Mahendra R.Gandhi, Ahmedabad vs Department Of Income Tax

ACIT, Cir.11 Shri Mahendra R. Gandhi Ahmedabad. Vs 41, Jain Society, Paldi Ahmedabad.

PAN : ACEPM 6168 R

अपीलाथ!/ (Appellant) "#यथ!/ (Respondent)

Revenue by : Shri M.K. Singh, Sr.DR Assessee(s) by : Shri Bharat Shah

सन ु वाई क तार ख/ Dateof Hearing : 02/03/2015 घोषणा क तार ख / Date of Pronouncement: 13/03/2015

आदे श/O R D E R

PER N.S. SAINI, ACCOUNTANT MEMBER: This an appeal filed by

the Revenue against order of the CIT(A)-XVI, Ahmedabad dated 4.7.2011 for Asstt.Year 2008-09.

2. The sole issue involved in this appeal is that the CIT(A) erred in deleting Rs.24,05,179/- on account of disallowance under section 24(b) of the Act made by the AO.

3. Brief facts of the case are that the assessee claimed interest expenditure of Rs.21,26,924/- under section 24(b) of the Act being the interest paid on borrowed capital. On going through the interest account submitted by the assessee, the AO observed that the assessee has shown wrong figure of deduction as the figure arrived at after netting interest income and expenditure. According to the AO as per the copy of the account filed by the assessee, it was seen that the ITA No.2300/Ahd/2011 2

assessee had made interest payment of Rs.24,05,179/- to various persons. Most payments were made to the persons from whom the assessee has taken unsecured loan. The AO observed that the assessee has earned interest income of Rs.2,78,254/- from various persons. Thus, the net interest expenses was Rs.21,26,924/-, and hence the real claim was for Rs.24,05,179/- and not for Rs.21,26,924/- as claimed and reported by the assessee. According to the AO, the assessee failed to produce even a single evidence to prove that house property was acquired, constructed, repaired and renewed or reconstructed with borrowed capital on which interest was paid and claimed as deduction, therefore, he disallowed deduction for expenditure of Rs.24,05,179/-.

4. On appeal, the CIT(A) held that it was surprising that at one place the AO was accepting the cost of construction and the interest capitalized and on the other hand denied about any evidence which may go to prove that the house property has been acquired, constructed, repaired , renewed or reconstructed with borrowed capital, on which the interest has been paid and claimed as deduction. He observed that the assessee had made the investment in property construction of Rs.1,89,77,628/- in A.Y.2006-07 and Rs.2,04,86,440/- in A.Y.2007-08 inclusive of capitalization of interest of Rs.15,30,210/- in A.Y.2006-07 and Rs.10,06,049/- in A.Y.2007-08. The CIT(A) observed that thus, the interest of Rs.25,36,259/- paid on borrowed capital and capitalized has never been disputed by the AO in the preceding years. He observed that no fresh investment was made in the property as the same was stated to be completed in January, 2007. He further observed that the interest claimed under section 24(b) of the Act was for the same borrowed capital remained after repayment. If no objection was raised for the borrowed capital used in construction in the preceding year, the same could not be disputed during the year under consideration where no capital was borrowed for construction. The CIT(A) observed that apart from it, the details and the order of the ITA No.2300/Ahd/2011 3

earlier years i.e. A.Y.2007-08 passed u/s.147 read with section 143(3) of the Act was already available in the file of the AO for satisfying the details and the conditions laid down under section 24(b) of the Act. He observed that objection raised by the AO was thus totally irrelevant and the same was rejected and the claim of deduction of interest of Rs.24,05,179/- was allowed and addition so made was deleted.

5. Before us, the DR merely relied on the order of the AO. The DR could not point out any specific error in the order of the CIT(A). No material was brought before us to show that borrowed funds on which interest was paid was not utilized for investment in house property, when the interest expenditure on the same borrowed funds was allowed as deduction to the assessee under the head "Income from House Property". We, therefore, do not find any good reason to interfere with the order of the CIT(A), which is confirmed and the ground of the appeal of the Revenue is dismissed.

6. In the result, the appeal of the Revenue is dismissed.

Order pronounced in the Court on Friday the 13th March, 2015 at Ahmedabad.

Sd/- Sd/- (SHAILENDRA KUMAR YADAV) ( N.S. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER