TMI Blog2006 (2) TMI 583X X X X Extracts X X X X X X X X Extracts X X X X ..... arding this property and mentioned that this property was an elongated plot measuring 168 feet by 40 feet approximately. This plot is situated at the Race Course Road and thus it had a front width of 40 feet. This plot had vacant land in the front and in the end i.e. away from the road, it had some constructed portion consisting of three rooms, store, bath room, etc., and a backyard behind the constructed portion. The width of the plot on the back side was 36.3 feet. This property also called 393, Basant Avenue, was owned by one Shri Sudershan Verma. Three separate shares of this property were sold by him to the assessee, his wife Dr. Sharda Adlakha and Shri Sahil Adlakha vide three separate transfer deeds executed on different dates in the years 2000 and 2001 as detailed below : Shares sold Name of the Transferee(s) Date of transfer 1/3rd i.e. 241.66 Sq. yds. Dr. A.L. Adlakha 27-1-2000. 1/3rd i.e. 241.66 Sq. yds. Dr. Sharda Adlakha 30-5-2000. 1/3rd i.e. 241.66 Sq. yds. Sh. Sahil Adlakha (equal Co-owners). Dr. A.L. Adlakha 26-2-2001. The Assessing Officer on perusal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n, the assessee had paid interest on borrowed capital taken for acquiring the property and claimed Rs. 1 lakh under the head "Income from house property" as interest paid on borrowed capital. It was submitted that the Assessing Officer while framing the assessment disallowed the assessee s claim of interest paid on borrowed capital with the contention that as there is no construction on the property, the interest, so paid, is not allowable. Section 24( b ) of the Income-tax Act was relied upon in which it is provided that the income chargeable under the head "Income from house property" shall be computed after making the following deductions : "( b ) where the property has been acquired, constructed, repaired, renewed or reconstructed with borrowed capital, the amount of any interest payable on such capital;" It was, therefore, submitted that the above provision clearly stated that if the interest was paid by the assessee on borrowed capital taken for acquiring any property, the interest so paid is eligible for deduction. The assessee relied upon the decision in the case of CIT v. National Insurance Co. Ltd. [1978] 113 ITR 37 (Cal.) and Dwarka Das Shrinivas of Bombay v. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and if entry is not allowed from that gate on account of existing sides the two portions of this property cannot be approached for the entry in their areas. The CIT(A) considering the facts and the circumstances of the case deleted the addition. 3.4 The Revenue is in appeal on the ground mentioned above. The learned D.R. relied upon the order of the Assessing Officer and submitted that for claiming deduction under section 24( b ), the word deduction from income from house property has been used and, therefore, since the assessee did not have a house property within the meaning of section 24 as is explained in the assessment order, therefore, the Assessing Officer rightly disallowed the interest paid on the borrowed capital. He has submitted that loan is taken for purchase of vacant land and for claiming deduction under section 24, there should be some construction in the property purchased out of the borrowed funds. The learned D.R. also referred to facts explaining various portions owned by the assessee and his family members. The learned D.R. submitted that the decision of the Madras Bench in the case of S. Govindrajan ( supra ) is not applicable. 3.5 On the other hand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n, then it would not be in better use by the assessee and his family members. It is not a disputed fact that the assessee and his family members are residing in the aforesaid residential property which is having one boundary wall and one entrance. The Assessing Officer tried to bifurcate their shares for the purpose of making the disallowance. Moreover, the Assessing Officer disallowed the interest because it was not a house property. I do not agree with the finding of the Assessing Officer because in section 24( b ) the deduction is allowable where the property has been acquired, constructed, repaired, renewed or reconstructed with borrowed funds, the amount of any interest payable on such capital. Therefore, the only word property has been used in this section, which is acquired from the borrowed capital. The CIT(A), therefore, rightly held that in section 24( b ) the word house property is not used. The CIT(A), therefore, rightly relied upon the decision in the case of S. Govindrajan ( supra ). This is a direct decision applicable to the facts and the circumstances of the case. It is a settled law that while interpreting the provisions of taxing statute, strict interpretat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee had one property at Dharampur which was purchased with co-owner Dr. Ved Prakash of Ludhiana in 1988 in equal shares. It was very old property. The property was situated near the Railway Track and contains one lantor which was cracked. During the year under consider-ation, the constructed portion was demolished as it is situated near the Railway Track. The building was not in a condition that any type of use by anybody. No part of the building was ever put to use by the assessee on account of its dilapidated conditions. In such circumstances, there could be no expectation of any rent, specially when there is Railway Track below the property and on the top of the property, there is a national highway. It was further submitted that there is no evidence with the Department that the property which was demolished even before the search was capable of inhabitant. It was submitted that the Assessing Officer with the presumption that the building was demolished in December, 2000 had taken the annual value for the whole building for the period April, 2000 to November, 2000. It was further submitted that even what is taxed under the Income-tax Act is only the annual value of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... partment had taken photographs of the crack in the lantor during the said search. The CIT(A) also accepted the view that as per section 22 only the annual value of the property could be taken for the purpose of making the addition. However, in this case, the Assessing Officer has taken only estimated value of the property for part of the year which is not permissible under the law. The CIT(A) accordingly deleted the addition. 4.1 The revenue is in appeal. The learned D.R. relying upon the order of the Assessing Officer submitted that no notional value was shown because property was demolished therefore, the Assessing Officer rightly took part of the value because no details whatsoever was filed and assessment can be made as is made by the Assessing Officer. 4.2 On the other hand, the learned counsel for the assessee relied upon the submissions made before the CIT(A) and relied upon the order of the Special Bench of the I.T.A.T., Madras Bench in the case of M. Raghunandan ( supra ). 4.3 I have considered the rival submissions and material available on record. Section 22 of the Income-tax Act provides : " Income from house property. The annual value of property consi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 15-2-2005. The findings in paras 21, 22 and 23 are reproduced as under : "21. We have considered the rival submissions and material available on record. The assessee very specifically before the authorities below have pleaded that there was no electricity or water supply fitted in the flat. This fact was not verified by the authorities below and no such attempt have been made on their part. The assessee has made the same submissions before the Assessing Officer in the earlier assessment years 1996-97 and 1997-98. Copies of the written submissions and the assessment orders are available in the paper book. The Assessing Officer was satisfied with the explanation of the assessee as regards non-habitability of the flat, in question, because of electricity and water supply not provided in the flat and as such did not charge the A.L.V. of the flat to tax under sections 22 and 23 of the Income-tax Act. Considering the past history of the assessee and submissions made before the authorities below clearly established that no water or electricity supply was available in the flat, in question, in the relevant assessment year. The assessee also explained that certain flooring, bath room et ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... condition because it was not having electricity or water connection in the financial year, relevant to the assessment year and other things have also to be completed for the purpose of use of occupation of the property by the tenant. In the absence of the material amenities available in the property, it is difficult to believe that the property might reasonably be expected to let out to the tenant. It is also difficult to believe that the owner would be in a position to create interest of the tenant in the property. The Hon ble Bombay High Court in the matter of Shree Nirmal Commercial Ltd. v. CIT 193 ITR 694 at page 712 held : "In our view, unless the property owned by the assessee is of such nature as could be let out, the charge under section 22 of the Act cannot be attracted. In our view, if the property is of such nature that it is inherently incapable of being let out and the assessee is the owner thereof, then the charge under section 22 of the Act cannot arise. What is necessary for the charge under section 22 of the Act to arise is that the property be inherently capable of being let out." 23. The word Building used in section 22 of the I.T. Act should be capabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... because the search was conducted in the case of the assessee on 6-2-2001 and almost the whole time the assessee remained busy in that matter and the books of account were checked as his accountant now left the job and his record keeper who maintained all the records was on leave due to the death of his relative. Therefore, all the vouchers of the expenditure could not be produced. It was further submitted that the assessee had suo motu offered a sum of Rs. 84,145 for taxation purposes on account of disallowance of expenses and that the assessee had already declared income from profession of Rs. 64,823. It was determined by the Assessing Officer at Rs. 1,25,000. The CIT(A) considering the facts and the circumstances of the case was of the view that the addition of Rs. 15,000 would serve the purpose and accordingly allowed the appeal of the assessee partly. 5.3 The learned counsel for the assessee at the outset submitted that after the order of the CIT(A) the addition left for consideration is Rs. 45,177 instead of Rs. 60,177. 5.4 The learned D.R. agreed to this proposition. The learned D.R. relied on the order of the Assessing Officer. 5.5 On the other hand, the learn ..... X X X X Extracts X X X X X X X X Extracts X X X X
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