TMI Blog2019 (4) TMI 2052X X X X Extracts X X X X X X X X Extracts X X X X ..... and accepted by the revenue and fits into legal proposition of claim u/s 24(b) of the Act. Accordingly, we set aside the order of the CIT(A) on this ground and direct the AO to allow the claim made by the assessee as deduction from income from house property. The ground of appeal of the assessee is allowed. Processing fee and pre-payment charges to be allowed u/s 24(b) - HELD THAT:- We found the submissions of the learned AR supported with judicial decisions PENTAGRAM PROPERTIES PRIVATE [ 2011 (8) TMI 1212 - ITAT MUMBAI] AND PEEPUL TREE PROPERTIES P. LTD. [ 2016 (8) TMI 860 - ITAT MUMBAI] are realistic. The learned AR also substantiated with judicial decisions which cannot be overlooked. Accordingly, following the ratio of the above decisions, we are inclined to allow the grounds of appeal of the assessee on this ground and direct the AO to allow deduction of pre-closure charges on term loan and processing charges of new term loan u/s 24(b) of the Act. - ITA Nos. 1649/Bang/2017, ITA No.730/Bang/2018, ITA No.731/Bang/2018 - - - Dated:- 24-4-2019 - SHRI B.R. BASKARAN, ACCOUNTANT MEMBER and SHRI PAVAN KUMAR GADALE, JUDICIAL MEMBER For the Appellant : Shri K.K.Chythanya ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said disallowance. 2.4. The Learned Commissioner (Appeals) and Learned Assessing Officer have erred in perversely holding that purchase of building complex along with related liabilities was slump purchase of business. 2.5. The Learned Commissioner (Appeals) has erred in perversely holding that the Appellant itself reflected business income in its return of income. 2.6. The Learned Commissioner (Appeals) and Learned Assessing Officer having assessed that the rental income from the building complex unc head 'income from House Property', erred in disallowing the interest on capital borrowed and used for acquiring the said building complex. 2.7. The Learned Commissioner (Appeals) and Learned Assessing Officer having allowed interest in respect of Rs. 45 Crores which was utilised towards re-payment of old loan, have erred in disallowing interest in respect of balance Rs. 19.50 Crores which was utilised for payment of purchase consideration, thus taking contradictory positions in respect of very same loan of Rs.64.50 Crores. 3. As regards alternate plea to allow the impugned interest under the head profits and gains from business: Without prejudice to the above ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... MMTP- INVESTMENT 79,51,74,939 2 BESCOM DEPOSIT 31,17,389 3 MMTP- HASE IV 1,27,38124 TOTAL (A) 81,10,30,45, 1 TERM LOAN FROM UNION BANK OF INDIA 44,04,52,711 2 RENT DEPOSIT FROM PHILIPS ELETRONICS INDIA LIMITED 1,47,13,965 3 RENT DEPOSIT FROM NX SEMICONDUCTORS INDIA PVT LTD 2,58,07,173 4 MMTP- PROJECT RELATED CREDITORS/ 1,35,29,017 TOTAL (B) 49,44,02,866 NET CONSIDERATION BY ISSUE OF SHARES (A) - (B) OR 5. The AO is of the opinion that purchase of asset which is composite in nature has been made by term liability and therefore, liabilities cannot be set off against rental income and made a proportion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r. Further, the learned AR referred to the assessment order for the assessment year 2010-11 filed at pages 161 to 163 of the paper book passed u/s 143(3) dated 30/11/2012. On further clarifications, the learned AR filed a copy of computation of income for the assessment year 2011-12 where the assessee has disclosed these facts in the ITR in schedule HP in the ITR filed where the interest component was claimed. For the present assessment year, the Return of income was filed on 29/09/2011 and claimed the interest component which is not disputed. The learned AR supported his argument relying on the following judicial decisions: i. CIT vs. R.P.Goenka and J.P.Goenka (233 ITR 123) (Cal), ii. CIT vs. Sunil Kumar Sharma (254 ITR 103) (Punjab Haryana), iii. Aryan Arcade Ltd. vs. CIT (250 Taxman 138) (Guj), iv. Sankeshwar Printers (P.) Ltd. vs. Dy.CIT (218 Taxman 360) (Karnataka), v. CIT vs. Gujarat Guardian Ltd. (177 Taxman 434) (Del). 9. We are of the considered opinion that the assessee has been claiming interest in the earlier assessment year and it was accepted in the scrutiny assessment and there is no dispute with respect to acquisition of asset availing loan and p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ver by the assessee, it could not be said that any particular asset, out of the total assets of the firm, was taken over with the aid of outstanding due to the outgoing partners. Such is not the case before us. The liability is clearly relatable to the acquisition of the property. 9. We are, therefore, of the considered view that the Commissioner (Appeals) and the Tribunal were justified in holding that the interest portion of the purchase price included in the instalments was allowable as deduction under section 24(1)(vi). There is, thus, no infirmity in the view taken by the Tribunal. The head-note of decision in the case of Aryan Arcade Ltd.(supra) reads as under: Section 24, read with section 263, of the Income-tax Act, 1961 - Income from house property - Deductions (Interest) - Assessment year 2011-12 - Assessee-company was engaged in renting of property - During relevant period assessee raised funds by issuing debentures - Funds raised through such debentures were utilised for repayment of past loans taken for purpose of construction of building - Assessee pointed out this aspect to Assessing Officer during original assessment - Through accounts assessee could esta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terest payable on capital borrowed for the purpose of acquiring, constructing, repairing or renewing the property. Section 2(28A), which was inserted by the Finance Act, 1976, with effect from 1st June 1976 defines interest as interest payable in any manner in respect of any moneys borrowed or debt incurred (including a deposit. claim or other similar right or obligation) and includes any service fee or other charge in respect of the moneys borrowed or debt incurred or in respect of any credit facility which has not been utilized. It is seen from the definition that even a service fee paid in respect of the moneys borrowed is included in the definition of interest . The processing fee is charged by the lender since the processing of the loan application and connected documents involves a service rendered by him to the borrower. By virtue of the definition of the word interest , the processing fee, which perhaps may not otherwise fall to be considered as interest, is to be treated as interest and allowed as a deduction under section 24(b) of the Act. If we may say, that with respect, the CIT(A) would appear to havelost sight of the fact that it is by definition of the word inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regulations and the provisions under section 40A(2), which have been referred to in the grounds of appeal, have no application to the facts of this case either. In our considered view, learned CIT(A) was fully justified in deleting the impugned disallowance of interest. and his order does not call for any interference. 9. Ground Nos.1 to 3 is thus dismissed'. 12. The headnote of the decision of the co-ordinate bench of Tribunal in the case of Peepul Tree Properties (P.) Ltd. vs. ACIT (71 taxmann.com 332)(Mumbai Trib) read as under: Section 24 of the Income-tax Act, 1961 - Income from house property - Deductions (Interest) - Assessment year 2010-11 - Whether prepayment charges and processing fee made for purpose of availing loans at lower interest cost are allowable under section 24(b) - Held, yes [Paras 4.7 4.11] [In favour of assessee] Section 23, read with section 24, of the Income-tax Act, 1961 - Income from house property - Annual value (Disallowance of claim) - Assessment year 2010-11 - Assessee earned income from leasing out of property and offered it under head income from house property on which it claimed maintenance charges as deduction - Assessin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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