2019 (10) TMI 433 - AT - Income Tax

Addition made on account of payment of interest - assessee computed the income earning from the said property under the head income from house property - HELD THAT - From the assessment Order the AO held a sum were not spent on repairs and renovation on the said property and no documentary evidence were filed in respect of the balance amount. Before us also the Ld. AR did not bring on record any evidence contrary to the finding of both the authorities below. The assessee filed paper book but however, no such evidences were filed before this Tribunal showing that the assessee actually incurred the said ₹ 1,00,00,000/- towards repairs and renovation. Therefore, in our view that the finding, both the Authorities below, are to be upheld in the absence of any documentary evidence substantiating the claim of assessee. Alternative claim of assessee that if not deduction is not allowable U/s 24(b) of the Act a deduction may be given U/s 57(iii) - On perusal of the Clause (iii) of Section 57 of the Act it is noted that the deductions are contemplated to the income computed under the head income from other sources, whereas as, in this present case the statement of total income as filed by the assessee in its paper book shows the assessee earned income from house property and claimed standard deduction U/s 24(a) of the Act @ 30% - income of the assessee are computed under the head income from house property and therefore, the application of deductions contemplated in the Section 57 of the Act does not arise at all, as the deductions are available u/s 57 of the Act if the income chargeable under the head income from other sources. Thus, AR's alternative deduction is not acceptable and are rejected. Payment to M/s. Aavishkar Corporation and claiming deduction on payment of interest - there was no evidence to show that a sum of ₹ 1,00,00,000/- spent for renovation and repairs before the Authorities below as well as before this Tribunal - claim of payment of interest as deduction cannot be seen separately to the fact that no evidence showing incurring of expenditure on account of repairs and renovation were not filed before us as well as both the Authorities below. Therefore we find no infirmity in the Order of CIT(A) for the reasons as set out in para no.-5 of impugned Order which is reproduced hereinabove and it is justified. Thus, ground no.-2 filed by the assessee is dismissed. Addition made on account of payment of brokerage - AO held that when the standard deduction U/s 24 of the Act is granted no other deduction is available under the statute and denied the same - HELD THAT - The claim of granting deduction U/s 57(iii) of the Act was denied by the CIT(A) only on the ground that the deduction is not permissible under law other than the standard deduction of 30% U/s 24(a) of the Act. Admittedly, an amount of ₹ 1,10,300/- has been debited under the brokerage expenses relating to earning income from house property. Therefore, as rightly pointed by the CIT(A) that the deduction U/s 57(iii) of the Act is not permissible when the assessee availed already standard deduction U/s 24(a) of the Act. Therefore, we find no infirmity in the Order of CIT(A) and it is justified. Ground no.-3 raised by the assessee is dismissed. Addition u/s 14(A) r.w.s. 8D(2)(ii) (iii) - contention of the Ld. AR is that the assessee has its own sufficient funds for investments and the disallowance under Rule 8D(2)(ii) (iii) is not maintainable - HELD THAT - As find from the perusal of balance sheet as on 31.03.2012 that the assessee has balance of fund at ₹ 5,59,80,394.72 and therefore, we find force in the arguments of the Ld. AR that the assessee did not utilize any borrowed funds for its investments and the disallowance made under Rule 8D(2)(ii) is not maintainable. Therefore, taking into consideration the submission of the Ld. AR along with the balance sheet we restrict the disallowance to an extent of ₹ 4,000/- and ₹ 20,152/- made under Rule 8D(2)(ii) is deleted. Ground no.-4 raised by the assessee is allowed in part.

Summary

Issues:
1. Challenge to addition made on account of payment of interest.
2. Challenge to addition made on account of payment of brokerage.
3. Challenge to addition made on account of Section 14(A) r.w.s. 8D(2)(ii)&(iii) of the Rules.

Issue 1: Challenge to addition made on account of payment of interest:
The appellant claimed deduction on payment of interest on a loan availed for property renovation. However, the AO denied the deduction, stating that part of the loan was used for capital purposes and not repairs. The CIT(A) upheld the AO's decision, emphasizing that interest expenses towards capital expenditure are not allowable. The appellant failed to provide evidence of repair and renovation expenses, leading to the denial of the deduction. The Tribunal upheld the lower authorities' decision due to the lack of substantiating evidence, dismissing the appeal.

Issue 2: Challenge to addition made on account of payment of brokerage:
The AO disallowed brokerage expenses claimed by the appellant under the head of income from house property, citing that standard deduction covers related expenses. The CIT(A) confirmed this decision, stating that no separate deduction is permissible beyond the standard deduction of 30%. The Tribunal upheld the CIT(A)'s decision, emphasizing that deduction under Section 57(iii) of the Act is not permissible when standard deduction under Section 24(a) has been availed. Consequently, the appeal challenging the addition made on account of brokerage was dismissed.

Issue 3: Challenge to addition made on account of Section 14(A) r.w.s. 8D(2)(ii)&(iii) of the Rules:
The AO disallowed a portion of exempt dividend income under Rule 8D(ii) and (iii), adding it to the total income. The CIT(A) supported this decision, considering expenses related to earning exempt income for disallowance. The appellant argued that no borrowed funds were used for investments, challenging the disallowance under Rule 8D(2)(ii)&(iii). The Tribunal, after reviewing the balance sheet, restricted the disallowance, deleting a portion of it. Consequently, the appeal challenging the addition made under Section 14(A) r.w.s. 8D(2)(ii)&(iii) of the Rules was partly allowed.

This detailed analysis of the legal judgment covers all the issues involved, providing a comprehensive understanding of the Tribunal's decision on each challenge raised by the appellant.