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TaxTMI 
TaxTMI 
TaxTMI 
2018 (9) TMI 63
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....see. 3. The facts in brief are that the assessee is a partnership carrying on the business of real estate developer during the year the assessee has shown a loss of Rs. 2,33,636/- from house property which was arrived at after claiming interest of Rs. 1,08,73,636/- under section 24 of the Act comprising Rs. 1,02,37,297/- paid to Axis Bank Ltd. and Rs. 6,36,700/- paid to Ramesh S. Shah Family Trust. The assessee has developed property known as Sumer Chambers along with M/s. R.K. Builders and project was completed in A.Y. 2005-06. After completion of the project, the assessee received its share in A-wing which is residential area and B-wing which is a commercial area and same were shown as closing stock in the balance sheet of the assessee. Thereafter, assessee sold part of the total area shown in closing stock during A.Y. 2005-06 and 2007-08 and income was offered for taxation under the head "Income from business and profession". The unsold area was converted from stock in trade to investment and was shown as under: Investment in Sumer Heights - Building "A" Rs.2,78,76,708/- Investment in Sumer Heights - Building "B" Rs.6,80,07,882/- Rs.9,58,84,590/- The loa....
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....t and the CBDT circular No.28 dated 20.08.1969 (F.No.8/8/69-IT (A-I) as the said circular provides that only loan borrowed to repay the previous loan taken for the construction of the property has to be considered at the time of allowing deduction under section 24B of the Act. However, AO further observed that the investments as appearing in the balance sheet as on 31.03.2009 was Rs. 12,47,74,629/- as per details as under: Investment in Sumer Heights - Building "A" Rs. 4,21,16,550 Investment in Sumer Heights - Building "B" Rs. 8,26,58,079 Rs.12,47,74,629 According to the AO if the loan of Rs. 8,26,58,079/- is taken for the purpose of construction of building A and B then the same can not be attributed to the construction of building B only and has to be divided between the two properties according to the percentage of investments which the AO worked out as under:- Name of the building Cost 9% of investment Total Interest paid Proportionate interest allowable Building "A" 4,21,16,550 34% 36,97,159 Building "B" 8,26,58,079 66% 71,76,838 Total 12,47,74,629 10....
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....ized the fact that Rs. 71,76,838/- pertained to the building-B whereas Rs. 36,97,159/- pertained to building-A. Finally, the Ld. A.R. prayed before the Bench that in view of the said finding the interest of Rs. 1,02,37,297/- should be allowed under section 24B as claimed by the assessee. The Ld. A.R. has also taken without prejudice submission and argument that if at all the first prayer of the assessee is not accepted by the Tribunal Rs. 71,76,838/- should be allowed under section 24B of the Act and Rs. 36,97,159/- may be allowed as business expenditure to be off set against the business income of the assessee. 8. The Ld. D.R., on the other hand, relied on the orders of authorities below and submitted that since the assessee is completely failed in establishing a nexus between the borrowed funds from the Axis Bank Ltd. and the repayment to the existing lenders and therefore the AO has rightly disallowed the entire interest as claimed by the assessee under section 24B of the Act. The Ld. D.R. also rebutted the reliance of assessee on circular No.28 dated 20.08.1969 by submitting that the said circular is not applicable in the present circumstances as the no nexus of the subsequent....
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....5,00,000 20/10/2009 5 Ruchira R. Shah 1,67,00,000 1,67,00,000 8,45,00,000 The contention of the AO was that since the loan repaid as above were not taken for the purpose of the construction and therefore the deduction of interest paid to Axis Bank Ltd. Rs. 1,02,37,297/- was not allowable under section 24B of the Act. Whereas, on the other hand, the assessee has claimed that the money taken from 5 parties aggregating to Rs. 8.5 crore were borrowed from 5 creditors as detailed hereinabove were used to pay the earlier lenders and therefore there is a direct nexus and the same is admissible under section 24B of the Act. We, further, find that there is a nexus between the borrowing and repayment of earlier loan creditors. The fact is also adequately substantiated by the observation of the AO in the assessment order wherein the AO has apportioned the interest between property A and property B as under: Name of the building Cost 9% of investment Total Interest paid Proportionate interest a....