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DCIT, Circle 48 (1) , Nederland Versus Arun Dagar

2017 (11) TMI 459 - ITAT DELHI

Nature of income - addition on account of interest on borrowed for acquiring immovable property and issuing directions to adjust the same against the income from other sources - house property of income from other sources - Held that:- CIT(A) has rightly held that this is not house property income as contemplated by the Assessing Officer and there is investment in land in the commercial property on which the assessee is getting assured return/interest for his investment of ₹ 6 crores with .....

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MEMBER For The Appellant : Ms. Sonal Jain, CA & Sh. Himanshu Jain, CA For The Respondent : Smt. Aparna Karan, CIT(DR) ORDER PER SUCHITRA KAMBLE, JM These appeals are filed by the Revenue against the order dated 20/03/2013 & 13/05/2013 for the A.Ys. 2009-10 and 2010-11 respectively passed by CIT(A)-XXX, New Delhi. 2. The grounds of appeal are as under:- On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in: (viii) Reducing the addition of ₹ 40,80 .....

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the I.T Act though the same is specifically allowable u/s 24(b) of the I.T. Act. (xii) Holding that the interest on loan was a revenue expenditure and not a capital expenditure; (xiii) Holding that the assessee had made an investment in commercial property ignoring the fact that the unit allotted to the assessee was a house property; (xiv) Not applying the ratio of decision in the case of Tuticorin Alkali Chemicals and Fertilizers Ltd Vs. CIT(1997) 227 ITR 172(Hon'ble Supreme Court) which i .....

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income from other sources; (x) Holding that the intention of the assessee was to earn assurance return given by the Omaxe Ltd and to purchase multiplex in the commercial space in Omaxe NRI City; (xi) Directing to allow the interest on loan u/s 57(3) of the I.T Act though the same is specifically allowable u/s 24(b) of the I.T. Act. (xii) Holding that the interest on loan was a revenue expenditure and not a capital expenditure; (xiii) Holding that the assessee had made an investment in commercia .....

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as issued on 23/8/2010 and notice u/s 142(1) was issued on 12/1/2011. The case was assigned for scrutiny to JCIT, Range-48 by the CIT, Delhi-XVI, New Delhi. Taking into account the nature and quantum of income, the issue involved and AIR Information details we have heard both the parties and perused the material available on record called for. 5. On perusal of the computation of income filed, it is seen that the assessee has claimed deduction of interest paid to Reliance Capital amounting to  .....

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eater Noida, UP. The assessee had obtained the loan of ₹ 6,00,00,000/- from Reliance Capital Ltd. and had paid it to Omaxe Ltd as advance for the aforesaid project. During the subject Assessment Year, the assessee jointly with his brother Mr. Ranjan Dagar earned interest income of rs.72,51,912/- from Omaxe Ltd on the advance given to Omaxe Ltd and duly offered his 50% share of interest income of ₹ 36,25,956/- for taxation under the provisions of Section 56 of the Act. Further, since .....

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of the Income Tax Act, 1961 (under the provisions of which, the assessee has claimed the aforesaid deduction) clearly states the deductions which can be claimed by the assessee for arriving at his income chargeable und the head income from Other Sources. The assessee in his return of income has claimed the deduction u/s 57(iii). 10. The Assessing Officer by relying on the judgment of the Hon ble Apex Court in case of Tuticorin Alkali Chemicals & Fertilizers Ltd. Vs. CIT 227 ITR 172 (SC) hel .....

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suing directions to adjust the same against the income from other sources was not justified on part of the CIT(A). The Assessing Officer has rightly added the said amount which was never the case of the assessee that the loan taken from Reliance Capital Ltd was for the purpose of earning income from other sources was not justified on part of the CIT(A). The Assessing Officer has rightly added the said amount which was never the case of the assessee that the loan taken from Reliance Capital Ltd. .....

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ntioned by the Assessing Officer. 13. We have heard both the parties and perused the order of the ITAT in case of ITO Vs. Shri Ranjan Dagar ITA No. 3346 & 4602/Del/2013 Assessment Years 2009-10 & 2010-11 order dated 22/9/2017. Thus, the ITAT held as under:- 7. Undisputedly, the assessee has availed off the loan from M/s. Reliance Capital Limited for the purpose of earning interest income on advance made to M/s. Omaxe Limited; that assessee has invested in commercial property as investmen .....

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es for determination in this case is :- as to whether the interest expenditure incurred by the assessee on the loan availed of from M/s. Reliance Capital Limited is directly related with the interest income earned on advance made to M/s. Omaxe Limited should be allowed to be deducted from the said interest income u/s 57 (iii) of the Act? 9. Ld. CIT (A), by relying upon the judgment of Hon ble Apex Court cited as CIT vs. Rajendra Prasad Moody - (1978) 115 ITR 519, held that the interest expenditu .....

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00,00,000/- availed of from M/s. Reliance Capital Limited and invested the same in M/s. Omaxe Limited for getting assured return only. However, M/s. Omaxe Limited has resiled form its promise and did not pay the assured return to the assessee and thereafter assessee has also stopped making payment of EMI to M/s. Reliance Capital Limited. 11. When we examine all these facts in the light of the fact that M/s. Reliance Capital Limited, M/s. Omaxe Limited and assessee are into litigation before Hon .....

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) has rightly held that this income is to be treated as income from other sources and the interest paid by assessee to M/s. Reliance Capital Limited is to be allowed as expenditure incurred for earning the income u/s 57 (iii) of the Act. Moreover, when there was a categoric understanding between the assessee and M/s. Reliance Capital Limited that the assessee will get assured return, the interest was being paid for the purpose of earning interest i.e. assured income from M/s. Omaxe Limited and a .....

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ture must be laid out or expended wholly and exclusively for the purpose of making or earning income. This section does not require that this purpose must be fulfilled in order to qualify the expenditure for deduction. It does not say that the expenditure shall be deductible only if any income is made or earned. Where the assessee borrowed monies for the purpose of making investment in shares and paid interest thereon during the accounting period relevant to the assessment year but did not recei .....

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