TaxTMI 
TaxTMI 
2018 (4) TMI 704
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.....T. Act, the deduction, the deduction so claimed u/s 54F of the I.T. Act is liable to be allowed. The addition made by the AO and sustained by the CIT (Appeals) is liable to be deleted. 3. That while sustaining the additions as above, the authorities below have not appreciated the submissions and the facts of the case, after taking into consideration the submission made by the appellant, no addition is liable to be sustained, additions made by the AO and sustained by the CIT (Appeals) is liable to be deleted." 2. The Ground No.1 pertains to sustaining the addition for Rs. 4,57,279/- made by the AO by disallowing of the interest claimed by way of set of. 3. The facts on record are that the assessee has shown interest receipts of Rs. 5,77,279/- from M/s Cilent Technologies Pvt. Ltd and set off the same against interest paid of Rs. 11,90,415/- to City Finance Ltd. The AO required the assessee to prove that how the said deduction u/s 57(iii) can be allowed in absence of any nexus between the interest paid and interest received. The AO observed from the copy loan account and the bank statement of the assessee that he has received a loan of Rs. 70,36,559/- from City Financ....
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.... which Rs. 5,77,279/- has been adjusted with the interest received from M/s Cilent Technologies Pvt. Ltd. To that extent, in this connection it is respectfully submitted that assessee in the preceding year has received loan from City Finance at Rs. 70,36,559/- which was transferred to M/s Cilent Technologies Pvt. Ltd. From where assessee in the year under consideration has earned Interest amounted to Rs. 5,77,279/- and same time paid Rs. 11.90.415/- as interest to the City Finance Ltd." Assessee has also filed reply dt. 28.02.2013 which is as under: - "Interest paid at Rs. 11,90,415/- to City Finance Ltd. out of which Rs. 5,77,279 has been adjusted with the interest received from M/s Cilent Technologies Pvt. Ltd. to that extent, in this connection it is respectfully submitted that as explained in my earlier reply that assessee in the preceding year has received loan from M/s City Finance at Rs. 70,36,559/- in personal capacity against which assessee has paid Rs. 11,90,415/- as interest, same interest to the extent of Rs. 5,77,279/- was adjusted with the interest received at Rs. 5,77,279/- from M/s Client Technologies Pvt. Ltd. It is requested that in the ....
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.... that the assessee has earned Rs. 5,77,279/- as interest out of his advance of loan and has paid the interest at Rs. 11,90,415/- to City Finance Ltd. Both (the amounts either received or paid are the interest amount chargeable to lax under the head income from other sources, can be set off with each other which the assessee did. The AO has incorrectly allowed the amount of Rs. 1.50 lakh only to be set off with the payment of interest paid to the City Finance Ltd. against the income of Rs. 5,77,279/- earned under the head interest. The entire amount of Rs. 5,77,279/-is liable to be allowed to be set off with the interest at Rs. 11,90,415/- paid by the assessee to the City Finance, no addition no addition on this score is liable to be made, addition made by restricting the set off of the income under the head interest with payment of interest is liable to be deleted." "5.3 I have gone through the assessment order, submissions of the assessee and legal position in this regard. It is seen that the assessee has claimed deduction of Rs. 11,90,415/- as interest paid to M/s City Finance against interest of Rs. 5,77,279/-received from M/s Client Technologies Pvt. Ltd. But the AO ha....
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.... expenditure in the hands of the assessee. In view of the foregoing discussions, the stand of the assessing officer is correct. Accordingly, addition of Rs. 4,57,279/- made on account of disallowance of interest paid under section 57(iii) is hereby confirmed." 6. The ld. counsel for the assessee has reiterated the submission made before the ld. CIT(A). He submitted that in compliance to the query of AO, the assessee has filed a written reply as discussed in the assessment order at page 5 in para 4.1 which is reproduced in the order of the ld. CIT(A) at page no. 3, whereby the assessee has claimed that he has taken a loan from M/s City Finance Ltd. on which he has paid interest amounting to Rs. 11,90,415/- and has transferred a part amount to M/s Cilent Technology Pvt. Ltd. He has received an interest of Rs. 5,77,279/- from M/s Cilent Technology Pvt. Ltd. which he adjusted against the interest paid. The counsel for the assessee submitted that the assessee is claiming set off u/s 70(1) whereas there is no loss under the head income from other sources, therefore, the provisions of Section 70(1) do not apply in the case of the assessee. The written reply filed by t....
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....ncome. That while not allowing of the set off of the expenses under the head 'interest' with the income earned by the assessee from interest, the authorities below have completely ignored that the assessee has set off the expenses under the head 'interest' with the income earned under the head 'interest', which the AC) has not allowed by recording the reason that the set off under Section 70(1) is not allowable being there is no loss under the head 'income from other sources. The authorities below while not allowing of the set off, have completely ignored that there was a loss under the head 'other sources' being excess amount of interest is paid against the income earned under the head 'interest1. The set off as claimed by the assessee out of the payment of interest i.e. expenses related with the payment of interest with income under the head 'interest' is liable to be set off being the loan taken against which interest is paid and loan given against which interest is received are the part of the assessee's balance sheet and receipt of interest and payment of interest are part of computation of income, same are to be set....
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....vance of the assessee on the first issue and therefore the same is not acceptable. Accordingly, the impugned order on this issue is upheld. 13. The next issue pertains to the deduction claimed u/s 54F of the I.T. Act. 14. Briefly, facts on this issue are that the assessee sold his land at Hodal (Haryana); that against the sale consideration of land, he has claimed deduction u/s 54F which has been denied by AO holding that on the date of sale of original assets, the assessee has owned two residential houses and as per the provision of section 54F of the Income Tax Act, 1961, if the assessee has more than once residential houses on the day of transfer of original assets, then deduction u/s 54F of the Act is not allowable. Accordingly, the AO has disallowed the assessee's claim of deduction u/s 54F of the Act. 15. While confirming the addition on disallowance of exemption claimed u/s 54F of the Act, the ld. CIT(A) inter alia observed as follows: "6.3 I have gone through the assessment order, submissions of the assessee and legal position in this regard. It is seen that during the year under consideration the assessee has sold a building at Hodal and capital gain has ....
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....al house owned on the date of transfer of the original asset, is chargeable under the haul "Income from house property". 6.3.2 The assessee has claimed that the other two properties are rented to the corporate for the purpose of running business from there, and hence those properties being used for commercial purposes. Thus, they can only be considered as commercial properties not residential properties. Therefore, the exemption should be allowed. 6.3.3 It is observed that the assessee has claimed to have rented both these properties for commercial purposes and the rental income from them are shown under the head house property. Further it is observed in light of Sec 54F of the Income Tax Act, 1961 that if the income from such residential house, other than the one, residential house owned on the date of transfer of the original asset, is chargeable under the head "Income from house property" then deduction under section 54F is not allowable. 6.3.4 In this context a physical verification of both the properties is made. It is seen that Jaipur House is a residential colony, and hence giving the residential house on rent for the purposes of qodown would not c....
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....is submitted that during the year the assessee has sold his land at Hodal. On the sale of land, the assessee has shown long term capital gain at Rs. 21,69,260/- against which the assessee has claimed deduction under Section 54F of the Income Tax Act by making the investment of sale consideration towards acquiring of the new house properly at 198, Jaipur House, Agra, which the AO has not allowed as per reason recorded in the assessment order at page 2 that, 'the assessee owned more than one residential house other than the new asset, on the date of transfer of original asset. Before the AO, the assessee has submitted that the assessee owned two houses House No. 271 and 293 at Jaipur House, Agra, on the date of transfer of asset at Hodal. The assessee claimed the deduction under Section 54F by making investment towards the purchase of another residential house at 198, Jaipur House, Agra. It was submitted before the AO that both the houses owned by the assessee are rented and used for commercial activity, property No. 271, Jaipur House, Agra, let out to Anand Enterprises and property at 293, Jaipur House, Agra, to Client Technologies Pvt. Ltd. used commercially from where the asse....
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...., hence, this appeal before the Hon'ble HAT, Agra Bench, Agra. In the appeal before the Hon'ble ITAT, the appellant has taken three grounds. That as per ground No.2, the appellant has challenged the addition for Rs. 21,69,260/- made by the AO by not allowing of the deduction claimed by the assessee under Section 54F which the learned CIT (Appeals) has sustained. That as stated above, the assessee has sold his asset on the sale of which the capital gain arises, against which the assessee has taken the exemption by showing the investment towards the residential house at No. 198, Jaipur I louse, Agra. The AO has not allowed the exemption on the reason that on the date of sale of asset, the assessee is already owned two residential houses No. 293, Jaipur House, Agra, and 271, Jaipur House, Agra. The assessee has submitted that these houses which he assessee owned on the day of selling of asset are used for commercial activities given to tenant receiving rent duly shown in the income tax return, in support of commercial activities, the assessee has furnished the copy of electricity connection obtained from electricity department for their commercial us....
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....se of a residential house at 198, Jaipur House, Agra from the capital gains arisen on the sale of a Land/building (capital asset) at Hodel. The ld. CIT(A) noted that the assessee had two residential property namely i.e. 273, Jaipur House and 293, Jaipur House, Agra on the date of transfer of original asset and he has shown rental income under the head income from these house properties in its return of income. The ld. CIT (A) further noted that "Jaipur House is a residential colony, and hence giving the residential house on rent for the purposes of qodown would not change the basic character of house from residential to commercial. Since both these properties are actually residential houses located in Jaipur House residential colony, Agra it is clear that on the day of transfer of original asset, assessee had in his possession two residential houses i.e. 273. Jaipur House and 293. Jaipur House, and hence assessee is not entitled for deduction under section 54F." 19. The Ld. AR contended before us that the residential houses were used by the lessee for commercial activities, although the assessee own both the residential houses. For the purpose of allowing of deduction under Sect....