TaxTMI 
TaxTMI 
2014 (7) TMI 547
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..... The first common ground for our consideration in these two appeals is with regard to disallowance of interest claimed on account of partners' capital contribution made to chit funds and interest claimed on payment to retired partners' outstanding balance. 4. Facts as narrated in A.Y. 2000-01 in ITA No. 1424/ Hyd/2010 are considered for adjudication. The assessee was in receipt of income from property on account of mulgies and also lease rent from lodge building. The AO made certain disallowances from expenses. The CIT(A) vide order dated 10.3.2004 held that lease rent from lodge building is to be treated as income from house property as against the claim of the assessee treating it as income from business. In addition, the intere....
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....ning of income from other sources by the assessee. He was not able to understand how and under which provisions of the Income Tax Act can such a claim of interest payment be allowed. Accordingly, he agreed with the Assessing Officer in disallowing the claim of interest payment of Rs. 2,29,532. 7. The CIT(A) observed with regard to the interest paid to retired partner's fund that the assessee stated that the amounts were not invested after the building came up. It was stated that the amounts were invested as capital contributions much before the building was erected and these amounts were utilised for the construction work. It was further contended that once the partners retired, the capital contributions were not returned but were kept....
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.... has direct nexus with the assessee's earning of income and this claim of the assessee is to be allowed. 10. The learned DR submitted that there is no nexus between the investment in construction of building made by retired partners' contribution to chit funds and earning of income. Being so, the claim of the assessee cannot be allowed. 11. We have heard both the parties and perused the material on record. Admittedly, in this case income of the assessee from lease rent of lodge is assessed as income from other sources. While computing the income from other sources any interest paid on money borrowed for the purpose of investment so as to earn income from such asset, then such interest on borrowal is to be considered wholly and exc....
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....ugh the provisions of section 150(1) applicable to the A.Y. 2001-02. 13. The facts of the case are that the assessee is a partnership concern came into existence vide partnership deed dated 02.01.2009. The firm is engaged in the business of leasing of lodge. For the AY 2001-02 the assessee filed return of income declaring loss of Rs. 42,837. The assessee declared rent from lodge and other rents and also interest from partners as receipts. The assessee claimed interest paid to retired partners at Rs. 7.53 lakhs and interest to partners at Rs. 3.06 lakhs. The return of income filed by the assessee was accepted by the AO. Thereafter, proceedings under section 147 of the Act were initiated and notice under section 148 of the Act was issued on ....
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....and also in the light of judicial decisions of various authorities he was of the view that the AO cannot take support of section 150(1) of the Act for initiation of proceedings under section 147 of the Act. (d) If there is no support of section 150(1) of the Act, in the given facts and circumstances of the case the time limit available for initiation of proceedings under section 147 of the Act is 31.3.2008. From the material available it can be seen that the AO initiated proceedings u/s 147 of the Act on 08.10.2008. Therefore, the action of the AO with regard to initiation of proceedings under section 147 of the Act after 31.3.2008 cannot be said to be valid. 15. The CIT(A) after considering the totality of the facts and circumstances of ....