TMI Blog2013 (5) TMI 399X X X X Extracts X X X X X X X X Extracts X X X X ..... were included in the statutory deduction a 30 per cent under s. 24 of the Act. See Sharmila Tagore vs. It. CIT (2004 (6) TMI 591 - ITAT MUMBAI) wherein held that maintenance charges paid to the housing society have to be deducted even while computing annual letting value - In favour of assessee. Interest paid on housing loan - CIT(A) deleted the addition - Held that:- The assessee purchased the house property for a sum of Rs. 1,19,55,353 and the payment was made after raising a loan from HDFC Bank. The assessee raised the loans from HDFC against RBI Bonds maturing in November, 2002 and to get those bonds realized from HDFC Bank, the assessee raised loan from the relatives and IDBI Bank, thus, the subsequent loans were raised by the assessee to repay the original loan raised to purchase the house property, as such, those loans partake the character of original loan as there was direct nexus between the loan and the purchase of the house property, therefore, the interest paid on the loan was deductible u/s 24 from the rental income realized from the house property. CBDT through Circular No. 28, dt.20th Aug.,1969 (F.No. 8/8/69-IT(A-I) stated that if the second borrowing has real ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an income of Rs. 21,84,590. Later on the case was selected for scrutiny. During the course of assessment proceedings, the AO noticed that the assessee had shown income under the head house property at Rs. 9,14,417. The computation of the income under the head house property was as under : Rent received - 28,38,000 Less : M. charges paid to the society - 4,20,000 Balance - 24,18,000 Less : Deduction under s. 24 @ 30% - 7,25,400 Less : Interest on loans taken for H.P. - 7,78,183 Income under the head house property - 9,14,417 3.1 The AO asked the assessee to justify claim of deduction with regard to payment of house tax, water tax, etc. to the municipal authority. The submission of the assessee was that a sum of Rs. 4,20,000 was paid to society Solitaire Corporate Park. The AO pointed out that the assessee had not given evidence of the payment made on account of municipal taxes, etc. from Mumbai Municipal Authority and it was not known whether the payment of Rs. 4,20,000 included maintenance charges or not. According to him, normally the society collects charges inclusive of maintenance charges and deductions of such charges was not permissible under the Act be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Total 10.0 4,20,000 The property tax as well as maintenance charges were incidental to the gross rent charged from the tenants and therefore, were rightly charged under s. 24 of the IT Act, 1961 against the gross amount of rent. (f) The appellant had shown income from property as follows : Particulars Amount (Rs.) Gross rent 28,38,000 Less : General maintenance paid to BPM Ind. Ltd. 2,35,200 26,02,800 Less : Property tax 1,84,800 24,18,000 Less Statutory deduction 30% for collection charges etc 7,25,400 Interest on loan taken for purchase of property under s. 24 7,78,183 15,03,583 Net income from house property 9,14,417 4.1 The assessee furnished a certificate issued by the M/s BPM Industries Ltd., Mumbai that they charged property tax Rs. 4.40 per sq. ft. per month and maintenance charges of the building 0 Rs. 5.60 per sq. ft. per month from the assessee and that the property tax has been paid to Brihat Mumbai Municipal Corporation vide a consolidated payment for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not allowed by the AO by stating that deduction of such charges was not permissible under the Act because 30 per cent deduction was allowed under s. 24 of the Act which will take care of expenses on account of maintenance. The claim of the assessee, on the other hand, is that those charges were not on account of maintenance but for the facilities provided by the society in respect of use of generator, lift, lighting and common area sweeping etc., the said contention of the assessee has not been rebutted at any stage. It therefore, appears that the assessee was paying the charges to the society for the common area amenities which was deductible from the gross rent received by the assessee. In the instant case, it is also noticed that the assessee had not claimed any separate deduction on account of municipal taxes because the same was included in the impugned charges 4.40 per sq. ft. per month, therefore, the AO was not justified in holding that the impugned charges amounting to Rs. 4,20,000 paid by the assessee, were on account of maintenance, which were included in the statutory deduction a 30 per cent under s. 24 of the Act. On a similar issue, the Tribunal, Mumbai Bench in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x-free RBI Bonds. According to the AO, the assessee diverted substantial amount of loan in making investment in tax-free RBI Bonds and still claimed deduction on account of housing loan which was not admissible to him. Accordingly, the interest of Rs. 7,78,183 claimed against housing loan was disallowed. 10. The assessee carried the matter to learned CIT(A) and submitted that the AO was not justified in disallowing the interest paid on different loans taken for repayment of loan taken for purchase of property charged to tax under the head `Income from house property'. It was explained that the loan was taken for repayment of loan taken at the time of purchase of house property, therefore, it partakes the character of housing loan as the same was directly or indirectly utilized for the purpose of purchase of property. The assessee submitted the details from the date of purchase of property to the financial year 2003-04 during which the said property was let out and its rental income was offered to tax and the interest paid on different loans utilized for repayment of housing loan taken earlier. The submissions made by the assessee were as follows : "The appellant is an individu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id aggregate interest amounting to Rs. 7,78,183 on the aforesaid loans the details of which are given below : Name of the loan creditor Amount of interest IDBI Bank Ltd. 1,50,223 Asha Agarwal 43,772 Renu Agarwal 51,553 Sheo Narain Agarwal, HUF 85,308 Sheo Narain Agarwal, S.HUF 80,882 Amar Nath Agarwal, HUF 76,749 Amar Nath Agarwal 2,48,829 Sheo Narain Agarwal HUF 35,541 Saroj Devi Agarwal 5,326 Total 7, 78,183 10.1 It was contended that the AO had not considered the source of repayment of the housing loan hence disallowed the interest amounting to Rs. 7,78,183 paid by the assessee on subsequent loan taken for repayment of earlier loan. It was stated that the details of interest paid during the financial year 2003-04 relevant to the assessment year under consideration as well as loan taken from time to time for repayment of housing loan taken earlier were not disputed and verifiable from the assessment record. 10.2 The learned CIT(A), after considering ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A. Doshi vs. ITO (supra). 13. We have considered the rival submissions and carefully gone through the material available on the record. In the present case it appears that the assessee purchased the house property for a sum of Rs. 1,19,55,353 and the payment was made after raising a loan from HDFC Bank. The assessee raised the loans from HDFC against RBI Bonds. The said RBI Bonds were maturing in November, 2002 and to get those bonds realized from HDFC Bank, the assessee raised loan from the relatives and IDBI Bank, thus, the subsequent loans were raised by the assessee to repay the original loan raised to purchase the house property, as such, those loans partake the character of original loan as there was direct nexus between the loan and the purchase of the house property, therefore, the interest paid on the loan was deductible under s. 24 of the Act from the rental income realized from the house property. In this regard, the CBDT issued a clarification in its Circular No. 28, dt. 20th Aug.,1969 (F.No. 8/8/69-IT(A-I) that if the second borrowing has really been used merely to repay the original loan and this fact is proved to the satisfaction of the ITO, the interest pa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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