2021 (10) TMI 1261 - HC - Income Tax

Deduction u/s 57(iii) - interest paid to the bank - establish the nexus for claiming the deduction under Section 57(iii) with the borrowed fund - HELD THAT - It is discernable that the Tribunal has dismissed the appeal solely on the ground that the Annexure/Schedule mentioned in the agreements placed on record by the assessee were not made available to decide the issue of deduction under Section 57 (iii) of the Act. As such, we are of the considered opinion that providing one more opportunity to the assessee to furnish the details would not prejudice the rights of the Revenue. Given the circumstances, we set aside the order impugned and remand the matter to the Assessing Officer to provide an opportunity to the assessee to furnish the Annexure/Schedule mentioned in the agreements in support of her claim made, without answering the substantial questions of law raised. The impugned order passed by the Income Tax Appellate Tribunal, Bengaluru Bench C , Bengaluru, is set aside. The matter is remanded to the Assessing Officer for reconsideration keeping open all the rights and contentions of the parties.

Summary

Issues:
1. Denial of deduction under Section 57(iii) of the Income Tax Act for interest paid to the bank without considering all materials.
2. Disallowance of expenditure incurred from other sources under Section 57(iii) of the Act in scrutiny assessment.
3. Disallowance of deduction claimed under Section 24(b) of the Act in relation to income from house property.
4. Failure to provide details of furniture and fixtures as per agreements dated 5.12.2007 and 21.5.2008.

Analysis:
1. The appellant, an individual deriving income from house property and other sources, filed a return for the assessment year 2012-13. The assessing officer disallowed expenditure under Section 57(iii) of the Act and also disallowed a deduction claimed under Section 24(b) of the Act. The Commissioner of Income Tax (Appeals) partially allowed the appeal, leading to appeals before the Tribunal by both the appellant and the Revenue.
2. The Tribunal upheld the Commissioner's order, prompting the appellant to file this appeal. The appellant's senior counsel argued that details of furniture and fixtures were provided, but specific annexures were missing. The Revenue's counsel contended that no evidence supported the deduction claimed under Section 57(iii) of the Act.
3. The Court noted the absence of crucial annexures and schedules mentioned in the agreements, leading the Tribunal to deny the claim. The appellant sought an opportunity to furnish these details to establish the nexus for claiming the deduction under Section 57(iii) of the Act with the borrowed funds.
4. The Tribunal's dismissal was based on the absence of these annexures and schedules, leading the Court to remand the matter to the Assessing Officer for reconsideration. The Court allowed the appeal in part, setting aside the Tribunal's order and instructing the Assessing Officer to consider the furnished details for the deduction under Section 57(iii) of the Act.

This detailed analysis covers the issues raised in the judgment, providing a comprehensive overview of the legal proceedings and the Court's decision.