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2015 (12) TMI 397 - AT - Income TaxTaxing the rental income under the head income from house property as against income from other sources - Allowance of interest expenditure - Held that:- In this case IOD was issued in relation to the plan that was put up on 25. 8. 2006 i. e. after entering into the development agreement. The fact is confirmed from the IOD dated 10. 1. 2007 and CC dt. 24. 4. 2007. It is found that amended plan was put up on 21. 2. 2007 and was approved on 8. 3. 2007, that construction work started in earlier assessment year and expenses were shown in the books of account from that year, that total expenditure incurred till 31. 3. 2007 was of ₹ 10, 53, 44, 733/-, that further expenses were incurred in the subsequent year and showed in the books of account, that the assessee had given details of the constructed area and the availability of certain areas free of FSI, that the certificate of the architect indicates that 3rd to7th floors were constructed later on, that the statement of the architect were not provided to the assessee though the same were relied upon by the AO, that as on 12. 4. 2008 two floors of the school building were complete. It is also found that in the case of BKF the AO has mentioned that the trust was conducting schools at Mira Road and Chembur, that there is no doubt that BKF was deducting tax at source on payment of rent to the Assessee. The AO has mentioned that instead of occupying the building the assessee might have utilised some other premises for running the school. We do not find any reason for arriving at the said inference. The evidences produced before the FAA about admission of students and their report cards for 3 academic years clearly prove that the school had commenced its activities in the year under consideration. We do not find any legal infirmity with the order of the FAA who had held that income could not be taxed as income from other sources and that interest paid had to be allowed u/s. 24 of the Act. - Decided against revenue. Allowance of expenses on account of improvement of leased premises - Held that:- We find that the assessee had installed various items as per the mutual agreement entered into with the lessee, that the amount was capitalised. We have, in the earlier part of the order, held that rental income was to be assessed u/s. 22 of the Act. Therefore, we agree with the observation of the FAA that capitalisation will not make any difference.- Decided against revenue. Allowance of expenses on account of bogus purchases and proportionate interest expenditure - Held that:- AO had made the disallowance on the basis of statements of Girish Sangani and Rajesh Kanakia, that both of them had admitted of accommodation entries and had made admission u/s. 132(4) of the Act with regard to these sale/purchases, that both of them had not alleged that the assessee had taken accommodation entries, that documentary evidences were produced regarding purchase of goods and same were not rebutted by the AO. In our opinion, the addition had to be restricted to the four entities who had taken the accommodation entries. As the AO has not brought on record that purchases made by the assessee were part of bogus bill transactions, so we are of the opinion that FAA was justified in deleting the addition with regard to addition made under the head bogus purchases as well as the proportionate interest disallowance - Decided against revenue. Addition made on account of accommodation entries - CIT(A) deleted the addition - Held that:- While deciding ground no. 4, we have held that the AO was not justified in making the addition for alleged accommodation entries in case of the assessee. Following the same we uphold the order of the FAA - Decided against revenue. Allowance of proportionate interest expenses related to advances made towards Juhu land - Held that:- FAA has given a categorical finding of fact that no interest bearing fund was utilised for purchasing the property in question, that the advances were given out of the funds received by the assessee from one of the group concerns namely Kanakia Spaces Pvt. Ltd., and it did not charge any interest from the assessee. Therefore, in our opinion disallowance was rightly deleted by the FAA - Decided against revenue.
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