BY: SHRI NARESH JAIN RESPONDENT BY: SHRI VIKRAM GAUR O R D E R PER B. RAMAKOTAIAH, A.M. THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER OF THE CIT(A)- XXVII, MUMBAI DATED 24.10.2008. 2. ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: - 1. THE LD. CIT(A) HAS ERRED IN CONSIDERING THE REN TAL INCOME RECEIVED TO BE ASSESSED UNDER THE HEAD OF INCOME FROM HOUSE PROPERTY INSTEAD OF INCOME FROM BUSINESS OR PROFESSION AND T HEREBY NOT ALLOWING INTEREST EXPENDITURE PAID ON LOANS AND DEP RECIATION ON BUILDING AND OTHER INCIDENTAL EXPENSES INCURRED FOR THE SAME. RENTAL INCOME TO BE ASSESSED AS BUSINESS INCOME. 2. WITHOUT PREJUDICE TO THE ABOVE, ASSESSING OFFICE R ERRED IN NOT ALLOWING THE INTEREST COST ON THE FUNDS BORROWED FO R THE INVESTMENT IN THE ASSET WHICH IS RENTED OUT. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE F IRM IS ENGAGED IN THE BUSINESS AND DURING THE YEAR UNDER CONSIDERATION, M AIN SOURCE OF INCOME OF THE FIRM WAS RENT RECEIVED FROM BUSINESS CENTRE. TH E ASSESSEE HAS FILED RETURN WHEREIN INCOME OF RS.10,32,145/- WAS CREDITE D WHICH INCLUDED RENT RECEIVED OF RS.6,60,000/-. AGAINST THIS THE ASSESSE E CLAIMED VARIOUS EXPENSES LIKE FACTORY MAINTENANCE CHARGES RS.74,808 /-, INTEREST AMOUNTING TO RS.3,28,272/-, FINANCIAL EXPENSES RS.2,02,219/- AND PROFESSIONAL FEE ITA NO. 3579/MUM/2009 M/S. LEELA IMPEX 2 RS.2,000/-. IN VIEW OF THE HON'BLE SUPREME COURT DE CISION IN THE CASE OF M/S. SHAMBHU INVESTMENT P. LTD. VS. CIT 263 ITR 143 , THE A.O. ASKED THE ASSESSEE TO SHOW CAUSE WHY THE SAID INCOME I.E. REN T RECEIVED SHOULD NOT BE TAXED UNDER THE HEAD INCOME FROM HOUSE PROPERTY AND THE EXPENSES ALLOWED TO THE EXTENT OF 30% ONLY AS PER PROVISIONS OF SECT ION 24 OF THE ACT. IN RESPONSE, THE ASSESSEE SUBMITTED THE STATEMENT OF B REAK-UP OF P & L ACCOUNT AS PER ACTIVITY-WISE OF THE ASSESSEE IE. UN DER THE BUSINESS CENTRE AND BUSINESS ACTIVITY. THE ASSESSEE ALSO SUBMITTED THAT THE ASSESSEE IS RUNNING BUSINESS CENTRE AND THE CLAIM OF EXPENDITUR E IS JUSTIFIED. THE A.O. OBSERVED THAT THE ASSESSEES CLAIM THAT THE RENT RE CEIVED IS TO BE ASSESSED AS BUSINESS INCOME CANNOT BE ACCEPTED AS THE SAID BUSI NESS CENTRE IS NOTHING BUT PROPERTY, I.E. LALINA BUILDING, B BLOCK, 3 RD FLOOR, ST. XAVIER STREET, PAREL, BHOIWADA, MUMBAI, WHICH IS GIVEN ON RENT AND THE IN COME FROM THE SAME IS TAXABLE UNDER THE HEAD INCOME FROM HOUSE PROPERTY IN VIEW OF THE HON'BLE SUPREME COURT JUDGEMENT IN THE CASE OF M/S. SHAMBHU INVESTMENT P. LTD. VS. CIT 263 ITR 143 WHEREIN ON A SIMILAR ISSUE, IT WAS HELD THAT THE INCOME WAS ASSESSABLE UNDER THE HEAD INCOME FROM HOUSE PRO PERTY. IN VIEW OF THE ABOVE, THE ASSESSEES INCOME FROM THE SAID PROPERTY WAS TREATED BY THE A.O. AS INCOME FROM HOUSE PROPERTY AND THE CLAIM OF EXPE NDITURE DEBITED WAS REJECTED BY THE A.O. HOWEVER, DEDUCTION UNDER SECTI ON 24 AT 30% AMOUNTING TO RS.1,98,000/- WAS ALLOWED BY THE A.O. 4. BEFORE THE CIT(A) IT WAS SUBMITTED THAT THE ASSESSE E IS ENGAGED IN THE BUSINESS OF MANUFACTURE AND EXPORT OF GOLD ORNAMENT S, DIAMONDS AND LABOUR JOB WORK. DUE TO CERTAIN BUSINESS COMPULSION S, THE ASSESSEE WAS FORCED TO LET OUT COMMERCIAL ASSETS. THE ASSESSEE, IN THIS REGARD, SUBMITTED A COPY OF LEASE AGREEMENT WHEREBY INDUSTRIAL UNIT H AS BEEN PUT TO LEASE. IT IS STATED THAT THE A.O. HAS WRONGLY TAKEN THE BUSINESS OF THE ASSESSEE AS BUSINESS OF HIRING OF ASSETS. THE ASSESSEE OBJECTED TO THE ABOVE VIEW AND STATED THAT THE ASSESSEES FINANCIAL STATEMENT FOR THE YEAR ENDING ON 31.03.2002 CLEARLY SHOWS THE ASSESSEE WAS ENGAGED I N THE BUSINESS OF MANUFACTURING AND ALSO RECEIPT OF LABOUR/ JOB CHARG ES. IT IS ALSO STATED THAT THE ASSESSEES FACTS ARE SIMILAR TO THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF COMMISSIONER OF EXCESS PROFIT TAX, B OMBAY CITY VS. SHRI ITA NO. 3579/MUM/2009 M/S. LEELA IMPEX 3 LAKSHMI SILK MILLS LTD. 20 ITR 451. THE HON'BLE SUP REME COURT IN THE CASE OF SHRI LAKSHMI SILK MILLS LTD. HAS HELD THAT THE I NCOME EARNED FROM LETTING OUT OF HIS DYEING PLANT TEMPORARILY WAS BUSINESS IN COME. DYEING PLANT HAD NOT CEASED TO BE A COMMERCIAL ASSET WHEN THE ASSESS EE ITSELF COULD NOT RUN IT FOR THE TIME BEING AND LET OUT THE PLANT TEMPORA RILY TO OTHER FOR MAKING PROFIT FOR HIS BUSINESS. BASED ON THIS HON'BLE SUPR EME COURT DECISION, THE HON'BLE M.P. HIGH COURT IN THE CASE OF CIT VS. KOHI NOOR TOBACCO PRODUCTS P. LTD. 283 ITR 162 HAS ALSO DECIDED THAT INCOME FROM EXPLOITATION OF COMMERCIAL ASSET BY WAY OF SHORT TERM LEASE SHOULD BE TAXED UNDER BUSINESS ASSET. THUS, RELYING ON VARIOUS JUDICIAL PRONOUNCEM ENTS, THE ASSESSEE SUBMITTED THAT THE INCOME FROM BUSINESS CENTRE SHOU LD HAVE BEEN CONSIDERED UNDER THE HEAD BUSINESS INCOME AND NOT F ROM HOUSE PROPERTY. 5. THE CIT(A) REJECTED THE CONTENTIONS OF THE ASSESSEE HOLDING AS UNDER: - 2.5 I HAVE GONE THROUGH THE FACTS OF THE CASE, SUB MISSION AND ALSO THE ASSESSMENT ORDER. ON REASONABLE CONSIDERATION OF FA CTS, I HAVE NOTED THAT THE ASSESSEE HAD CLAIMED TO BE CARRYING ON BUS INESS AS MANUFACTURING OF ALL ITEMS IN HIS FACTORY DURING TH E Y.E. 31.03.2002. HOWEVER, THE APPELLANT LET OUT HIS BUSINESS PREMISE S TO M/S. LEELA GOLD DESIGNS LTD. HAVING ITS OFFICE AT A/7, AEME INDL. E STATE, 3 RD FLOOR, SEWRI (E), MUMBAI VIDE LEASE AGREEMENT FROM 1.4.03 TO 31. 12.2005. IN THE LEASE AGREEMENT, THERE IS A CLAUSE THAT ON EXPIRY O F THE SAID TERM, THE LEASE MAY BE EXTENDED TO FURTHER PERIOD. FROM THE F ACTS OF THE CASE, IT CANNOT BE SAID THAT DUE TO CERTAIN BUSINESS COMPULS IONS, THE APPELLANT WAS FORCED TO LET OUT THE INDUSTRIAL UNIT FOR A SHO RT PERIOD OF 33 MONTHS. THE APPELLANT HAS FAILED TO EXPLAIN NOT ONLY BEFORE THE AO BUT ALSO DURING THE COURSE OF APPEAL PROCEEDINGS THE BUSINES S COMPULSIONS WHICH LED TO STALL ITS BUSINESS ACTIVITY TEMPORARILY THER EBY LETTING OUT HIS PREMISES AND ASSETS TO ANOTHER PARTY APPARENTLY A S ISTER CONCERN. THE APPELLANT HAD NOT BROUGHT ON RECORD ANY CONVINCING EXPLANATION IN SUPPORT OF ITS CLAIM THAT DUE TO BUSINESS COMPULSIO NS IT WAS FORCED TO STALL ITS MANUFACTURING BUSINESS ACTIVITIES. THOUGH THE APPELLANT HAD FURNISHED FINANCIAL STATEMENT FOR THE YE 31.3.2002 IT HAS NOT SUBMITTED THE FINANCIAL STATEMENT FOR THE Y.E. 31.3.2003. IN ABSENCE OF CONVINCING EXPLANATION SUPPORTED BY MATERIAL ON RECORD, THE AP PELLANTS CASE IS DISTINGUISHABLE FROM THE CASES RELIED ON BY THE APP ELLANT. ON THE BASIS OF FACT OF THE CASE, I FIND THE AO HAS RIGHTLY TREATED THE RENTAL INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY IN VIEW OF THE SUPREME COURTS DECISION IN THE CASE OF M/S. SHAMBHU INVESTMENT P. LTD. VS. CIT 263 ITR 143. THIS GROUND IS DISMISSED. ITA NO. 3579/MUM/2009 M/S. LEELA IMPEX 4 6. BEFORE US THE LEARNED COUNSEL SUBMITTED THAT THE AS SESSEE HAS RENTED OUT THE BUSINESS PREMISES AND ACCORDINGLY THE INCOM E HAS TO BE ASSESSED AS INCOME FROM BUSINESS ONLY. IT HAS FILED A PAPER BOO K RUNNING FROM PAGE NO. 1 TO 53 AND ALSO CASE LAW RUNNING FROM PAGE NO. 1 T O 35. HE REITERATED THE SUBMISSIONS MADE BEFORE THE CIT(A) WITH REFERENCE T O VARIOUS CASE LAW AND REFERRED TO THE AGREEMENT PLACED ON RECORD BETWEEN M/S. LEELA IMPEX AND M/S. LEELA GOLD DESIGNS LTD. AND ALSO TO THE INCOME TAX RETURNS IN A.Y. 2002-03 AND 2003-04 TO SUBMIT THAT THE ASSESSEE WAS IN THE BUSINESS OF GOLD EXPORT AND ACCORDINGLY RENT RECEIVED SHOULD BE CONSIDERED AS INCOME FROM BUSINESS. 7. THE LEARNED D.R., HOWEVER, RELIED ON THE ORDERS OF THE A.O. AND THE CIT(A). 8. WE HAVE CONSIDERED THE ISSUE AND PERUSED THE ORDERS AND PAPERS FILED IN THE PAPER BOOK. IT IS THE FACT THAT THE ASSESSEE WAS INVOLVED IN GOLD AND JEWELLERY EXPORT UP TO 31.03.2002. FOR THE YEAR END ING ON 31.03.2003 THE ASSESSEE HAS FURNISHED ONLY COMPUTATION STATEMENTS AND P & L ACCOUNT WITHOUT ANY SCHEDULES, WHICH DOES NOT INDICATE ANY BUSINESS ACTIVITY AS SUCH AND THE ONLY RECEIPT WAS THE INCOME RECEIVED A T RS.2,89,000/-,MAY BE THE RENTAL INCOME. FOR THE YEAR UNDER CONSIDERATION THE ASSESSEE HAS SHOWN IN ADDITION TO RENTAL INCOME OF RS.6,60,000/-, PROF IT ON SHARE TRADING AT RS.3,72,145/-. AS SUCH THERE IS NO EXPORT ACTIVITY OF EITHER GOLD OR JEWELLERY. IT WAS ONE OF THE ASSESSEES CONTENTIONS THAT THE A SSESSEE HAD LET OUT THE PREMISES ALONGWITH MACHINERY AND IT WAS ONLY A TEMP ORARY LET OUT OF COMMERCIAL ASSETS. IT WAS THE CONTENTION OF THE ASS ESSEE THAT THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE SHAMBHU INVES TMENT P. LTD. IS NOT APPLICABLE AS IT HAD LET OUT INDUSTRIAL UNIT ALONGW ITH MOVEABLE ASSETS. THE CASE IS MORE SPECIFICALLY COVERED BY THE DECISION I N THE CASE OF SHRI LAKSHMI SILK MILLS LTD. 20 ITR 451 AND THE DECISION OF THE HON'BLE MP HIGH COURT IN THE CASE OF KOHINOOR TOBACCO PRODUCTS P. LTD. 283 ITR 162. 9. IN ORDER TO EXAMINE THE ISSUE IT IS NECESSARY TO EX TRACT THE RELEVANT CLAUSES OF AGREEMENT ENTERED INTO BY THE ASSESSEE W ITH M/S. LEELA GOLD DESIGNS LTD.: - ITA NO. 3579/MUM/2009 M/S. LEELA IMPEX 5 1) IN PURCHASE OF THE SAID AGREEMENT THE LICENSOR HEREBY GRANT TO THE LICENSEE LEAVE & LICENSE TO USE AND OCCUPY THE SAID INDUSTRIAL UNIT FOR LICENSEES USE FROM 01.-04-2003 TO 31-12-20 05. 2) THAT THE LICENSEES HAVE AGREED TO PAY MONTHLY COMPE NSATION OF RS.30,000/- (RS. THIRTY THOUSANDS ONLY) PER MONTH, ON OR BEFORE 10 TH DAY OF THE END OF EACH MONTH FOR THE USE OF THE SA ID INDUSTRIAL UNIT. 3) THAT THE SAID LEAVE & LICENSE AGREEMENT SHALL BE IN FORCE FOR A PERIOD OF 33 MONTH FROM 01-04-2003 TO 31-12-3005 AN D ON ITS EXPIRY, THE LICENSEES SHALL HANDOVER THE VACANT POS SESSION OF THE SAID (PREMISES) INDUSTRIAL UNIT TO THE LICENSORS. 4) THAT THE LICENSORS SHALL EXPIRES THE OPERATION OF T HIS AGREEMENT FOR A FURTHER PERIOD IF REQUIRED. 5) THE LICENSEES FURTHER AGREE THAT THEY SHALL PAY THE ELECTRIC CHARGES REGULARLY & SHALL PAY TELEPHONE BILL OF TEL . NO: 24139157, 24135882, 56624340, 56674341, 24166560: LICENSORS H AVE PERMITTED THEM TO USE IT. 6) THAT THE LICENSES SHALL USE THE PREMISES AND SHALL KEEP THE SAME IN GOOD CONDITION. THE LICENSORS SHALL NOT SUPPLY A NY FITTINGS OR FIXTURES MORE THAN WHAT EXISTS IN THE PREMISES AT P RESENT. 7) THAT SHOULD THE LICENSEES FAIL TO PAY THE AGREED MO NTHLY COMPENSATION OF RS.30,000/- THE LICENSOR SHALL BE A T LIBERTY TO TERMINATE THE SAID AGREEMENT FORWITH. 10. AS CAN BE SEEN FROM THE ABOVE THE ASSESSEE HAS LET OUT ONLY THE INDUSTRIAL UNIT WITHOUT ANY MACHINERY. WE HAVE PERU SED THE BALANCE SHEET PLACED ON RECORD FOR THE YEAR ENDING 31-03-2002 AND THE DEPRECIATION SCHEDULE. THE ASSESSEE WAS HAVING PLANT AND MACHINE RY AS ON 31.03.2002 VALUED AT RS.32,96,581/- WITH WDV AT RS.24,72,436/- . IT ALSO HAD FACTORY BUILDING VALUED AT RS.59,58,200/- WITH WDV AT RS.5 3,62,380/- AS ON 31.03.2002. AS SEEN FROM THE BALANCE SHEET AS ON 31 .03.2003 THE FIXED ASSETS HAVE COME DOWN TO RS.48,77,750/- , I.E. ONLY THE FACTORY SHED WITHOUT THERE BEING ANY OTHER MACHINERY. THE DETAILED DEPRE CIATION SCHEDULE WAS NOT ON RECORD BUT THE RECORD INDICATES THAT THE ASS ESSEES BALANCE SHEET HAS ONLY FIXED ASSETS OF RS.48,77,750/- AND CURRENT ASS ETS OF RS.9,38,551/-. THE BALANCE SHEET FILED FOR THE YEAR ENDING ON 31.0 3.2004, PARTICULARLY THE SCHEDULE 3 OF FIXED ASSETS INDICATE THE BUILDING VA LUE AT RS.48,26,142/- AND FURNITURE OF RS..51,608/-. THERE IS NO MACHINERY IN VOLVED IN THE LIST OF PROPERTY, HENCE, THE ASSESSEES STATEMENT THAT IT H AS LEASED OUT MACHINERY ITA NO. 3579/MUM/2009 M/S. LEELA IMPEX 6 OR MOVABLE ASSETS CANNOT BE ACCEPTED. THE CASE LAW RELIED UPON BY THE ASSESSEE ARE ALSO NOT APPLICABLE TO THE FACTS OF TH E CASE. IN THE CASE OF CIT VS. SHRI LAKSHMI SILK MILLS LTD. 20 ITR 451 THE ISS UE IS WITH REFERENCE TO LETTING OUT OF PLANT, WHICH WAS A COMMERCIAL ASSET, THAT TOO TEMPORARILY WHEREIN THE HON'BLE SUPREME COURT HAS STATED THAT I NCOME EARNED FROM SUCH LETTING OUT IS BUSINESS INCOME. SIMILAR IS THE FACT IN THE DECISION OF THE HON'BLE M.P. HIGH COURT IN THE CASE OF CIT VS. KOHI NOOR TOBACCO PRODUCTS P. LTD. 283 ITR 162 WHEREIN IT WAS DECIDED THAT EXPLOI TATION OF COMMERCIAL ASSETS BY WAY OF SHORT TERM LETTING OUT SHOULD BE T AXED UNDER BUSINESS ASSET. IN THE CASE OF SULTAN BROTHERS P. LTD. 51 IT R 353 (SC) THE FACTS WERE THAT THE BUILDING, PLANT, MACHINERY AND FURNITURE W ERE INSEPARABLY LET, THE INCOME HAS TO BE CONSIDERED AS INCOME FROM OTHER SO URCES AND THAT DECISION WAS GIVEN IN THE CONTEXT OF I.T. ACT 1922 AND THE F ACTS ARE ENTIRELY DIFFERENT FROM ASSESSEES FACTS OF THE CASE. IN THE CASE OF C.P. PICTURES LTD. VS. CIT 46 ITR 1182 (BOM) THE ASSESSEE HAS LET OUT THE CINEMA HOUSE INCLUDING ALL OTHER ASSETS OF CINEMA HOUSE WHEREIN THE HON'BLE BO MBAY HIGH COURT HAS HELD THAT INCOME DERIVED BY WAY OF EXPLOITATION OF COMMERCIAL ASSET IS INCOME FROM BUSINESS. HOWEVER, IN ALL THE ABOVE CAS ES RELIED UPON BY THE ASSESSEE, THE ISSUE IS EXPLOITATION OF COMMERCIAL A SSET. HOWEVER, IN THE CASE OF THE ASSESSEE THE ASSESSEE HAS SOLD AWAY THE MACH INERY/PARTED WITH THE MACHINERY, AS SEEN FROM THE SCHEDULES, IN THE YEAR 2002-03 AND SUBSEQUENTLY ENTERED INTO LEASE OF THE BUILDING PRO PERTY W.E.F. 01.04.2003. THIS AGREEMENT WAS FOR A PERIOD OF THREE YEARS AND ON ENQUIRY FROM THE COUNSEL IT WAS INFORMED THAT THE AGREEMENT WAS EXTE NDED FOR ANOTHER THREE YEARS, WHICH MEANS THAT IN THE LAST SIX TO SEVEN YE ARS THE PROPERTY WAS LEASED OUT AS SUCH OBTAINING RENTAL INCOME. IN THES E CIRCUMSTANCES THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE O F SHAMBHU INVESTMENT P. LTD. 263 ITR 143 IS SQUARELY APPLICABLE. ACCORD INGLY THE ORDERS OF THE A.O. AND THE CIT(A) ON THIS ISSUE ARE UPHELD. GROUN D NO 1 IS ACCORDINGLY REJECTED 11. THE ISSUE IN GROUND NO. 2 IS WITH REFERENCE TO NOT ALLOWING INTEREST COST ON THE FUNDS BORROWED FOR INVESTMENT IN ASSETS WHICH IS RENTED OUT. THE ASSESSEE HAS CLAIMED INTEREST EXPENSES OF RS.3,28,2 72/- AND FINANCIAL ITA NO. 3579/MUM/2009 M/S. LEELA IMPEX 7 EXPENSES OF RS.2,219/- IN THE P & L ACCOUNT. WHILE CONSIDERING THE INCOME UNDER HOUSE PROPERTY THE A.O. HAS NOT CONSIDERED AN Y DEDUCTION ON INTEREST APPLICABLE UNDER THE PROVISIONS OF SECTION 24(2). T HE CIT(A), WHEN IT WAS CONTESTED, DID NOT AGREE WITH ASSESSEES CONTENTION HOLDING THAT THE ASSESSEE HAS NOT BROUGHT ON RECORD ANY MATERIAL TO SUGGEST THAT IT HAS BORROWED FUNDS FOR ACQUISITION OF PROPERTY AND PAID INTEREST ON THIS BORROWED FUNDS. THE LEARNED COUNSEL SUBMITTED THAT THE ONLY ASSET AVAILABLE IS THE PROPERTY AND THE ASSESSEE HAS PAID INTEREST ON THE BORROWED FUNDS AND ACCORDINGLY INTEREST WAS ALLOWABLE. 12. WE ARE UNABLE TO CORRELATE THE INTEREST CLAIM VIS- -VIS BORROWED FUNDS. FROM THE BALANCE SHEET AVAILABLE ON RECORD THE ASSE SSEE HAS UNSECURED LOANS FROM EARLIER YEARS AND AS STATED ABOVE, ALSO HAD PLANT AND MACHINERY AND OFFICE EQUIPMENTS. UNLESS BORROWED FUNDS ARE US ED IN PURCHASE OF THE UNIT WHICH WAS LET OUT, THE CORRESPONDING INTEREST INCOME CANNOT BE ALLOWED. THE A.O. HAD NOT EXAMINED THIS ISSUE AND T HE CIT(A) HAS NOT CONSIDERED ISSUE BY EXAMINING THE FACTS AS WELL. IN THE INTEREST OF JUSTICE WE RESTORE THE MATTER OF CLAIM OF INTEREST UNDER SECTI ON 24 TO THE FILE OF THE A.O. THE A.O. SHOULD EXAMINE WHETHER THE ASSESSEE HAS IN VESTED ANY OF THE BORROWED FUNDS IN THE LEASED ASSET AND ON EXAMINATI ON AND VERIFYING WHETHER THE INTEREST IS ALLOWABLE WHILE WORKING OUT THE HOUSE PROPERTY INCOME, THE SAME CAN BE ALLOWED. THE ISSUE IS RESTO RED TO THE FILE OF THE A.O. ASSESSEE SHOULD BE GIVEN PROPER OPPORTUNITY. GROUND NO. 2 IS CONSIDERED ALLOWED. 13. IN THE RESULT, APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 25 TH JUNE 2010. SD/- SD/- (D.K. AGARWAL) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 25 TH JUNE 2010 ITA NO. 3579/MUM/2009 M/S. LEELA IMPEX 8 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) XXVII, MUMBAI 4. THE CIT XVII, MUMBAI CITY 5. THE DR, A BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.