Isola Srinivas, Hyd, Hyderabad V. Addl.CIT, Range-11, Hyd, Hyderabad

ITA 976/HYD/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 6186 (ITAT-HYDERABAD)
• Duration Of Justice: 7 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-02-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 04-07-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A SITARAMA RAO
• Keywords: Proportionate interest
• Section: 143(3)

Judgement Text

ITA NOS 976 AND 977 OF 2016 ISOLA SRINIVAS HYDERAB AD PAGE 1 OF 6 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD A BENCH, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S.RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NOS.976 & 977/HYD/2016 (ASSESSMENT YEARS: 2009-10 & 2011-12) SHRI ISOLA SRINIVAS PROP: WHITE STAR INDUSTRIES PLOT NO.106 PHASE-1 IDA JEEDIMETLA, HYDERABAD PAN: ABMPS 7058 K VS ADDL. COMMISSIONER OF INCOME TAX, RANGE-11 HYDERABAD FOR ASSESSEE : SHRI K.C. DEVDAS FOR REVENUE : SHRI A. SITARAMA RAO, DR O R D E R PER SMT. P. MADHAVI DEVI, J.M. BOTH ARE ASSESSEES APPEALS FOR THE A.YS 2009-10 AN D 2011-12 RESPECTIVELY. THE COMMON ISSUE IN THESE TWO APPEALS IS THE ASSESSMENT OF INCOME FROM HOUSE PROPERTY AND AL LOWING OF DEDUCTION OF INTEREST ON THE HOUSING LOAN THEREFROM . 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE, AN INDIVIDUAL AND THE PROPRIETOR OF M/S WHITE STAR IND USTRIES AND ALSO THE MANAGING DIRECTOR OF M/S. SREEPATHI PHARMA CEUTICALS LTD, FILED HIS RETURN OF INCOME ON 30.09.2009 DECLA RING A TOTAL INCOME OF RS.87,78,156. DURING THE ASSESSMENT PROCE EDINGS U/S 143(3) OF THE ACT, VARIOUS INFORMATION WAS CALLED F OR, WHICH WAS DATE OF HEARING : 30.01.2017 DATE OF PRONOUNCEMENT : 08.02.2017 ITA NOS 976 AND 977 OF 2016 ISOLA SRINIVAS HYDERAB AD PAGE 2 OF 6 FILED BY THE ASSESSEE. THE ASSESSEE ALSO PRODUCED H IS BOOKS OF ACCOUNT, BILLS AND VOUCHERS ETC. 3. ON VERIFICATION OF THE RETURN OF INCOME AND ALSO THE DETAILS FILED BY THE ASSESSEE, THE AO NOTICED THAT THE ASSESSEE HAS RECEIVED RENTAL INCOME OF RS.23,82,480 FROM A PROPE RTY SITUATED AT BANJARA HILLS, HYDERABAD WHICH HAS BEEN LET OUT TO M/S. SREEPATHI PHARMACEUTICALS LTD IN WHICH THE ASSESSEE IS THE MANAGING DIRECTOR AND THAT IN THE COMPUTATION OF IN COME, THE ASSESSEE HAS CLAIMED INTEREST OF RS.40,41,000 ON HO USE LOAN TAKEN FROM STATE BANK OF INDIA AND HAS ARRIVED AT T HE LOSS OF RS.20,58,179 FROM HOUSE PROPERTY. ON EXAMINATION OF THE SALE DEED DATED 2 ND JANUARY, 2008, THE AO OBSERVED THAT THE PROPERTY IS CO-OWNED BY THE ASSESSEE ALONG WITH HIS WIFE AND SON AND ALSO THAT ALL THE 3 PERSONS HAVE AVAILED THE HOME LOAN O F RS.4.40 CRORES FROM THE SBI. IN VIEW OF THESE FACTS, THE AO WAS OF THE OPINION THAT THE ASSESSEE IS ENTITLED TO ONLY 1/3 RD OF THE RENTAL INCOME AND IS ALSO ELIGIBLE FOR SET OFF INTEREST PR OPORTIONATELY. THE ASSESSEE SUBMITTED THAT THOUGH THE ASSESSEE IS THE SOLE OWNER OF THE PROPERTY, HE HAS INCLUDED HIS WIFE AND SON AS C O-OWNERS IN THE SALE DEED ONLY TO AVOID SUCCESSION PROBLEMS IN FUTURE AND THAT THEY WERE ALSO INCLUDED AS CO-OBLIGANTS IN THE LOAN AGREEMENT ON INSISTENCE BY THE SBI TO AVOID LEGAL LITIGATION IN FUTURE. HE ALSO SUBMITTED THAT IN HIS RETURN OF INCOME, HE ALONE HA S OFFERED THE RENTAL INCOME. THE AO, HOWEVER, WAS NOT CONVINCED W ITH THE ASSESSEES CONTENTIONS AND ASSESSED THE INCOME FROM HOUSE PROPERTY BY TAKING INTO CONSIDERATION ONLY 1/3 RD O F THE RENTAL INCOME AND ALSO ALLOWING PROPORTIONATE INTEREST ON THE HOUSING LOAN IN HIS HANDS. AGGRIEVED, THE ASSESSEE PREFERRE D AN APPEAL ITA NOS 976 AND 977 OF 2016 ISOLA SRINIVAS HYDERAB AD PAGE 3 OF 6 BEFORE THE CIT (A), WHO CONFIRMED THE ORDER OF THE AO AND THE ASSESSEE IS IN 2 ND APPEAL BEFORE US. 4. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BY THE ASSESSEE BEFORE THE AUTHORI TIES BELOW AND HAS ALSO DRAWN OUR ATTENTION TO VARIOUS DOCUMEN TS FILED IN THE PAPER BOOK TO DEMONSTRATE THAT THE ASSESSEE IS THE SOLE OWNER OF THE PROPERTY. 5. THE LEARNED DR HOWEVER, RELIED UPON THE ORDERS O F THE AUTHORITIES BELOW. 6. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE M ATERIAL ON RECORD, WE FIND THAT THE ASSESSEE IS EARNING REM UNERATION AS PROPRIETOR OF M/S WHITE STAR INDUSTRIES WHICH IS EN GAGED IN THE MANUFACTURE OF CHEMICAL PRODUCTS AND IS ALSO RECEIV ING REMUNERATION FROM M/S. SREEPATHI PHARMACEUTICALS LT D AS ITS MANAGING DIRECTOR. IT IS ALSO SEEN THAT HIS WIFE AN D SON ARE SHOWN AS CO-OWNERS OF THE PROPERTY IN THE SALE DEED. IT I S ALSO SEEN THAT THE PROPERTY HAS BEEN PURCHASED BY AVAILING A HOUSI NG LOAN OF RS.4.40 CRORES FROM SBI AND THE ASSESSEES WIFE AND SON ARE ALSO CO-OBLIGANTS TO THE LOAN. IT IS NOT IN DISPUTE THAT ASSESSEES WIFE IS A TEACHER AND HIS SON WAS ONLY A STUDENT AT THE TIM E OF PURCHASE OF THE HOUSE PROPERTY. THEREFORE, IT CANNOT BE ACCE PTED THAT THEY HAVE THE FINANCIAL CAPACITY INDEPENDENTLY TO INVEST EQUAL SHARE IN THE PROPERTY. THUS, IT IS EVIDENT THAT THE ASSESSEE S INCOME IS THE MAJOR CHUNK WHICH HAS BEEN TAKEN INTO CONSIDERATION BY THE BANK FOR GRANT OF SUCH A HUGE LOAN. THE FACT THAT T HE WIFE AND THE SON OF THE ASSESSEE ARE ALSO PARTY TO THE LOAN AGRE EMENT AS CO- ITA NOS 976 AND 977 OF 2016 ISOLA SRINIVAS HYDERAB AD PAGE 4 OF 6 OBLIGANTS AND CO-OWNERS OF THE PROPERTY IS THE ONLY CONSIDERATION FOR TREATING THEM AS THE EQUAL OWNERS OF THE PROPER TY. HOWEVER, WE FIND THAT THE ASSESSEE AND THE OTHER CO-OWNERS H AVE ENTERED INTO AN AGREEMENT WHICH IS PLACED AT PAGES 34 AND 3 5 OF THE PAPER BOOK, WHEREIN THE OTHER TWO PARTIES HAVE AGRE ED THAT THE ASSESSEE IS A SOLE OWNER OF THE PROPERTY AND THAT T HE INCOME FROM THE HOUSE PROPERTY SHALL ACCRUE TO HIM ONLY AND HE ALONE SHALL BE ELIGIBLE FOR CLAIMING DEDUCTION UNDER THE INCOME TA X ACT. IT IS ALSO SEEN FROM THE COMPUTATION OF INCOME OF THE ASSESSEE THAT HE HAS OFFERED THE ENTIRE INCOME IN HIS HANDS AND HAS ACCO RDINGLY CLAIMED THE DEDUCTION OF INTEREST ON THE HOUSING LO AN. FURTHER, IT IS ALSO SEEN FROM THE BANK A/C OF THE ASSESSEE THAT THE ADVANCE PAYMENT FOR THE HOUSE PROPERTY HAS BEEN MADE BY THE ASSESSEE ALONE. THUS, IT IS CLEAR THAT IT IS THE ASSESSEE WH O HAS PAID THE ADVANCE PAYMENT AND IS ALSO PAYING EMIS FROM HIS B ANK A/C. THEREFORE, WE HAVE NO DOUBT IN HOLDING THAT THE ASS ESSEE IS THE REAL OWNER OF THE PROPERTY EVEN THOUGH HIS WIFE AND SON ARE ALSO SHOWN AS CO-OWNERS OF THE PROPERTY IN THE SALE DEED . 7. WE ARE ALSO SUPPORTED BY THE DECISION OF THE HON 'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. RAVINDER KU MAR ARORA REPORTED IN (2011) 15 TAXMANN.COM 307(DEL.), WHEREI N THE HON'BLE DELHI HIGH COURT HAS HELD THAT WHERE AN ASSESSEE IN DEPENDENTLY INVESTED IN THE PURCHASE OF A NEW RESIDENTIAL HOUSE , IN HIS NAME ALONG WITH THE NAME OF HIS WIFE ALSO, AND WHERE IT WAS THE ASSESSEE WHO PAID THE STAMP DUTY AND THE CORPORATIO N TAX AT THE TIME OF THE REGISTRATION OF THE HOUSE PROPERTY, THE N HE IS THE REAL OWNER OF THE RESIDENTIAL HOUSE IN QUESTION. THE COO RDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF ITO VS. DR. VANDANA BHULCHANDANI ITA NOS 976 AND 977 OF 2016 ISOLA SRINIVAS HYDERAB AD PAGE 5 OF 6 REPORTED IN (2016) 72 TAXMANN.COM 281 (MUMBAI TRIB. ) HAS ALSO HELD ON SIMILAR LINES. 8. HAVING REGARD TO THE JUDICIAL PRECEDENTS ON THE ISSUE, WE HOLD THAT IT IS THE ASSESSEE WHO IS THE REAL OWN ER OF THE PROPERTY AND THE ENTIRE RENTAL INCOME IS TO BE TAXE D IN THE HANDS OF THE ASSESSEE AND THE INTEREST ON HOME LOAN IS AL SO TO BE ALLOWED IN HIS HANDS ONLY. THUS, THE ASSESSEES GROUNDS OF APPEAL 1 TO 5 FOR THE A.Y 2011-12 ARE ALLOWED AND THE ASSESSEES G ROUNDS OF APPEAL NO.3.1 TO 3.1.5 FOR A.Y 2009-10 ARE ALLOWED. 9. AS REGARDS GROUND 1 AND 2 IN THE ASSESSEES APPE AL FOR THE A.Y 2009-10, WE FIND THAT THEY NEED FACTUAL VERI FICATION. IN VIEW OF THE SAME, THESE TWO GROUNDS ARE REMITTED TO THE FILE OF THE AO FOR DUE VERIFICATION AFTER GIVING THE ASSESSEE A FAIR OPPORTUNITY OF HEARING. THESE TWO GROUNDS ARE THEREFORE TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 10. IN THE RESULT, ASSESSEES APPEAL FOR A.Y 2009-1 0 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES AND THE ASS ESSEES APPEAL FOR THE A.Y 2011-12 IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 8 TH OF FEBRUARY, 2017. SD/- SD/- (S.RIFAUR RAHMAN) ACCOUNTANT MEMBER (P. MADHAVI DEVI) JUDICIAL MEMBER HYDERABAD, DATED 8 TH FEBRUARY, 2017. VINODAN/SPS ITA NOS 976 AND 977 OF 2016 ISOLA SRINIVAS HYDERAB AD PAGE 6 OF 6 COPY TO: 1 SHRI ISOLA SRINIVAS, PROP: WHITE STAR INDUSTRIES PLOT NO.106 PHASE- 1 IDA JEEDIMETLA, HYDERABAD 2 ADDL. COMMISSIONER OF INCOME TAX, RANGE-11, HYDER ABAD 3 CIT (A)-5 HYDERABAD 4 PR. CIT 5 HYDERABAD 5 THE DR, ITAT HYDERABAD 6 GUARD FILE BY ORDER