TaxTMI 
TaxTMI 
2019 (9) TMI 1198
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....re business, leasing of premises, etc. In simple words, the assessee is in real estate business. For the assessment year under dispute, the assessee filed its return of income on 30th September 2009. Subsequently, it filed a revised return of income on 10th February 2011, declaring income of Rs. 9,68,61,713. During the assessment proceedings, the Assessing Officer on examining the Balance Sheet of the assessee for the year under consideration noticed that the assessee had taken secured and unsecured loan aggregating to Rs. 41,21,88,995, in respect of which it has claimed interest payment of Rs. 52,12,41,939, and financial charges of Rs. 1,75,67,680. He also noticed that the assessee had given loans and advances of Rs. 188,83,93,532. After calling for and examining the break-up of loans and advances, he was of the view that the assessee had diverted interest bearing fund for advancing loans to related entities at much lower rate of interest than the rate of interest at which it had availed the loan. Further, he found that the assessee had diverted interest bearing fund for non-business purpose, such as, advances given for flat at Bandra Kurla Complex, flat at Ashok Garden, to employ....
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....al Representative submitted, assessee's claim regarding availability of sufficient interest free fund has not been examined either by the Assessing Officer or by learned Commissioner (Appeals). Therefore, it requires verification. Further, he submitted, assessee's claim that the loans were utilised for the purpose of business also requires verification since the assessee needs to establish its claim through proper evidence. Thus, he submitted, the issue may be restored back to the Assessing Officer for fresh adjudication. 7. We have considered rival submissions and perused material on record. We have also applied our mind to the decisions relied upon. As noticed from the order of learned Commissioner (Appeals), disallowance of interest expenditure on loans advanced to three parties have been sustained by him primarily for the reason that interest bearing funds have been advanced for non-business purpose. As regards assessee's claim that the loan advanced to the aforesaid three parties were for the purpose of business, we must observe that the loan advanced to the two individuals i.e., Khusru Jujina and Ramesh Jogani cannot be considered to be for the purpose of assessee's ....
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....bmitted, during the year under consideration, the assessee has not earned any exempt income. Therefore, no disallowance under section 14A r/w rule 8D can be made. In support of such contention, he relied upon the following decisions:- i) CIT v/s Chettinad Logistics Pvt. Ltd., [2018] 98 taxmann. com 250 ii) DCIT v/s L&T Power Development Ltd., ITA no.874/Mum./ 2017; 09.08.2018; iii) DCIT v/s Future Market Networks Ltd., ITA no.5781/Mum./ 2016, etc., dated 03.10.2018; iv) Tejaskiran Pharmachem Industries Pvt. Ltd. v/s DCIT, ITA no.3307/Mum./2014, dated 13.12.2017; v) Sajjan India Ltd. v/s ACIT, [2018] 89 taxmann.com 21 (Mum.)(Trib.); vi) Chand N. Bhojawani v/s DCIT, ITA no.272/Mum./2015, etc., dated 28.07.2017; and vii) Techprocess Payment Services Ltd. v/s DCIT, ITA no.8547/ Mum./2011, dated 12.10.2018. 13. The learned Departmental Representative relied upon the observations of the Assessing Officer and learned Commissioner (Appeals). 14. We have considered rival submissions and perused material on record. We have also applied our mind to the decisions relied upon. Notably, before the first appellate authority, ....
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....for claiming deduction under section 24(b) of the Act on the basis of area used for commercial purpose and the area let out. The Assessing Officer observed that the deduction of interest on borrowed fund as per section 24(b) of the Act is not dependent upon the area used for letting out but the utilization of fund. Alleging that the assessee failed to provide any evidence showing utilization of fund for construction of house property, he disallowed the deduction claimed under section 25(b) of the Act amounting to Rs. 7,23,51,153. The assessee challenged the aforesaid disallowance before the first appellate authority. 18. The learned Commissioner (Appeals) after considering the submissions of the assessee in the context of facts and material on record was convinced with assessee's claim, hence, allowed the deduction of interest on borrowed fund as claimed under section 24(b) of the Act. 19. The learned Departmental Representative strongly relying upon the observations of the Assessing Officer submitted, the basis for deduction under section 24(b) of the Act is the utilization of borrowed fund for the construction of property from which rental income is derived. He submit....
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.... companies for commercial purpose and the rest of the building was leased out by the assessee. It is evident, the area leased out for rental purpose depends on the occupancy of the property for commercial purpose. Therefore, the area let out changes from time to time. It is also evident, from the past years the assessee had been allocating the interest on loan on the basis of area let out and the aforesaid basis of allocation of interest commensurate with the area let out was accepted by the Department from the assessment year 2004-05 onwards, except, the impugned assessment year. As could be seen, the Assessing Officer has disallowed the deduction claimed under section 24(b) of the Act, basically for two reasons viz. (i) the assessee has not proved utilization of fund for construction of property; and (ii) the deduction under section 24(b) of the Act cannot be allowed on the basis of area let out. In our view, the reasons on the basis of which the Assessing Officer disallowed deduction under section 24(b) of the Act, are unacceptable. Undisputedly, the loan was sanctioned for construction of the entire building. When a part of the building is used for commercial purpose and the re....