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2023 (11) TMI 690 - ITAT MUMBAIRevision u/s 263 - Claim of interest against rental income - Proof of availing loan for acquisition or construction of property - CIT mentioned that assessee has claimed deduction u/s. 24(b) and assessee has not furnished documentary evidences in support of its claim during the assessment proceedings - HELD THAT:- As in our considered view proviso of section 24(b) states that “where the property has been acquired, constructed, repaired, renewed or reconstructed with borrowed capital, the amount of any interest payable on such capital”; however, we observe that this proviso is directly linked to the 1st and 2nd proviso. The first proviso, states that in respect the property referred to in sub section (2) of section 23, which is the property consists of house or part of house which is in the occupation of the owner for the purpose of his own residence or it cannot actually be occupied by the owner by reason of the fact that owing to his employment, business or profession carried on at any other place, he has to reside at that other place in a building not belonging to him. In such situation, the annual value of such house shall be taken to be NIL. The first proviso has specifically relates to the situation discussed in section 23 sub-section 2 of the Act, where the individual can claim deduction not exceeding ₹ 30,000/-. The second Proviso is also in relation to first proviso, wherein the above said individual has acquired a constructed with the borrowed capital [within five years from the end of the Financial Year in which capital was borrowed] the amount of deduction shall not exceed two lakhs rupees. The third proviso is also closely linked to the proviso 1 and 2 and gives certain contingencies in order to claim the deduction mentioned in proviso 1 and 2 therefore all the proviso mentioned in section 24(b) are relation to an individual who intend to claim deduction u/s. 23(2) of the Act. Therefore, the proviso contained in section 24(b) is not applicable to assessee who borrows the capital for the purpose of earing income by letting out the property under the head “income from house property”. Therefore, the interpretation of third proviso to 24(b) in isolation is not proper and we are not inclined to agree with the findings of the CIT u/s. 263 of the Act. As per the facts on record, we observe that assessee is in business of construction and letting of the property as well as maintenance of the property, in such combined business, it is normal in the construction business to borrow the capital for the overall business and apportion the same based on the head of income. It is not in dispute that assessee has paid the relevant interest to the bank. We observe from the record that AO has collected the information from the assessee and as per the assessment records there is no evidences to show that AO has verified the same in detail. Assessee has submitted all the relevant information, the basis of allocation before the AO. Even otherwise if we consider that Assessing Officer has not verified the claim made by the assessee it can be considered as erroneous order. However, in order to invoke provisions of section 263 of the Act, both conditions has to be satisfied, not just erroneous, even the condition, prejudicial to the revenue. But as per the discussion in the above paragraph we do not agree with the Ld. Pr.CIT that the condition of prejudicial to the interest of the Revenue is satisfied. Therefore, twin conditions as per provisions of section 263 are not satisfied in this case. Hence the order passed u/s. 263 is set aside.
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