2020 (1) TMI 1083 - AT - Income Tax

Exemption u/s 11 - Deduction u/s. 24 against income from house property - treatment of capital expenditure as application of income - HELD THAT - Extrapolation made by learned CIT(A) that the Trust shall not be entitled for deduction u/s. 24 of the Act in computation of income from house property is totally unsustainable in law. As a matter of fact, the proposition that income has to be computed as per provisions of the Act even in the case of Trust was approved in the case of CIT v. Institute of Banking Personnel Selection (IBPS) 2003 (7) TMI 52 - BOMBAY HIGH COURT wherein capital expenditure for acquiring asset which was already shown as application of income was held to be eligible for depreciation which was denied by the Revenue. In this view of the matter in our considered opinion the assessee is entitled to deduction u/s. 24. Following the precedent as above, we direct accordingly. Since we are deciding the issue following the Hon'ble Bombay High Court decision as above, other decisions relied upon by the Revenue are not applicable. Disallowance of claim of accumulation of unutilized funds - We find that the issue in dispute on this issue is unutilized portion of fund of ₹ 18,50,000/- for A.Y. 2008-09. The same has been held to be taxable by the Assessing Officer u/s. 11(3) of the Act. This aspect has been upheld by learned CIT(A) on the ground that any specified unavoidable circumstances is not on record. This he held so by observing that if any specified period expires then it is the option to assessee to revise the purposes cannot be exercised. He held that while perusing the document filed by the assessee, he did not find anything contrary to the observation of the AO Therefore in the absence of any specified unavoidable circumstances on record to modify purpose, he declined to interfere with the finding of the Assessing Officer. In our considered opinion it is nowhere emanating as to whether the learned CIT(A) has confronted this aspect or not. In our considered opinion interest of justice demands this issue may be remitted to the file of the Assessing Officer. The Assessing Officer is directed to consider the issue afresh after giving the assessee opportunity of being heard.

Summary

Issues:
1. Deduction claim under section 24 of the Income Tax Act for income from house property.
2. Disallowance of claim of accumulation of unutilized funds.

Issue 1: Deduction claim under section 24 of the Income Tax Act for income from house property:

The appellant claimed a deduction under section 24 of the Income Tax Act against income from house property. The Assessing Officer denied the claim based on various grounds, including circulars and judicial precedents. The learned CIT(A) upheld the denial, emphasizing the interpretation of the term "income" under section 11(1) and distinguishing it from "total income." The CIT(A) referred to relevant circulars and legal decisions to support the denial of the deduction claim. However, the ITAT found the CIT(A)'s interpretation erroneous, citing express provisions of the Act and settled legal principles. The ITAT emphasized that the Act should be strictly construed when unambiguous and referred to a Bombay High Court decision to support the appellant's entitlement to the deduction under section 24.

Issue 2: Disallowance of claim of accumulation of unutilized funds:

The Assessing Officer disallowed the accumulation of unutilized funds by the appellant trust, considering it as deemed income under section 11(3) of the Income Tax Act. The learned CIT(A) upheld the disallowance, noting discrepancies in the appellant's application of funds and the absence of valid resolutions. The CIT(A) also rejected the alternative claim under section 11(3A) due to lack of documentary evidence and time constraints. The ITAT found the issue regarding the unutilized funds of ?18,50,000 for A.Y. 2008-09 taxable under section 11(3) unresolved. The ITAT directed the Assessing Officer to reconsider the issue after providing the appellant with an opportunity to be heard, emphasizing the need for clarity and justice in the decision-making process.

In conclusion, the ITAT partially allowed the appeal by the assessee, highlighting the importance of proper assessment and adherence to legal provisions in determining deductions and tax liabilities.