2007 (9) TMI 454 - AT - Income Tax

Summary

Issues Involved:
1. Deletion of addition of Rs. 60,000 on account of conveyance expenses.
2. Deletion of addition of Rs. 50,000 on account of house-tax.
3. Deletion of disallowance of Rs. 94,500 on account of interest claimed under section 24.
4. Deletion of addition of capital gain of Rs. 52,642.
5. Addition of Rs. 15,55,250 as deemed dividend under section 2(22)(e).

Detailed Analysis:

1. Deletion of Addition of Rs. 60,000 on Account of Conveyance Expenses
The assessee declared a salary from M/s. Panchsheel Properties Pvt. Ltd. of Rs. 1,80,000. However, the salary certificate showed Rs. 2,40,000, including Rs. 60,000 claimed as reimbursement for conveyance expenses. The Assessing Officer (AO) found this claim incorrect, noting that all car expenses were borne by the company. The Commissioner of Income-tax (Appeals) (CIT(A)) accepted a revised certificate showing Rs. 60,000 as reimbursement. The tribunal upheld the AO's view, stating that the revised certificate lacked credibility and the amount could not be allowed under section 37(1) since it pertains to salary income, which only allows deductions under section 16.

2. Deletion of Addition of Rs. 50,000 on Account of House-Tax
The assessee claimed Rs. 3,50,000 as property tax deduction, including Rs. 50,000 paid by the property's purchaser. The AO disallowed the Rs. 50,000, as it was not paid by the assessee. The CIT(A) allowed the deduction, stating the liability rested with the assessee until the sale date. The tribunal restored the AO's disallowance, emphasizing that the tax must be paid by the property owner to be deductible under section 23.

3. Deletion of Disallowance of Rs. 94,500 on Account of Interest Claimed under Section 24
The assessee claimed Rs. 94,500 as interest on loans for property acquisition. The AO disallowed the claim due to lack of evidence linking the loans to property acquisition. The CIT(A) allowed the deduction, noting the loans were old and accepted in previous years. The tribunal upheld the AO's disallowance, citing the assessee's failure to establish a nexus between the loans and property acquisition.

4. Deletion of Addition of Capital Gain of Rs. 52,642
The assessee declared Rs. 1,177 as long-term capital gain, claiming Rs. 1,70,000 for property improvements. The AO disallowed the claim, finding the supporting bill bogus. The CIT(A) allowed the claim, doubting the son's knowledge of his father's business. The tribunal restored the AO's disallowance, stressing the need for genuine and substantiated claims and noting the assessee's attempt to claim the entire expense despite owning only a quarter share.

5. Addition of Rs. 15,55,250 as Deemed Dividend under Section 2(22)(e)
The AO treated loans from three companies as deemed dividends, totaling Rs. 15,55,250. The CIT(A) confirmed the additions for two companies and reduced the third to the closing balance of Rs. 3,60,000. The tribunal upheld the AO's full addition, rejecting the assessee's claim that the amounts were for business purposes and noting the statutory fiction of deemed dividend applies regardless of loan repayment.

Conclusion
The tribunal upheld the AO's disallowances and additions, emphasizing the need for genuine, substantiated claims and adherence to statutory provisions. The revenue's appeal was allowed, and the assessee's appeal was dismissed.