SHAH ENTERPRISES, MUMBAI V. ADDL CIT WD 23(3), MUMBAI

ITA 759/MUM/2013

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 1454 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 10 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-12-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 03-11-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 29-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B S BIST
• Keywords: Depreciation
• Section: 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH E, MUMBAI BEFORE SHRI P.K. BANSAL, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO. 759/MUM/2013 : (A.Y : 2008 - 09) M/S. SHAH ENTERPRISES 401/A, BLUE BELL APARTMENTS, DEVI DAYAL ROAD, MULUND (E), MUMBAI 400 080 ( APPELLANT ) PAN : A BKFS1697N VS. ADDL. CIT , WARD - 23(3) , MUMBAI (RESPONDENT) ASSESSEE BY : SHRI DHARAN GANDHI REVENUE BY : SHRI B.S. BIST DATE OF HEARING : 22 /12/2016 DATE OF PRONOUNCEMENT : 23 /12/2016 O R D E R PER P.K. BANSAL , AM : THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) - 34, MUMBAI DATED 30.11.2012. THE ONLY ISSUE INVOLVED IN THE VARIOUS GROUNDS OF APPEAL TAKEN BY THE ASSESSEE RELATES TO WHETHER THE INCOME EARNED BY THE ASSESSEE HAS TO BE ASSESSED AS INCOME FROM HOUSE PROPERTY OR AS INCOME FROM BUSINESS AND CONSEQUENTLY, WHETHER THE INTEREST AMOUNTING TO RS.4,56,441/ - PAID BY THE ASSESSEE TO THE BANKER WAS ALLOWABLE AS DEDUCTION. 2 M/S. SHAH ENTERPRISES ITA NO. 759/MUM/2013 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER NOTED THAT THE ASSESSEE - FIRM DERIVED ITS INCOME FROM RENT RECEIVED FROM THE PROPERTY OWNED BY IT AT AKRUTI CITY LTD., MIDC , SEEPZ, ANDHERI. THE NET LOSS AS PER THE PROFIT & LOSS ACCOUNT AS DECLARED BY THE ASSESSEE WAS RS.30,19,668/ - . DURING THE YEAR, THE ASSE SSEE - FIRM MADE INVESTMENT IN A HOUSE PROPERTY. THE SAID PROPERTY WAS GIVEN ON RENT OF RS.24,41,998/ - . THE ASSESSEE HAS DECLARED THE SAID RENTAL INCOME AS INCOME FROM BUSINESS AND CONSEQUENTLY FILED THE RETURN AT A LOSS OF RS.30,19,668/ - AFTER CLAIMING DEPRECIATION OF RS.44,56,861/ - , LOAN PROCESSING AND INTEREST CHARGES OF RS.5,68,801/ - AND ADMINISTRATIVE EXPENSES OF RS.4,36,004/ - ON THE SAID PROPERTY. THE ASSESSING OFFICER, AFTER CALLING FOR EXPLANATION OF THE ASSESSEE, TREATED THE SAID INCOME OF RS.24 ,41,998/ - AS INCOME FROM HOUSE PROPERTY AND ALSO DISALLOWED THE INTEREST AMOUNTING TO RS.4,56,441/ - AS EVEN U/S 24(B) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT), THE ASSESSEE HAS NOT FILED CERTIFICATE FROM THE PERSON TO WHOM INTEREST WAS PAID AND T HE CAPITAL BORROWED. THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(A). CIT(A) CONFIRMED THE ORDER OF THE ASSESSING OFFICER THAT THE RENTAL INCOME HAS TO BE ASSESSED UNDER THE HEAD INCOME FROM HOUSE PROPERTY, BUT IN RESPECT OF THE CLAIM OF INTEREST AMOUNTI NG TO RS.4,56,441/ - , HE VERIFIED THE SANCTION LETTER OF THE LOAN AND NOTED THAT THE TERM LOAN HAS BEEN SANCTIONED AGAINST THE RENT RECEIVABLE AND, THEREFORE, HE TOOK THE VIEW THAT IT IS NOT A HOUSING LOAN GRANTED FOR THE PURCHASE OF THE PROPERTY AND ACCORD INGLY, CONFIRMED THE ORDER OF ASSESSING OFFICER DENYING THE DEDUCTION U/S 24(B) OF THE ACT. 3 M/S. SHAH ENTERPRISES ITA NO. 759/MUM/2013 3. WE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY CONSIDERED THE SAME. WE NOTED THAT SUBSEQUENT TO THE ORDER OF CIT(A), NOW THIS MATTER IS NO MORE RES INTEGRA IN VIEW OF THE DECISION S OF THE HON'BLE SUPREME COURT IN THE CASE OF CHENNAI PROPERTIES AND INVESTMENTS LTD. V. COMMISSIONER OF INCOME TAX [2015] 373 ITR 673 (SC) AS WELL AS RAYALA CORPORATION PVT. LTD . VS. ACIT IN CIVIL APPEAL NO.6437 OF 2016 DATED 11 TH AUGUST, 2016 . WE, THEREFORE, SET ASIDE THE ORDER OF CIT(A) AND RESTORE THIS ISSUE TO THE FILE OF ASSESSING OFFICER WITH THE DIRECTION THAT THE ASSESSING OFFICER SHALL RE - DECIDE THE ISSUE WHETHER THE INCOME HAS TO BE ASSESSED UNDER THE HEAD INCOME FROM HOUSE PROPERTY OR INCOME FROM BUSINESS IN ACCORDANCE WITH THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF CHENNAI PROPERTIES AND INVESTMENTS LTD. AS WELL AS RAYALA CORPORATION PVT. LTD. (SUPRA) . 4. COMING TO THE ISSUE REGARDING THE CLAIM OF DEDUCTION OF A SSESSEE IN RESPECT OF INTEREST AMOUNTING TO RS.4,56,441/ - , THIS INTEREST HAS BEEN PAID BY THE ASSESSEE ON THE LOAN WHICH HAS BEEN SANCTIONED BY HDFC AGAINST THE RENT RECEIVABLE. THIS INTEREST HAS NOT BEEN PAID ON THE HOUSING LOAN. IF THE INCOME OF ASSESS EE IS BEING ASSESSED UNDER THE HEAD INCOME FROM HOUSE PROPERTY, WE HOLD THAT THE ASSESSEE WILL NOT BE ENTITLED FOR DEDUCTION OF INTEREST U/S 24(B) OF THE ACT. IN CASE THE ASSESSING OFFICER ASSESSES THE INCOME UNDER THE HEAD INCOME FROM BUSINESS, WE AR E OF THE VIEW THAT THE INTEREST PAID BY ASSESSEE ON THE SANCTION OF THE TERM LOAN SHALL BE ALLOWED U/S 36(1)(III) OF THE ACT AS THE LOAN HAS BEEN RECEIVED BY THE ASSESSEE FOR THE PURPOSE OF BUSINESS. WE MAY CLARIFY THAT IN CASE THE INCOME OF ASSESSEE IS A SSESSED BY THE ASSESSING OFFICER IN VIEW OF THE DECISION OF THE HON'BLE SUPREME COURT 4 M/S. SHAH ENTERPRISES ITA NO. 759/MUM/2013 IN THE CASE OF RAYALA CORPORATION PVT. LTD . (SUPRA) UNDER THE HEAD INCOME FROM BUSINESS, ASSESSEE SHOULD BE ALLOWED ALL THE DEDUCTIONS IN RESPECT OF THE DEPRECIATION AN D OTHER EXPENSES AS HAS BEEN CLAIMED BY THE ASSESSEE, AS THE INCOME UNDER THE HEAD INCOME FROM BUSINESS HAS TO BE COMPUTED AFTER ALLOWING THE DEDUCTIONS AS SPECIFIED U/S 30 TO 37 OF THE ACT. 5. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWE D FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 2 3 R D DECEMBER, 2016. SD/ - SD/ - (PAWAN SINGH) JUDICIAL MEMBER ( P.K. BANSAL ) ACCOUNTANT MEMBER MUMBAI, DATE : 2 3 R D DECEMBER, 2016 * SSL * COPY TO : 1) THE APPELLANT 2) THE RESPONDENT 3) THE CIT(A) CONCERNED 4) THE CIT CONCERNED 5) THE D.R, E BENCH, MUMBAI 6) GUARD FILE BY ORDER DY./ASSTT. REGISTRAR I.T.A.T, MUMBAI