2019 (5) TMI 1708 - AT - Income Tax

Disallowance of business loss - revenue submits that there was no business during the year. The assessee has not proved the expenditure that the expenses were incurred wholly and exclusively for the purpose of business and no documentary evidences was furnished by the assessee - in the return of income the assessee has shown the income under the head Income from House Property and under the head Income from Other Sources in its Profit Loss A/c - HELD THAT - As per Profit Loss A/c, the assessee offered income under two heads only (i) Income from House Property and (ii) Income from Other Sources. In the Profit Loss A/c, no business income was shown. As the assessee is already allowed the benefit under section 24(a). Therefore, the ld. CIT(A) concurred with the finding of Assessing Officer. Before us the assessee has neither furnished any documentary evidence nor disclosed the details particulars of new business venture which was undertaken by the assessee. No name or municipal number of property in connection of which the assessee allegedly selected for such business venture. Moreover, while perusal of details of expenses, we have noted that the assessee has claimed depreciation, remuneration to Directors, appeal fees, audit fees, professional fees and telephone expenses. All the expenses were included in the standard deduction claimed by the assessee. In our view, the assessee failed to substantiate the business activities as no details particulars regarding the alleged new business venture undertaken by assessee is furnished. Therefore, we do not find any merit in the ground of appeal raised by assessee. Disallowance of claim of interest under section 24(b) - assessee submits that the assessee purchased a property known as Dhanwatay House - from which date, the assessee is eligible to claim interest on the loan - HELD THAT - There is no dispute that the agreement for acquisition of part of Dhanwatay House was executed only on 31.03.2008. There is no dispute that during the relevant period that the assessee has offered the rental income of part of Dhanwatay House. The intention of assessee was further to let out the property and to earn the rental income. In our view, when the availing of finance and payment interest thereon is not in dispute the assessee is entitled for interest allowance irrespective of fact that finally agreement to sale for change of ownership was executed subsequently. Therefore, in our considered view, the assessee is entitled for proportionate allowance of interest on the payments of ₹ 5.28 Crore paid to Vedant Property Pvt. Ltd. Hence, the Assessing Officer is directed to compute the interest allowance from the date of payment i.e. on 14.02.2008. In the result, this ground of appeal is allowed. Determination of capital gain - NIL returned by the appellant - HELD THAT - Before the ld. CIT(A), the assessee again not furnished any documentary evidence in respect of transfer/surrender of property. The ld. CIT(A) confirmed the action of Assessing Officer holding that in absence of any documentary evidence and on the basis of receipt on substantial payment, the transfer was within the period of three years. The ld. AR of the assessee vehemently argued before us that variation is only on account of capitalization of interest. Before us, the assessee failed to disclose the date of acquisition of different share of Dhanwatay House in earlier Assessment Year i.e. 2008-09, 2009-10 or 2010-11. In absence of any documentary evidence, we are unable to convince ourselves about the allowance of capitalization of interest for Assessment Year 2010-11 2011-12. In the result, ground of appeal raised by assessee is dismissed.

Summary

Issues Involved:
1. Disallowance of business loss of ?9,08,549.
2. Disallowance of claim of interest under section 24(b).
3. Determination of capital gains of ?61,68,015.

Issue-wise Detailed Analysis:

1. Disallowance of Business Loss of ?9,08,549:

The assessee, a company engaged in leasing property, filed its return for AY 2008-09 declaring a total income of ?3,22,161. The Assessing Officer disallowed the business loss of ?9,08,549, which included expenses like depreciation, salary, and purchase of a motor vehicle for a new business venture. The CIT(A) confirmed this disallowance.

The assessee argued that the expenses were incurred for developing another property, but this venture was unsuccessful. The revenue countered that the assessee did not provide documentary evidence to prove that the expenses were incurred wholly and exclusively for business purposes. The assessee had shown income under "Income from House Property" and "Income from Other Sources" and already claimed standard deduction under section 24(a).

The Tribunal noted that the assessee failed to provide details or evidence of the new business venture, such as the name or municipal number of the property. The claimed expenses were already covered under the standard deduction. Consequently, the Tribunal found no merit in the assessee's claim and dismissed this ground of appeal.

2. Disallowance of Claim of Interest Under Section 24(b):

The assessee claimed interest on borrowed funds used to acquire a property known as Dhanwatay House. The Assessing Officer allowed the interest from the date of the agreement (31.03.2008) rather than the date of payment (14.02.2008). The CIT(A) upheld this decision, stating that the property was not in the assessee's ownership until 31.03.2008.

The assessee argued that the interest should be allowed from the date of payment, as the property was acquired with borrowed funds. The Tribunal agreed, stating that the intention to let out the property and earn rental income was clear. Therefore, the interest should be computed from the date of payment. This ground of appeal was allowed, and the Assessing Officer was directed to compute the interest from 14.02.2008.

3. Determination of Capital Gains of ?61,68,015:

For AY 2012-13, the Assessing Officer noted a reduction in the assessee's property investment and concluded that part of the property was surrendered back to Vedant Property P. Ltd., resulting in a capital gain of ?61,68,015. The assessee argued that the amount received was equal to the acquisition cost, resulting in no capital gain. The CIT(A) confirmed the Assessing Officer's decision, noting the absence of documentary evidence for the transfer.

The Tribunal reviewed the details and noted that the assessee failed to provide documentary evidence of the property transfer. The assessee's claim that the variation was due to capitalization of interest was not substantiated with evidence. Consequently, the Tribunal upheld the decision of the lower authorities and dismissed this ground of appeal.

Conclusion:

The appeal for AY 2008-09 was partly allowed, with the Tribunal allowing the interest claim under section 24(b) from the date of payment. The appeal for AY 2012-13 was dismissed, with the Tribunal upholding the determination of capital gains. The order was pronounced in the open court on 31/05/2019.