TaxTMI 
TaxTMI 
TaxTMI 
2015 (6) TMI 645
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....ITCA) has also erred in ignoring the fact that the value of building (gross block) as per the depreciation chart up to FY 02-03 was Rs. 1.11 Crores only. II. I.T.A.No. 5181/Del/2011: (Assessee's cross appeal): "The Ld. CIT(A) XIII, New Delhi has erred in not allowing interest u/s 24(b) of the I. T. Act, 1961 of Rs. 22,16,370/- out of Rs. 39,41,374/- being interest on borrowed capital." 2. The brief facts as noted in the assessment order are that the assessee declared a loss from house property at Rs. 20.64 lacs after deduction of interest payment amounting to Rs. 39.40 lacs. The case of the assessee was selected for scrutiny. During assessment proceedings the assessee company was asked to furnish details of interest expenses and to justify claim of interest made against rental income. In reply, vide letter dated 30.10.2008, the assessee stated that during financial year 1997-98, the assessee company had obtained a loan of Rs. 18.80 lacs from M/s. D. S. Construction Ltd. which was increased to Rs. 16456230/- up to financial year 2003-04. This loan amount was used for the purpose of construction of building. It was further submitted that during the year 2004-05, the assessee had....
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....as already been repaid by the appellant in F Yr 2003-04 by taking a loan of Rs. 2 crores from group company Ebony Retail Holding Ltd.- the company to whom the rented premises were let out. Therefore as on 31.03.2004 only Rs. 1,64,56,2301- of the loan amount is outstanding. Subsequently in FY 2004-05 i.e. AY 2005-06 MIs. D.S. Construction gave Rs. 2 crore to the appellant to repay the loan taken from MIs. ERHL. Apparently the appellant is treating this amount as part of the original construction loan. However the sum of Rs. 2 crores received from MIs. D.S. Construction in F.Y. 2004-05 is not the loan utilized in the construction of the building. Neither is it in the nature of loan taken to repay the loan utilized in the construction of the building. Therefore the sum of Rs. 2 crores cannot be added back to the loan amount of Rs. 3,16,95,184/- taken from D.S. Constructions for construction of property. Nor can it be treated as a part of the original amount of Rs. 3, 16,95,184/-. Furthermore as per Ld. Counsel's submissions, of the sum of Rs. 2 crores taken from ERHL in F.Y. 2003-04 only Rs. 1,52,38,954/- was utilized for repaying the construction loan taken from D.S. Construction....
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.... required to dispose of the cases, therefore the cases were fixed for clarification and finally the cases were heard on 05.06.2015. 5. Ld. A.R. first took up the assessee's appeal and submitted that entire loan of Rs. 3.76 crores was obtained by assessee form Lord Krishna Bank to repay, the loan raised from M/s. D. S. Construction Company and M/s. ERHL which was a group company. To support his argument, Ld. A.R. took us to paper book pages 52-53 where a copy of annual accounts for financial year 2003-04 was placed. Ld. A.R. submitted that on page 52, an amount of Rs. 1,64,56,230/- was outstanding under the head unsecured loan which was payable to M/s. D. S. Construction company. He submitted that immediately before the close of the year, amount outstanding to M/s. D. S. Construction Company was Rs. 3,72,56,230/-/- out of which Rs. 2.08 crores was repaid to the above loanee by borrowing an amount of Rs. 2 crores form M/s. ERHL which is the company under the same management and in this respect, he invited our attention to paper book page 53 where the amount of Rs. 2 crores was reflected as current liability. Ld. A.R. also invited our attention to paper book page 12 to demonstrate th....
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....truction Company amount of which went up to Rs. 3,72,56,230/-, which is apparent form paper book page 12 wherein as on 01.04.2003, the opening balance of M/s. D. S. Construction Company loan account has been reflected. During the year under consideration, an amount of Rs. 2.08 crores was repaid to above said company which is also apparent from paper book page 12. Out of Rs. 2.08 crores repaid by assessee to M/s. D. S. Construction company, Rs. 2 crores was borrowed from M/s. ERHL which has been reflected as a current liability in the balance sheet as on 31.03.2004 which is apparent from paper book page 53. Therefore, in all, the assessee had repaid to M/s. D.S. Construction Company an amount of Rs. 3,72,56,230/-, which included Rs. 2.08 crores repaid in financial year 2003-04 and Rs. 1,63,99,000/- in financial year 2004-05. However, the fact remains that in financial year 2003-04, out of repayment of Rs. 2.08 crores, Rs. 2 crores was borrowed as a short term loan from ERHL ( a group company of assessee). This short term loan of Rs. 2 crores was repaid to ERHL in financial year 2004-05 by again borrowing Rs. 2 crores from D. S. Construction Company. These facts are verifiable from p....