2011 (6) TMI 907 - AT - Income Tax

Summary

Issues Involved:
1. Addition of Rs. 1,50,000 under the head "tanker running."
2. Disallowance of interest amounting to Rs. 1,23,370 under section 40(a)(ia).
3. Disallowance of interest of Rs. 1,34,165 under section 24(b) of the Income Tax Act.

Issue 1: Addition of Rs. 1,50,000 under the head "tanker running"
The assessee claimed expenses of Rs. 4,60,481 against receipts of Rs. 3,75,265 from tanker running, resulting in a loss of Rs. 85,217. The Assessing Officer (A.O.) disallowed Rs. 1,50,000 citing lack of vouchers for most expenses. The assessee argued that necessary expenses for running the tanker were incurred, supported by vouchers for diesel and wages. However, the Commissioner of Income Tax (CIT) upheld the disallowance, emphasizing the lack of verifiable vouchers for various expenses. The Income Tax Appellate Tribunal (ITAT) directed the A.O. to recompute income from the tanker based on a fixed amount per month due to unverifiable accounts.

Issue 2: Disallowance of interest amounting to Rs. 1,23,370 under section 40(a)(ia)
The A.O. disallowed interest paid to certain individuals totaling Rs. 1,23,370 due to non-deduction of Tax Deducted at Source (TDS) under section 40(a)(ia). The assessee contended that the recipients had submitted Form 15G, exempting TDS. However, the A.O. found no record of these forms and disallowed the interest. The CIT(A) upheld the disallowance, stating that the forms were not filed with the relevant authorities. The ITAT ruled in favor of the assessee, citing compliance with section 197A(1A) exempting TDS for interest payments.

Issue 3: Disallowance of interest of Rs. 1,34,165 under section 24(b) of the Income Tax Act
The A.O. disallowed interest on housing loan amounting to Rs. 1,34,165 under section 24(b) as the residential house was deemed incomplete. The assessee argued that the valuation report indicated completion of certain floors and self-occupation by the owner. However, the A.O. highlighted discrepancies in ownership documents and incomplete construction. The CIT(A) upheld the disallowance, emphasizing the unfinished state of the property. The ITAT directed a reevaluation of interest deduction based on the portion occupied by the assessee and loan utilization.

In conclusion, the ITAT partially allowed the appeal, directing the A.O. to recompute income from tanker running and interest deductions based on the specific circumstances of each issue.