Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2018 (9) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2018 (9) TMI 63 - AT - Income TaxDeduction of interest from income from house property - Disallowance of interest paid to Axis Bank Ltd - the assessee could not establish the nexus between the borrowing funds from Axis Bank and repayments to the previous lenders - allow the deduction of interest as business expenditure to be set off against the business income of the assessee - Held that:- There is a nexus between the borrowing and repayment of earlier loan creditors. The fact is also adequately substantiated by the observation of the AO in the assessment order wherein the AO has apportioned the interest between property A and property B AO has himself observed that the interest of ₹ 1,08,73,997/- which is made up of two amounts ₹ 1,02,37,297/- as interest to Axis Bank Ltd. and ₹ 6,36,700/- paid to Ramesh S. Shah Family Trust. AO got confused and misunderstood the sequence of transaction and their chronology. The assessee first constructed the building with borrowed money thereafter to pay the major creditor Manakchand H. Loonkar HUF retired partner of ₹ 5,15,05,674/-. The five partners of the firm contributed ₹ 5,20,00,000/- and thereafter the loan from the Axis Bank Ltd. was used to pay the money to the partners and to the lenders. The observation of the AO that interest of ₹ 1,08,73,997/- has to be apportioned between two buildings i.e. building A and B in the ratio of investment according to which the interest attributable to building A comes to ₹ 36,97,159/- and building B ₹ 71,76,838/-. We direct the AO to allow the interest of ₹ 1,02,37,297/- in the proportion of 34% to building A and 36% to building B. Resultantly, ₹ 67,56,616/- is admissible under section 2(b)B and ₹ 34,80,681/- is to be treated as business interest be set off against the business income of the assessee. The AO is accordingly directed. - Decided partly in favour of assessee
|