2019 (4) TMI 2052 - AT - Income Tax

Disallowance of proportionate interest u/s 24(b) - Loan borrowed for acquisition of property - AO was of the opinion that the transaction of the assessee is in the nature of slump sale and referred to the assets and liabilities whereas the learned AR heavily contested that it is in the nature of take over of the asset along with liability and does not come under the purview of slump sale - HELD THAT - 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 payment of interest. The acquisition made by the assessee cannot be considered as slump sale as the assessee has discharged the liability of other sister concern and obtained the property on loan which is not disputed by the Revenue. Since the assessee has been offering income from house property and claiming interest income from earlier years which is not disputed 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.

Summary

Issues Involved:
1. Disallowance of proportionate interest u/s 24(b) of the Income-tax Act, 1961.
2. Alternative plea for allowance of interest u/s 36(1)(iii).
3. Deduction towards processing fees and pre-payment charges u/s 24(b).
4. Disallowance under the provisions of section 14A.

Detailed Analysis:

1. Disallowance of Proportionate Interest u/s 24(b):
The primary issue revolves around the disallowance of proportionate interest claimed by the assessee under section 24(b) of the Income-tax Act, 1961, for the assessment years 2012-13, 2013-14, and 2014-15. The assessee argued that the loan of Rs. 64.50 Crores was utilized partly for repaying an old loan of Rs. 45 Crores and partly for paying the purchase consideration of Rs. 19.50 Crores. The Assessing Officer (AO) and the Commissioner of Income Tax (Appeals) [CIT(A)] disallowed the interest on Rs. 19.50 Crores, considering the purchase of the building complex as a slump purchase of business. The Tribunal found that the assessee had been claiming interest in previous years, which was accepted in scrutiny assessments. The Tribunal held that the acquisition could not be considered a slump sale and directed the AO to allow the interest deduction as claimed by the assessee.

2. Alternative Plea for Allowance of Interest u/s 36(1)(iii):
The assessee raised an alternative plea to allow the interest under section 36(1)(iii) if it was not allowed under section 24(b). The Tribunal, having allowed the interest under section 24(b), did not need to delve into this alternative plea.

3. Deduction Towards Processing Fees and Pre-payment Charges u/s 24(b):
The assessee claimed deductions for pre-closure charges on an old term loan and processing charges on a new term loan under section 24(b). The Tribunal referred to various judicial decisions, including the case of Pentagram Properties Pvt. Ltd. vs. Dy.CIT, which allowed such deductions. The Tribunal directed the AO to allow the deductions for pre-closure charges and processing charges under section 24(b).

4. Disallowance under the Provisions of Section 14A:
For the assessment year 2013-14, the assessee raised a ground regarding the disallowance under section 14A. However, this ground was not pressed during the hearing, and hence, it was dismissed by the Tribunal.

Conclusion:
The Tribunal allowed the assessee's appeals partly for the assessment years 2012-13 and 2013-14 and fully for the assessment year 2014-15. The Tribunal directed the AO to allow the interest deduction under section 24(b) and the deductions for processing fees and pre-payment charges. The disallowance under section 14A for the assessment year 2013-14 was dismissed as it was not pressed.