2018 (12) TMI 1382

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....s 148 of Act. 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in directing the A.O. to allow the claim of interest u/s 24 (b) of I.T Act against the rental income from Dhanwatay House without appreciating the fact that the assessee had not received any the rent from the tenants but it was deposited in the bank account of AOP namely M/s. M.D. Dhanwatay & Others as the property was in dispute and the suit for partition of the property amongst the original co-owners and restraining the co-owners from intermeddling the suit property is pending in the Hon'ble Bombay High Court. 3. On the facts and in the circumstances of the case and in law, Ld. CIT(A) erred in not following the ratio of decision of Hon'ble Supreme Court in the case of Goetze (India) Ltd. vs. C.I.T. (284 ITR 323) wherein it was held that the claim of deduction cannot be entertained otherwise than by filing revised return of income. The appellant prays that the order of the Ld. CIT(A) on the above grounds be set aside and the order of the A.O be restored. The appellant craves leave to amend or alter any ground and/or add any other grounds which may....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....allowed. Alternatively, it was observed by the A.O that as observed by his predecessor while framing the assessment in the case of the assessee for A.Y 2009-10, due to disputes amongst the members of Dhanwatay family the rent received from the tenants was being deposited in the bank account standing in the name of M/s M.D Dhanwatay & Others, AOP. It was thus observed by the A.O, that as the facts during the year under consideration remained the same, thus the rent received by the AOP was liable to be brought to tax in its hands. On the basis of his aforesaid observations, the A.O referring to Sec. 67A of the Act, observed that the share of profit in the form of rent in the hands of the assessee (as a member of the AOP), as per Sec. 67A(2) was liable to be assessed under the head "Income from house property". On the basis of his aforesaid observations, the A.O concluded that as per Sec. 67A(3), any interest paid by a member on capital borrowed for investing in the AOP was to be deducted from his share of income chargeable under the head "Profits and gains of business or profession". It was thus, in the backdrop of the aforesaid facts, observed by the A.O that no deduction of the int....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....h the order of the CIT(A) has carried the matter in appeal before us. The ld. D.R relied on the order of the A.O. It was averred by the ld. D.R that as the assessee had not claimed any deduction of the interest expenditure under Sec. 24(b) in respect of the Dhanwatay House property, either in its „Original‟ return of income or in the return of income filed in compliance to notice issued under Sec. 148 of the Act, thus the CIT(A) had erred in allowing the same. In support of his aforesaid contention the ld. D.R relied on the judgment of the Hon‟ble Apex Court in the case of viz. Goetze (India) Ltd. Vs. CIT (2006) 284 ITR 323 (SC). It was averred by the ld. D.R that now when the assessee had failed to raise the aforesaid claim of interest expenditure, therein the only recourse available to it was to have raised the same by filing a revised return of income. Per contra, the ld. A.R relied on the order of the CIT(A). It was submitted by the ld. A.R that the CIT(A) had rightly followed the view as was earlier taken by him while disposing off the appeals of the assessee for A.Y 2008-09 and A.Y 2009-10. 6. We have heard the authorised representatives of both the parti....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....e CIT(A) directed the A.O to follow the same method for working out the nexus of funds and their utilization towards the aforementioned properties, viz. (i) Dhapla House property; and (ii) Dhanwatay House property. We find that the revenue is aggrieved with the aforesaid observations of the CIT(A), which thus had entitled the assessee for claim of deduction of the interest expenditure under Sec. 24(b) in respect of the Dhanwatay House Property, despite the fact that no such interest expenditure in respect of the said property was claimed in its return of income for the year under consideration. We are of the considered view that the reliance placed by the A.O on the judgment of the Hon‟ble Supreme Court in the case of Goetze (India) Ltd. Vs. CIT 284 ITR 323 (SC) is well in order, and as such the A.O is restrained from allowing any such claim of deduction which had not been raised by the assessee in its return of income. However, in our considered view, on a perusal of the aforesaid judgment of the Apex Court, it can safely be gathered that the said restriction in no way confines the powers of the appellate authorities. Our aforesaid view is fortified by the judgment of the Ho....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....heads of income. In our considered view, in terms of the aforesaid mandate of law, the rental income received by the assessee as his share of income from the aforementioned AOP was liable to be assessed under the head "Income from house property". To the said extent, there is no controversy between the revenue and the assessee. However, thereafter the A.O by taking support of Sec. 67A(3) had observed that any interest paid by a member on capital borrowed by him for the purpose of investment in the association or body shall, in computing his chargeable under the head "Profits and gains of business and profession" in respect of a share in the income of the association is to be deducted from his share. On the basis of the aforesaid observations, the A.O was of the view that now when share of income of the assessee from the AOP was to be assessed under the head "Income from house property", thus its claim of interest expenditure under Sec. 24(b) could not be accepted. We have given a thoughtful consideration to the observations of the A.O, and unable to persuade ourselves to subscribe to the interpretation of Sec. 67A(3) so accorded by him. Admittedly, the interest paid by a member on ....