Revenue appeal dismissed due to small amount in disallowance. Interest expenditure withdrawals not disallowed. Housing loan interest remanded for review.

The appeal filed by the Revenue was dismissed due to the small amount involved in the disallowance made under section 14A of the Act. Regarding the disallowance made out of interest expenditure, the Tribunal held that withdrawals from the overdraft account were from the capital account, not necessitating any disallowance. The issue of disallowance on interest paid on a housing loan was remanded back to the AO for fresh examination due to discrepancies in determining the annual letting value and the occupancy status of the flat. The appeal filed by the assessee was treated as allowed for statistical purposes.

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Issues:
1. Disallowance made u/s. 14A of the Act
2. Disallowance made out of interest expenditure
3. Disallowance on interest paid on housing loan

Issue 1: Disallowance made u/s. 14A of the Act
The learned AR did not press the grounds related to the disallowance made u/s. 14A due to the small amount involved. Consequently, the appeal filed by the Revenue was dismissed on this issue.

Issue 2: Disallowance made out of interest expenditure
The Assessing Officer disallowed the entire interest claim by the assessee due to withdrawals from the overdraft account for personal use. The CIT(A) deleted a portion of the disallowance, considering the capital balance of the assessee and the source of withdrawals. The AR argued that the withdrawals should be considered as from the capital account, citing a Bombay High Court decision. The Tribunal agreed, holding that the withdrawals were from capital and no disallowance was necessary, directing the AO to delete the addition confirmed by the CIT(A).

Issue 3: Disallowance on interest paid on housing loan
The AO treated two flats as deemed to be let out, calculating annual letting value at 7% of the investment. The CIT(A) disagreed with this method, following a precedent that municipal rateable value should determine the annual letting value. The AR claimed the entire interest expenditure on the Goregaon flat should be allowed as a deduction under section 24(b) since it was deemed to be let out. The CIT(A) rejected this claim, stating the flat was not fit for rent. The Tribunal found a contradiction in the CIT(A)'s order and remanded the issue back to the AO for fresh examination due to the change in character of the flat and the confusion regarding its occupancy status.

In conclusion, the appeal filed by the Revenue was dismissed, and the appeal filed by the assessee was treated as allowed for statistical purposes.

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