AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2025 (5) TMI 1658
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....e Ld. CIT(A) erred in holding that notice issued u/s 148 of the Act dated 30.07.2022 as invalid ignoring the fact that the original notice u/s 148 of the Act was issued on 10.05.2021 Le. within the extended time limit by TOLA, 2021 ii) On the facts and circumstances of the case, the Id. CIM(A) erred in allowing the deduction claimed u/s. 24(b) of the Act of Rs. 7,14,84,210/-ignoring the fact that the assessee has failed to establish nexus between the house property income earned and interest expenditure which is wholly and exclusively for the purpose of earning house property income. iii) On the facts and circumstances of the case, the Ld. CIT(A) erred in allowing the deduction claimed u/s. 24(b) of the Act of Rs. 7,14,84,210/-ignoring the fact that the assessee has failed to prove that second and subsequent loans were availed for payment of outstanding housing loan iv) On the facts and circumstances of the case, the Ld. CIT(A) erred in allowing the deduction claimed u/s. 24(b) of the Act of Rs. 7,14,84,210/-ignoring the fact that the assessee has not fulfilled the conditions laid down in section for 24(b) of the Act for claiming deduction u/s 24(b) of th....
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....hence, it is in violation of provision of Section 151A. * Fourthly, ld. AO has erred in reopening the assessment without obtaining the necessary approval u/s. 148A r.w.s. 151 as ld. AO has obtained approval from Pr. Commissioner of Income Tax as against Pr. Chief Commissioner of Income Tax as required u/s. 151 (amended by Finance Act 2021; and * Lastly, reopening cannot be done on the behest of revenue audit. 4. Since the legal issue raised in cross objection, especially that notice issued is in the name of non-existing entity, goes to the very root of the validity of the re-assessment order therefore, same has been taken it first. 5. The brief facts qua the issue involved as captured in the first paragraph of the assessment order is that, erstwhile assessee company, that is, "Wadhwa Associates and Realtors Pvt. Ltd" having PAN AAACW5273G amalgamated with "Raghuleela Estates Pvt. Ltd." [AACCR6864N] w.e.f. 01/10/2019 (appointed date of the amalgamation) vide Order dated 11.02.2021, passed by the NCLT Mumbai Bench sanctioning the scheme of Amalgamation. Now pursuant to the amalgamation, Wadhwa Associates and Realtors Pvt. Ltd. (i.e., Amalgamating Company/Trans....
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....losed TDS 1,88,742 In reconciliation statement did. 04.12.2015, the assessee has given a comparison ie. 'Income as per 26AS' and 'Income as per ERP (P/L account)' For the difference in the income, only a note is written under the reconciliation statement that "the difference is on account of service tax which is collected and paid to the central government which is routed through current liability." The assessee has reconciled breakup of the amounts of Rs. 98,61,90,942 as per 26AS and arrived/reconciled at a figure of Rs. 98,34,53,821 as per P/L account, the difference being claimed to be on account o service tax However, in the undisclosed TDS information as per AIR statement, the total income as shown at Rs. 55,23.62,870/- Neither the assessee nor the AO during the assessment proceedings has reconciled the breakup of Rs. 55,23,62,870/ shown in AIR statement and corresponding incomes as per P/L account. This is discrepancy noticed from the records, which needs to be ensuring that the corresponding incomes as per receipts reflected in 26AS are forming part of total income as per return of income. 6. Notice u/s. 148 was issued on 10.05.2021 to erstwhil....
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....on of the decision of the Hon'ble Supreme Court dated 04.05.2022. 5.2 The submissions of the assessee have been carefully considered but not found to be acceptable. At the outset, the proceedings cannot be regarded as invalid in view of the fact that the Hon'ble Supreme Court in its order dated 04.05.2022 has concluded in Para 10 that the notices issued during the extended period shall be construed to be notices issued u/s 148A(b) of the amended provisions. It is abundantly clear that the Hon'ble Supreme Court has upheld the validity of the notices Issued under the unamended provisions. The other arguments regarding the validity of the proceedings relate to the legal position prevailing before the amendment and before the decision of the decision of the Hon'ble Supreme Court dated 04.05.2022 and hence, do not require any specific rebuttal. The assessee's objection as regards the validity of the notice/proceedings is hereby rejected. 5.3 The assessee's argument that the Wadhwa & Associates Realtors Pvt. Ltd. had got amalgamated with Raghuleela Estates Pvt. Ltd. w.e.f. 01.10.2019 and hence notice should not have been issued in the case of a n....
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....al purposes this ground is treated as ALLOWED without going into each of the other arguments of the appellant which become academic in nature." 9. We have heard both the parties and also perused the relevant documents placed before us and the findings given in the impugned order. It is an undisputed fact that first notices u/s. 148 was issued on 10/05/2021 in the name of "Wadhwa Associates and Realtors Pvt. Ltd. PAN: AAACW5273G" and approval u/s. 151 was also sought on the same date in the name of erstwhile company. Later on show-cause notice u/s. 148A(b) also issued in the name of Wadhwa Associates and Realtors Pvt. Ltd., a non-existing entity at that time. Even when assessee raised this objection before the ld. AO, order u/s. 148A(d) and final notice u/s. 148 dated 30/07/2022 has again been issued in the name of Wadhwa Associates and Realtors Pvt. Ltd., Once the ld. AO himself has noted in his order u/s. 148A(d) about the factum of amalgamation in the order of the NCLT that the erstwhile company has been amalgamated with M/s. Raghuleela Estate Pvt. Ltd., then also he issued the notice u/s. 148 in the name of the non-existing entity. Here in this case as noted above NCLT has ap....
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....sessment proceedings for A.Y. 2020-21, the assessee had again intimated to the FAO about the amalgamation and the same was duly considered and has been mentioned in the assessment order passed u/s. 143(3) dated 31/03/2022 for A.Y.2020-21. Thus, not only the JAO but also the FAO was well aware of merger of WARPL with the assessee company. 11. Now, it is a well settled law and this issue stands covered by several decisions of the Tribunal and the Hon'ble Bombay High Court wherein the judgment of the Hon'ble Supreme Court in the case of PCIT vs. Maruti Suzuki reported in 416 ITR 613 has been discussed and relied upon and distinguishing the judgment of the Hon'ble Supreme Court in the case of PCIT vs. Mahagun Realtors Pvt. Ltd., reported in 443 ITR 194. For the sake of ready reference, latest judgment of the Hon'ble Bombay High Court in the case of Reliance Industries Ltd. vs. P.L. Roongta Ltd., reported in (2025) 171 taxman.com 467 judgment dated 14/02/2025 is referred, wherein the Hon'ble high Court has discussed the ratio and principle of Mahagun Realtors Pvt. Ltd., and Maruti Suzuki in the following manner:- "28. The reliance placed by the respondent-revenue on the deci....
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....roceedings taken against the non-existing company would be void. In paragraph 32 of Mahagun Realtors (P) Ltd. (supra), it is observed that the legislative change, by way of introduction of Section 2(1A), defining "amalgamation" was not taken into account in the earlier decision of the Hon'ble Supreme Court. Further, tax treatment in the various provisions of the Act was not brought to the notice of this Court in the previous decisions. In paragraph 30 of Mahagun Realtors (P) Ltd. (supra), the Hon'ble Supreme Court observed that the combined effect of Section 394(2) of the Companies Act, 1956, Section 2(1A) and various other provisions of the Income-tax Act, 1961 is that unlike a winding up, there is no end to the enterprise, with the entity. The enterprise in the case of amalgamation continues. In paragraph 18 of Mahagun Realtors (P) Ltd. (supra), the Hon'ble Supreme Court observed that it is essential to look beyond the mere concept of destruction of corporate entity which brings to an end or terminates any assessment proceedings. The Supreme Court further observed that there are analogies in civil law and procedure where upon amalgamation, the cause of action or the c....
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....cerned. (iv) Upon ceasing to exist, an entity cannot be regarded as a "person" under Section 2(31) of the Act against whom an assessment order can be passed. In the instant case before us also the amalgamating companies are RPEL and RPPL which have ceased to exist on account of amalgamation, but still the assessment order is passed in the names of RPEL and RPPL. (v) The scheme of amalgamation in the present case before us was approved on 11 January 1995 with effect from 1 January 1995 by the order of this Court and the assessment orders were passed after 1 January 1995. (vi) Inspite of the Assessing Officer being aware of the fact of amalgamation, the assessment order was passed on an entity which had ceased to exist. (vii) The assessment orders are passed in the name of RPEL and RPPL only without mentioning anything about RIL. This fact is identical to Maruti Suzuki's case whereas in Mahagun's case, assessment orders contained names of both amalgamating and amalgamated company. 33. In our view, the facts of the present appellant-assessee before us are similar to the significant facts in the case of Maruti Suzuki India Ltd. (supr....
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....iled manner and their applicability under various situations, in the case of ACIT vs. Candor Renewable Energy Pvt. Ltd., vide judgment and order dated 19/10/2022 in ITA No.2560 & 2561/Mum/2021 and 697 & 698/Mum/2022. Thus, we hold that the notice issued u/s. 148 for acquiring jurisdiction to reopen the completed assessment u/s. 143(3) in the name of a non-existing entity despite the fact that this was intimated to the department much earlier, the impugned notice u/s. 148 is held as "null and void" and consequently, re-assessment order is quashed. Since we have quashed the assessment on the aforesaid ground, therefore, the grounds for appeal raised by the Revenue as well as other cross objections raised by the assessee are treated as academic and hence, infructuous. 13. In the result, the appeal of the Revenue is dismissed and cross objection of the assessee is allowed. 14. Now coming to the appeal for A.Y.2016-17, the brief facts are that the returned income was filed on 16/10/2016 declaring income of Rs. 39,64,07,570/- and the said return was selected for scrutiny assessment u/s. 143(3) was completed on 29/12/2018 determining total income of Rs. 40,30,07,860/-. The assessee'....
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....the assessee is part and parcel of the rent and maintenance charges received are rental income. v) On the facts and circumstances of the case, the Ld. CIT(A) erred in deleting the addition of Rs. 1,98,89,541/- assessed under house property income on account of maintenance charges without appreciating the fact that common area maintenance charges were part of rent agreement. vi) On the fact and circumstances of the case and in law, Ld. CIT(A) has erred relying on the decision of the Hon'ble Bombay High Court in the case of CIT Vs Runwal Developers(p) Ltd. without appreciating the fact that the decision of Hon'ble High Court is not applicable to this case as the facts in the case of Runwal Developers are distinguishable from facts of instant case." 18. In the cross objection, the assessee has raised the following grounds:- 1) The Commissioner of Income Tax (Appeals) 53, Mumbai [CIT(A)] erred in confirming the AO's action of disallowing preconstruction interest of Rs 51,40,617 claimed under section 24(b) of the Act on the ground that preconstruction interest shall be allowed only to the extent of the cost of the property which is finally acqui....
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.... on the other hand submitted that, it has in fact received interest of Rs. 249,855,463 from WCIPL on the above loan given to them and thus the observation of the AO that the assessee has given interest free loan to WCIPL is factually incorrect and based on assumptions and without appreciating the facts of the case. 21. AO further observed that the Assessee has not claimed interest u/s 24(b) for the A.Y. 2011-12, Α.Υ. 2012-13 2013-2014 and earlier years on the property 601/602 Trade Centre and 202/1502 Capital which establishes that the assessee has made payments of borrowed loans for acquisition of the above mentioned properties, hence, during the year there is no question of claiming deduction. The assessee's claim before the ld. AO was that it has been claiming deduction u/s. 24(b) on the properties from the date of acquisition / construction till the date including A.Y.2011-12 to 2013-14 and has also submitted the details of deduction in respect of three properties in the paper book. It was clarified before us that assessee while filing of return for the above three properties has inadvertently clubbed the income and deduction claimed under one property i.e. the....
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....in the best interest of his income earning activities. 13. We have noticed earlier that it is not the case of the AO that the interest bearing funds have been used for personal purposes or for non- income earning activity. Hence, under these set of facts, we are of the view that the AO has missed a moot point that the entire interest expenditure shall be allowable as deduction either under the head Income from House Property' or under the head "Income from Business" so long as it is not shown that the loan funds have been diverted for non-income earning/personal purposes. Hence, even if the AO considers that a part of interest expenditure is not allowable under the head Income from Other sources", then the same shall be allowable as deduction either under the head Income from House Property' or under the head "Income from Business". 14. Since the assessee has generated income from three sources, it has followed a consistent methodology for allocating interest expenditure between three heads of income. This is for the reason that the assessee is of the opinion that all types of funds, viz., own funds, loan funds and interest free lease advances have been us....
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.... were held as investments in the Assessee Company prior to amalgamation and the property Platina was acquired by the Assessee by virtue of amalgamation of WARPL. The Ld. Counsel for the assessee before us submitted that it is not in dispute that initially the loans were utilized for the purpose acquiring/Constructing the property, interest on the same has been allowed as deduction in earlier years and the same were replaced time and again for better interest rates and increase in the sanction limits. The subsequent loans were for replacing the existing loans and for general corporate purposes. Since the loans obtained subsequently were for replacing old loans the interest paid on such loans were claimed as a deduction under section 24(b) of the Act while computing Income from House Property. He aslo relied upon and he referred to CBDT Circular No. 28 dated 20/08/1969 which clarifies that fresh loans raised to repay the earlier loans taken on the property, then the interest paid on subsequent loan shall be allowed as deduction. There is no restriction placed in the Circular that second or third loan shall not be eligible for claiming deduction u/s. 24(b). He further submitted that a....
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....on these properties year on year. The Assessee Company has claimed deduction under section 24(b) of the Act to the extent of Interest bearing borrowed funds were used for the construction/acquisition of the property. Initial loans for constructing/acquiring the property were taken from HDFC Ltd. The total borrowed funds utilized for the properties was Rs 360,045,000, Subsequently the Loans were replaced by Loan taken from India Bulls Financial Services (IBFS) then by PNB Housing Finance Ltd and Laxmi Villas Bank, loan from Wadhwa Group Holding Private Limited and finally by loan taken from Bank of Baroda. The Capital The Assessee Company has booked a property in the Project "The Capital" situated at C-70, Bandra Kurla Complex in the year 2010 out of borrowed funds of Rs 30 crores from HDFC Bank. The Assessee Company was allotted Unit No.1502 and 202 in the year 2014-15 and the same was capitalized in the year 2014-15 at Rs 43,46,72,365 which included interest cost of Rs. 189,826,961 The Unit 1502 was spilt in to Unit 1502A and 1502 B and the Unit 1502A was sold in the year 2016-17. Thus the investment in Project Capital currently consists of Unit No 202 and 1502B ....
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....i) against the Interest offered under the head "Income from Other Sources" and disallowed balance interest while computing the taxable income. In the year under consideration WARPL was amalgamated with Raghuleela Estate Pvt. Ltd (REPL) as per the order dated 11/02/2021 issued by the National Company Law Tribunal, Mumbai Bench, Mumbai. The appointed date of amalgamation is 01/10/2019. On merger the property "Platina" standing in the books of WARPL was fair valued to 13,920,000,000 along with liabilities of Loan of Rs 1183,68,55,248 taken by WARPL from HDFC Ltd. The deduction of interest under section 24(b) was taken by the Company WARPL (till 30.09.2019 i.e the date of merger) and the assessee Company for the period from 1.10.2019 to 31.3.2020 from the Rental Income received from the Property. In the assessment of WARPL for the period till 30.09.2019 i.e part of the year the claim of interest under section 24(b) was allowed, thus there cannot be a question of disallowance of interest for remaining part of the year in the hands of the assessee company. 25. In view of the above facts and material placed on record, it is clear that the subsequent loan were taken for the repayment of....
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....re higher. As per the agreement the Assessee was under an obligation to maintain the said premises and bear the cost of maintenance and the licensee was under obligation to reimburse the proportionate share in respect of the maintenance charges. It is to be noted here that the maintenance expenses is on account of maintenance of common area, such as lift, electricity, security of common area and not pertaining to the maintenance of area given in lease structure. Thus, it has been stated that the common area maintenance cannot be taxed under the head "income from house property". Before us assessee has also relied upon the decision of the Tribunal in the case of group entities Wadhwa group Holdings Private Limited (LT.A. No. 1988/Mum/2024) dated 28.02.2025 wherein similar issue has been decided in favour of the Assessee. The ITAT declined to interfere with the findings of the Id. CIT (A) in deleting the additions made by the AO for CAM charges and hence dismissed the departments appeal on the above said ground that it is consistently treated as business income in earlier years. 29. We find that this issue not only stands covered by the decision of the Tribunal in the aforesaid ca....
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....tion interest u/'s 24(b) and this being the 5th year of claim. However, the AO allowed only a sum of Rs. 2,28,20,519/- and disallowed the sum of Rs. 51,40,617/- having worked out the total interest on cost on property acquired of Rs. 24,48,45,404 as against Rs. 30 crores initially paid on booking of property. 32. Assessee's case before us is that it had incurred interest cost on Rs. 30 crores for 5 years until the units were allotted and money was refunded back. The funds were used by RLREPL till date of allotment and in 2015 the same were refunded back. Hence the actual outflow of interest for the year 2010-11 to 2014-15 was on Rs 30 crores and not on Rs. 24,48,45,404 till the units were finally allotted. The total property value stood in the books at Rs. 43,46,72,365 which included interest cost of Rs. 18,98,26,961. Thus, it has been stated that cost of property acquired includes actual interest cost borne by the assessee of Rs. 30 Crores for the period of 5 years till acquisition of the property and it was much later when the area was reduced and money was refunded back. It has been brought on record and pointed out that a revisionary proceedings u/s. 263 was undertaken i....