DCIT, Circle-3(2), Hyd, Hyderabad V. Y. Uma Rani, Hyd, Hyderabad

ITA 908/HYD/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 2224 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 5 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-12-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 03-07-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUMAN MALIK
• Assessee Lawyers: A V RAGHURAM

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A', HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO. 908/HYD/2015 ASSESSMENT YEAR: 2011-12 DY. COMMISSIONER OF INCOME-TAX, CIRCLE 3(2) HYD. VS. Y. UMA RANI, HYDERABAD. PAN AANPY 9751 B APPELLANT RESPONDENT REVENUE BY: SMT. SUMAN MALIK ASSESSEE BY: SRI A.V. RAGHURAM DATE OF HEARING: 22/11/2017 DATE OF PRONOUNCEMENT: 29/12/2017 O R D E R PER S. RIFAUR RAHMAN, AM: THIS APPEAL IS FILED BY THE REVENUE AGAINST THE OR DER OF CIT(A) - 3, HYDERABAD DATED 30/04/2015 RELATES TO T HE AY 2011-12. 2. BRIEFLY THE FACTS OF THE CASE ARE, ASSESSEE FILE D HER RETURN OF INCOME ON 21/07/2011 ADMITTING A TOTAL IN COME OF RS. 1,52,20,668/-. ASSESSEE CLAIMED A DEDUCTION OF RS. 1,10,91,667/- U/S 24B OF THE INCOME-TAX ACT, 1961 ( IN SHORT THE ACT) FOR PAYMENT OF INTEREST ON HOUSING LOAN PAID TO HDFC BANK. ASSESSEE HAD CONSTRUCTED A PROPERTY AT P LOT NO. 19 & 21, SHRI THYAGARAYA ROAD, T. NAGAR, CHENNAI AT A COST OF RS. 23.46 CRORES. ASSESSEE OBTAINED A TERM LOAN OF RS. 8 CRORES FROM STATE BANK OF HYDERABAD, T. NAGAR BRANC H, CHENNAI BY MORTGAGING THE PROPERTY ON 12/01/2005 AN D THE SAME WAS DISCHARGED ON 23/05/2006. THE NEW LOAN OF RS. 19,98,76,000/- WAS TAKEN FROM DEEWAN HOUSING FINANC E I.T.A. NO. 908/HYD/2015 Y. UMA RANI 2 CORPORATION (DHFL) ON 06/05/2005, WHICH WAS CLAIMED TO HAVE BEEN UTILIZED FOR CONSTRUCTION OF PROPERTY AND THE SAME WAS REPAID AND CLOSED ON 31/10/2009 BY TAKING AN UNSECU RED LOAN FROM HER HUSBAND SHRI Y. JITIN KUMAR ON 21/10/2009 AND 30/10/2009. SUBSEQUENTLY, ASSESSEE OBTAINED ANOTHER LOAN OF RS. 14 CRORES FROM HDFC BANK, OUT OF WHICH, RS. 12 CRORES WAS DISBURSED ON 05/03/2010 AND THE SAME WAS UTILIZ ED TO REPAY TO HER HUSBAND. 2.1 ACCORDING TO THE AO, THE LOAN WHICH WAS TAKEN F ROM DHFL WAS REPAID ON 31/10/2009 BY OBTAINING AN INTER EST FREE LOAN OF RS. 16 CRORES FROM HER HUSBAND. AFTER DISCH ARGING THE LOAN LIABILITY OUT OF INTEREST FREE LOAN, ASSESSEE HAS NOT CLAIMED ANY INTEREST FOR THE PERIOD 01/11/2009 TO M AY, 2010. THE AO OBSERVED THAT SINCE THE HOUSING LOAN TAKEN F ROM DHFL IS CLOSED ON 31/10/2009, THERE IS NO OUTSTANDING OF HOUSING LOAN, INTEREST LIABILITY WILL NOT BE REVISED AFTER HIATUS OF 7 MONTHS. FURTHER, HE NOTED THAT ASSESSEE HAS OBTAINE D LOAN FROM HDFC, WHICH WAS NOT UTILIZED TO REPAY THE LOAN OBTAINED FROM SHRI Y. JITIN KUMAR, BUT, THE LOAN AMOUNT WAS TRANSFERRED TO ONE MR. NAVEEN SRINIVASA. IN VIEW OF THE ABOVE OBSERVATIONS, AO DISALLOWED THE ABOVE INTEREST BY R ELYING ON THE DECISION IN THE CSE OF ITO VS. SATYA CO. LTD., [[1986] 19 ITD 596 (CAL.). 3. AGGRIEVED WITH THE ABOVE ORDER, ASSESSEE PREFERR ED AN APPEAL BEFORE THE CIT(A) AND AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND FACTS ON RECORD, HE HAS DELETED THE ABOVE ADDITION MADE BY THE AO. 4. AGGRIEVED WITH THE ABOVE ORDER OF CIT(A), REVENU E IS IN APPEAL BEFORE US RAISING THE FOLLOWING GROUNDS OF A PPEAL: 1. THE LEARNED CIT (A) ERRED BOTH IN LAW AND ON FAC TS OF THE CASE. I.T.A. NO. 908/HYD/2015 Y. UMA RANI 3 2. THE LEARNED CIT(A) ERRED IN ALLOWING DEDUCTION U /S 24(B) WHICH IS AGAINST THE SAID PROVISIONS OF THE A CT AND CIRCULAR NO. 28{F.NO.8/8/69-IT(A-I)} DATED 20/08/19 69, ISSUED BY THE CBDT AS WELL. 3. THE LD. CIT(A) ERRED IN DIRECTING THE AO TO ALLO W THE INTEREST ON LOAN OBTAINED FROM HDFC, DESPITE OF THE FACT THAT THE LOAN TAKEN FROM HDFC WAS CLEARLY FOR THE PURPOSES OF UTILIZATION FOR REPAYMENT OF UNSECURED LOAN. 4. THE LD. CIT (A) OUGHT TO HAVE APPRECIATED THE FA CT THAT THE INTEREST EXPENDITURE CLAIMED IS INCURRED O N AN INTEREST BEARING LOAN TO CLEAR AN INTEREST FREE LOA N AND NOT FOR THE PURPOSES OF MAKING PAYMENT OF ANY HOUSI NG LOAN. 5. THE LD. CIT(A) ERRED IN NOT APPRECIATING THE FAC T THAT THERE IS NO NEXUS BETWEEN THE UTILIZATION OF LOAN OBTAINED FROM HDFC BANK TOWARDS THE CONSTRUCTION OF HOUSE OR REPAYMENT OF HOUSING LOAN. 6. ANY OTHER GROUND(S) THAT MAY BE URGED AT THE TIM E OF HEARING. 5. LD. DR SUBMITTED A FACT SHEET AND BROUGHT TO OUR KNOWLEDGE THE FINDINGS OF THE AO, AS PER WHICH, ASS ESSEE HAS CLOSED THE LOAN TAKEN FROM DHFL ON 31/10/2009 AND T AKEN A NEW LOAN FROM HDFC BANK ON 05/03/2010. THE FUNDS FR OM HDFC WAS USED TO PAY TO ONE MR. Y. NAVEEN SRINIVASA . HE SUBMITTED THAT THERE IS NO LINK FOR AVAILING THIS N EW LOAN AND PAYMENT OF INTEREST TO THE CONSTRUCTION OF PROPERTY AS THE LOAN AVAILED FOR CONSTRUCTION OF PROPERTY WAS ALREADY SE TTLED BY THE ASSESSEE AND, THEREFORE, DEDUCTION U/S 24B IS NOT A VAILABLE TO THE ASSESSEE. 6. LD. AR SUBMITTED THAT ASSESSEE HAS AVAILED A LOA N FOR THE PURPOSE OF CONSTRUCTING THE PROPERTY AND TOOK I NTEREST FREE LOAN FROM HER HUSBAND. SUBSEQUENTLY, IN ORDER TO SE TTLE THE INTEREST FREE LOAN TAKEN FROM HER HUSBAND, SHE HAS AVAILED A LOAN FROM HDFC AND PAID THE SAME ON THE INSTRUCTION OF HER I.T.A. NO. 908/HYD/2015 Y. UMA RANI 4 HUSBAND TO MR. Y. NAVEEN SRINIVASA. HE, THEREFORE, SUBMITTED THAT THE ASSESSEE HAS BONAFIDELY CLAIMED INTEREST P AID TO HDFC AGAINST THE LOAN TAKEN ONLY FROM THE DATE OF U TILISATION OF NEW LOAN AND NOT FOR THE EARLIER PERIOD. THEREFO RE, ASSESSEE IS JUSTIFIED TO CLAIM THE ABOVE INTEREST U/S 24B. 7. CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL FACTS ON RECORD. IT IS CLEAR THAT ASSESSEE HAS TAKEN A LOAN FROM DHFL FOR THE PURPOSE OF CONSTRUCTION OF A HOUSE PROPERTY AND THE SAME WAS REPAID BY AVAILING INTERE ST FREE LOAN FROM HER HUSBAND. NO DOUBT, THE LOAN FROM DHFL WAS CLOSED, BUT, LIABILITY IS CLOSED BY AVAILING INTE REST FREE LOAN FROM HER HUSBAND. AS THERE IS NO FINDING BY THE AO THAT ASSESSEE HAS ANY INCOME TO SETTLE SUCH LOAN LIABILI TY INDEPENDENTLY, LIABILITY ON THE ASSETS IS CONTINUED TILL ASSESSEE TOOK ANOTHER LOAN FROM HDFC BANK IN ORDER TO SETTLE THE INTEREST FREE LOAN TAKEN FROM HER HUSBAND, BUT, THE FUNDS WERE TRANSFERRED TO ONE MR. Y. NAVEEN SRINIVASA ON THE D IRECTION OF HER HUSBAND SHRI Y. JITIN KUMAR. IN OUR CONSIDERED VIEW, LIABILITY ON THE ASSET IS CONTINUED EVEN DURING THE PERIOD OF AVAILING INTEREST FREE LOAN FROM HER HUSBAND. ONLY AGAINST THIS LIABILITY, ASSESSEE HAS TAKEN FRESH LOAN FROM HDFC BANK TO REPAY TO HER HUSBAND. IT IS NOT NECESSARY THAT IT S HOULD BE PAID ONLY TO HER HUSBAND, BUT IT CAN BE REMITTED TO ANYB ODY ON THE DIRECTION OF HER HUSBAND TO DISCHARGE THE LIABILITY . MERE NON- CLAIMING OF INTEREST FOR THE PERIOD OF 7 MONTHS, AS SESSEE WILL NOT LOOSE THE LEGITIMATE CLAIM OF INTEREST PAYMENT SINCE THE LIABILITY IS CONTINUED FOR FURTHER PERIOD OF AVAILI NG INTEREST BEARING LOAN. THERE IS A DIRECT NEXUS WITH THE LOAN AVAILED FOR THE PURPOSE OF CONSTRUCTION OF PROPERTY. 7.1 AO RELIED ON THE DECISION OF ITO VS. SATYA CO. LTD. (SUPRA). IN THIS CASE, THE BENCH CONSIDERED THE BOA RD CIRCULAR I.T.A. NO. 908/HYD/2015 Y. UMA RANI 5 ALLOWING BENEFIT OF SECOND LOAN RAISED TO REPAY THE ORIGINAL LOAN. HOWEVER, IT OPINED THAT THIS BENEFIT CANNOT B E EXTENDED TO THE ASSESSEE THEREIN AS THERE WAS NO MATERIAL ON RECORD TO SAY WHETHER IT WAS FIRST LOAN OR SECOND LOAN OR SUB SEQUENT LOAN UTILIZED TO ACQUIRE THE PROPERTY. THEREFORE, T HIS DECISION IS NOT APPLICABLE TO THE CASE ON HAND. IN OUR CONSI DERED VIEW, AS LONG AS THE LIABILITY ON THE ASSET IS CONTINUED, IT DOES NOT MATTER HOW MANY LOANS ASSESSEE AVAILS IN ORDER TO M INIMISE HIS OR HER INTEREST BURDEN. 8. IN VIEW OF THE ABOVE DISCUSSION, THE GROUNDS RAI SED BY THE REVENUE ARE DISMISSED. 9. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DI SMISSED. PRONOUNCED IN THE OPEN COURT ON 29 TH DECEMBER, 2017 SD/- (P. MADHAVI DEVI) JUDICIAL MEMBER SD/- (S. RIFAUR RAHMAN) ACCOUNTANT MEMBER HYDERABAD, DATED 29 TH DECEMBER, 2017 KV COPY FORWARDED TO: 1. DCIT, CIRCLE 3(2), 7 TH FLOOR, B BLOCK, IT TOWERS, AC GUARDS, HYD. 2. SMT. Y. UMA RANI, PLOT NO. 321, MLA & MPS COLON Y, ROAD NO. 10C, JUBILEE HILLS, HYD. 3. CIT(A) - 3, HYDERABAD 4 CIT - 3, HYDERABAD 5 THE DR, ITAT, HYDERABAD 6. GUARD FILE