TMI Blog2014 (4) TMI 428X X X X Extracts X X X X X X X X Extracts X X X X ..... s were examined by the A.O. in A.Y. 2005-06 which was the first year, of not only rental income but also claim of interest on the borrowed funds, the observations of the CIT cannot be upheld – the opinion of the CIT is not based on the facts on record and AO examined the issue and given a finding that assessee owns 50% of the constructed area – thus, the CIT has not exercised the jurisdiction correctly – the order of the CIT set aside – Decided in favour of Assessee. - ITA. No. 832 & 833/Hyd/2011 - - - Dated:- 26-3-2014 - Shri B. Ramakotaiah And Shri Saktijit Dey,JJ. For the Petitioner : Mr. S. Rama Rao For the Respondent : Mr. D. Sudhakar Rao ORDER Per B. Ramakotaiah, A.M. These two appeals are by assessee against ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ame as erroneous and prejudicial to the interests of the Revenue on the following reasons : (i) The supplementary deed is colourable device introduced by the assessee to claim interest expenditure from the rental income. Since, there is no need for this supplementary deed, except to claim that assessee has provided some funds to the developer. If the supplementary deed is a real deed, the same should have been mentioned in the lease deeds entered into with the lessee M/s. Secunderabad Hotels Pvt. Ltd. But in all the three lease deeds the development deed dated 01.04.2001 is only mentioned, which strengthen that this supplementary deed is a self serving instrument. This has not been examined by the A.O. (ii) The assessee has not borro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... od on the amount of Rs. 3 crores paid to M/s. Salivahana Associates. It was further submitted by referring to the P L Account of M/s. Salivahana Associates and the return of income filed therein to submit that receipts from assessee were shown as revenue income for the year ended 31.03.2005, wherein receipts were shown at Rs. 3.30 crores. It was the submission that A.O. who was also assessing the sister concern M/s. Salivahana Associates has examined the transactions in detail and therefore, the CIT order is not correct. It was further submitted that referring to the correspondence with the Bank, that a loan was obtained from the Bank to repay the loan taken from Oriental Bank of Commerce and that the amount was directly paid by the Bank ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e A.O. in the course of assessment proceedings for A.Y. 2006-07 and 2007-08 and so CIT was correct in invoking the provisions of section 263. Further, no prejudice can be caused to the assessee as Ld.CIT has not given any finding and has only set aside. Therefore, no interference was called for as decided by the Hon'ble Karnataka High Court in the case of Infotech Technologies Ltd. 341 ITR 293. Ld. D.R. relied on the orders of the Ld. CIT. 6. We have considered the issue and examined the paper book placed on record. As seen from the facts available on record, assessee did borrow funds to pay M/s. Salivahana Associates for completion of the building, which was leased out. Therefore, there is no diversion of funds as alleged by the Ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ings, albeit in another assessment year while examining two assessment years simultaneously, any other opinion given by the CIT is not sustainable under law. 7. Even though learned CIT(D.R). relied on the Judgment of Infotech Technologies Ltd. 341 ITR 293 for the proposition that it is always open to the assessee to justify the claim as CIT has not given any opinion, in this case, the CIT opinion is not based on the facts on record and A.O. examined the issue and given a finding that assessee owns 50% of the constructed area. It cannot be said that supplementary deed by which assessee share of property was increased from 35% to 50% was not in the knowledge of the A.O. Since the CIT finding is not based on facts but on presumptions, the s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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