2023 (10) TMI 375 - AT - Income Tax

Disallowance being interest - self occupied house property - Second loan taken to repay earlier loan for the same house property - HELD THAT - It is an admitted fact that it is never disputed by the AO that the assessee has obtained a LIC loan for acquiring/purchasing property and in subsequent years obtained a loan from SBI for the second property for which he has also taken those funds to repay an earlier loan amount. At no point of time, the Revenue disputed that the assessee has paid the interest component and therefore the basis of the Revenue that the present appeal is identical to those for assessment year 2009-10 appears to be incorrect. Therefore, the Assessing Officer as well as CIT(A) is not justified in denying the claim of the assessee towards interest payment - Decided in favour of assessee.

Summary

Issues involved:
The appeals filed by the assessee against the orders passed by the ld. CIT(A) for assessment years 2010-11 & 2011-12.

Issue 1 - Assessment Year 2010-11:
The assessee challenged the disallowance of interest expenses of Rs. 15,38,826/- by the AO, which was confirmed by the CIT(A). The grounds of appeal included errors in law, factual aspects, and the nexus of borrowed funds utilization. The appellant argued for deletion of the disallowance based on various provisions of the Act and differences from the previous assessment year.

Issue 2 - Assessment Year 2011-12:
Similar to the previous year, the assessee contested the disallowance of interest expenses of Rs. 14,40,493/- made by the AO and upheld by the CIT(A). The grounds of appeal highlighted errors in law, factual aspects, and the need to consider provisions of the Act. The appellant sought deletion of the disallowance and raised concerns about blindly following previous orders without considering changed circumstances.

In the assessment for 2010-11, the assessee declared total income of Rs. 11,12,990/- and claimed interest payment of Rs. 15,38,826/- towards a housing loan of Rs. 1,50,00,000/-. The AO disallowed the claimed interest amount, adding it to the total income. The CIT(A) upheld this decision, leading to the appeal.

During the proceedings, the authorized representative argued that the interest expenses were incurred against interest income received, with specific utilization of the new loan amount. The representative detailed the utilization of the loan for various purposes, including repayment of housing loan and advancing funds to others, under relevant sections of the Act.

The Departmental Representative contended that the facts were similar to the previous year, suggesting an undesirable activity of obtaining housing loans for earning interest. However, the Tribunal found that the Revenue did not dispute the interest payment made by the assessee, leading to the conclusion that the denial of the claim was unjustified.

The Tribunal allowed the appeal for assessment year 2010-11, stating that the basis for denying the interest payment claim was incorrect. Subsequently, for assessment year 2011-12, the Tribunal also allowed the appeal, considering the identical nature of the issues. Both appeals filed by the assessee were allowed, overturning the decisions of the lower authorities.