2022 (8) TMI 359

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....ssable under the head "Income from House Property" by merely stating that the possession of the space is not handed over to the appellant till 31.03.2011. The directions given by the Ld CIT(A), without considering the fact that the appellant is a beneficial owner of the said property, is bad in law and needs to be dropped. 2. On facts and circumstances of the case and in law, the learned CIT(A) erred in not netting the interest received of Rs. 1,16,66,614/- & interest claimed against the "Income from House Property of Rs. 1,76,36,246/- against the total interest paid of Rs. 3,52,72,492/- while calculating the disallowance u/s. 14A Ld CIT(A) erred in not appreciating direct nexus between interest received and paid and thereby erred in not netting the interest to Rs. 59,69,632/- for consideration of disallowance u/s. 14A. 3. On facts and circumstances of the case and in law, the learned CIT(A) erred in calculating the disallowance u/s. 14A at the rate of 15% on the capital balance of Rs. 6.72 crores instead of considering the closing capital balance of Rs. 1,46,09,693/-. 4. Without prejudice to the above, on facts and circumstances of the case and in law, t....

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....s Akruti SMC JV, the same income declared by assessee is not under challenge neither by AO nor by Ld. CIT(A). Moreover, applicable standard deduction under the head "House Property" were also claimed and allowed to the assessee. The Ld. CIT(A) disallowed interest on the ground that possession was given on the last day of the year, hence, interest was not allowable for whole year, whereas income show by assessee from lease rental was for six months. 8. In this regard, Paper Book (PB) filed by the assessee clearly demonstrates that assessee received six month rent and chargeable service tax thereon. It is only the accounting entry which was passed on the last day of the accounting year. Observation of Ld. CIT(A) "It is also observed that only on 31.03.2011, the capital contribution in JV was reduced to Rs. 1,46,09,693/- through "manual adjustment" entries in the books of the appellant after adjusting cost of lease rights of commercial premises acquired by the appellant from the JV for Rs.5,26,82,674/. In these circumstances, it is clear beyond doubt that there is no basis for the assumption that 50% of the interest paid viz. Rs.1,76,36,246/- was relatable to the lease rights of sa....

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....) is not sustainable. In the result, ground no.1 of assessee be allowed and action of Ld. CIT (A) is reversed. 12. Ground No.2 & 3, before going into the facts and merits of both the issues, it will be more appropriate to take up and discuss about an alternate argument taken by assessee about the applicability of section 14A of the Act in the present matter. The arguments of the assessee are reproduced herein below as under: "[2. Share income of JV is not exempt hence sec. 14A is not applicable. Rely on order of assessee itself in earlier year. Get copy of ITAT order for AY 10-11 accepting our plea that sec. 14A is not applicable to share income from AOP Now argue that instead of set aside as done in earlier year, it should be allowed at this stage only because it is a pure question of law. Legal issues are not set aside in view of the following arguments: Whether share income from AOP attracts section 14A? (1) As per section 14A(1), deduction is not allowable in respect of expenditure incurred by the assessee in relation to "INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT". (2) There is chapter III in IT Act with the same ti....

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....e income from AOP. [2015] 53 taxmann.com 40 (Mumbai Trib.) Goldgerg Finance (P.) Ltd. v. ACIT Thane." 13. Before making disallowance, the AO has not given any cogent reasons for rejecting the disallowance under section 14A of the Act amounting to Rs. 59,69,632/- made by the appellant itself and resorting to the provisions of section 14A(2) read with Rule 8D. A perusal of the impugned order reveals that the AO has not properly examined the suo moto disallowance made by the assessee. Nor has the AO expressed any opinion on the correctness or otherwise of the appellant's claim in respect of aforesaid expenditure. 14. In this regard, we follow the directions of Jurisdictional Tribunal in assessee's own case vide ITA No. 3840/Mum/2015 & ITA No. 3841/Mum/2015 dated 15.12.2017. Jurisdictional ITAT held as under: "Undisputedly, in the facts of the present case, the Assessing Officer has not recorded any satisfaction as per the mandate of section 14A(2) r/w rule 8D(1). It is relevant to observe that the learned Commissioner (Appeals) has accepted the aforesaid factual position by holding that the Assessing Officer has not recorded any satisfaction with regard to the correctne....