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M/s. Siroya Holdings Versus Addl. Commissioner of Income-tax 12 (3) , Mumbai

2015 (10) TMI 2233 - ITAT MUMBAI

Disallowance of interest u/s 24(b) while computing 'Income from House Property" - assessee contented that the interest has been paid on loan/capital received from the partners which was utilized in acquisition/ construction of property or repayment. of loan utilized for acquisition/ construction of property, hence, should have been allowed - Held that:- It is a case where partners have contributed the said amount of ₹ 3,82,33,742/- over and above their fixed capital contribution and theref .....

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he Appellant : Shri B.V.Jhaveri (AR) For The Respondent : Shri Sumit Kumar (DR) ORDER Per VIJAY PAL RAO, JM: This appeal by the assessee is directed against the order dated 16/8/2013 of the CIT(A)-23, Mumbai, for the assessment year 2009-10. 2. The assessee has raised the following grounds: 1. On the facts and in the circumstances, the Ld. CIT(A) erred in confirming action of the A.O. in disallowing interest of ₹ 18,70,675/- u/s 24(b) while computing 'Income from House Property" w .....

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preciate that there is no bar in the law that interest paid on partners' capital which was utilized wholly and exclusively for acquisition! construction of property cannot be allowed as deduction u/s 24(b) of the Income Tax Act, 1961. 4. The Ld. CIT(A) failed to appreciate that the interest paid by the appellant was offered for taxation by the partners, therefore, such disallowance amounts to double taxation on the same amount, therefore, either deduction of interest may be allowed in the ha .....

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operty called Siroya Centre in Andheri(E), Mumbai. This property was let out to M/s.Aditya Birla Retails Ltd., for annual rent of ₹ 8,40,84,000/-. While computing income from house property, the assessee has claimed interest u/s 24(b) of ₹ 19,64,857/-. The AO noted that the assessee paid interest of ₹ 4,70,909/- on loans from outsiders and balance interest of ₹ 93,53,377/- was paid to partners on their capital contribution. Accordingly AO has restricted the claim of inter .....

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s per the Partnership Deed dated 1/4/2002, partners capital was increased to ₹ 4,50,000/- which was taken as partners fixed capital. He has referred to clauses 7 & 8 of the Partnership Deed and submitted that the Partnership Deed permits payment of interest at the rate of 12% per annum or such other ate as may be mutually agreed upon or at such rate not exceeding the rate as may be prescribed by the IT Act or other statutory provision shall be payable on the amount standing to the cred .....

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ssee u/s 24(b) cannot be rejected. In support of his contention, he has relied upon the decision of this Tribunal dated 16/5/2012 in the case of M/s.Sane & Doshi Enterprises vs. ACIT in ITA No.6532/Mum/2010 which has been upheld by the Hon'ble jurisdictional High Court vide judgment dated 9/4/2015 reported in 232 Taxman 452. Thus the learned AR of the assessee submitted that the issue is covered in favour of the assessee. 6. On the other hand, learned Departmental Representative has reli .....

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apital balance of the partner is over and above the fixed capital contribution of the capital. There is no dispute that as per Partnership Deed dated 1/4/2002, payment of interest at the rate of 12% per annum on the amount standing to the credit of the capital account, loan account or current accounts of the partners is provided under clause 8 which reads as under: 8. Simple interest at the rate of 12% per annum or at such other rate as may be mutually agreed upon or at such rate not exceeding r .....

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n allowable expenditure if the said amount is used for acquisition or improvement of the house property in question as per provisions of sec.24(b) of the IT Act. An identical issue has been considered by the co-ordinate bench of this Tribunal in the case of M/s.Sane & Doshe Enterprises (supra) in paragraph 4 as under: 4. We have heard the arguments of both the sides and also perused the relevant material on record. Although the learned DR has strongly supported the impugned order of the lear .....

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, as rightly submitted by the learned counsel for the assessee, a similar issue involved in the immediately preceding year i.e. assessment year 2006-07 was decided by the learned CIT(Appeals) in favour of the assessee in the similar facts and circumstances and the said decision of learned CIT(Appeals)d giving relief to the assessee has been upheld by the Tribunal vide its order dated 20111 April, 2010 passed in ITA No. 3216/Mum12009. As held by the Tribunal in the said order, the entire interest .....

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This order of the Tribunal has been upheld by the Hon'ble jurisdictional High Court reported in 232 Taxman 452 in paragraphs 40 to 42 as under: 40. While carrying the matter to the Tribunal, the assessee specifically urged that the Commissioner erred in rejecting his claim without appreciating the fact that interest is paid to partners on the amount contributed by them and the said amounts in this case had been utilised for the purpose of construction of the property from which the appellant .....

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ous reasons given in the impugned order, the learned counsel for the assessee has filed a written submission to meet satisfactorily each and every point raised by the learned CIT(Appeals) while confirming the disallowance made by the AO on account of assessee's claim for deduction u/s 24(b). Moreover, as rightly submitted by the learned counsel for the assessee, a similar issue involved in the immediately preceding year i.e, assessment year 2006-07 was decided by the learned CIT(Appeals) in .....

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e under the head Income from house property". Respectfully following the said decision of the Tribunal in assessee's own case for assessment year 2006-07, we direct the AO to allow the claim of the assessee for deduction on account of interest paid on partners' capital u/s 24(b)." 41. The Tribunal held that if a similar issue was involved in the immediately preceding assessment year 2006-07 and there a finding was rendered in favour of the assessee by the Commissioner (Appeals) .....

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