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TMI Blog2011 (3) TMI 906X X X X Extracts X X X X X X X X Extracts X X X X ..... gh there was credit balance after that also up to 31.3.2006 - , when the interest bearing borrowed funds have been utilized by the assessee for earning interest income which is taxable under the head income from other sources, deduction on account of full payment of interest is allowable to the assessee and it cannot be restricted to the extent of actual interest income only - Decided in the favour of assessee - ITA No. 1065/Del/2009 - - - Dated:- 18-3-2011 - R.P. Tolani, A.K. Garodia, JJ. Satish K Goel, Adv., for the Appellant B. Kishore, Sr. DR, for the Respondent ORDER A.K. Garodia: This is an assessee's appeal filed against the order of Ld CIT(A), Karnal dated 4.2.2009 for assessment year 2006-07. 2. Ground No.1 of the appeal is general. Ground No.2 of the appeal reads as under:- "That in the facts and circumstances of the case of the appellant, the order of Ld CIT(A) in confirming the order of ACIT in treating rental income of Rs.463388/- in respect of property Unit No.206 which was paid to M/s PJ Associates (purchaser) in the hands of the appellant is altogether arbitrary, illegal, void and uncalled for." 3. Brief facts of the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rent up to March, 2006 was Rs.4,62,588/-. It is submitted that it is certified by that party that it has not claimed credit of TDS in the present year or in the next year on this impugned amount of Rs.5,72,806/- and TDS amount was Rs.82,482/- for the present year and Rs.38,594/- for the next two months i.e. April, 2006 and May, 2006 and total TDS amount is of Rs.1,21,076/-. It is also submitted by the Ld AR of the assessee that the assessee has also not claimed credit of TDS in the present year for four months from December, 2005 to March, 2006 although the Assessing Officer has allowed credit for TDS of this period also because he has included this income of four months in the taxable income of the assessee. It is also submitted by him that if the ground of the assessee is allowed and this addition made by the Assessing Officer is deleted then the Assessing Officer may be directed to exclude the credit of TDS for this period of four months from December, 2005 to March, 2006 amounting to Rs.82,482/-. 5. Regarding merit of addition, it is submitted that the property in question was registered in the name of the buyer after May, 2006 and hence, under similar circumstances, the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ates on account of sale of the impugned property by the assessee to that party. The dispute is regarding the rental income from the month of December, 2005 to March, 2006 i.e. for four months. It is also admitted factual position that under similar circumstances, the assessee received rental income for the month of April and May, 2006 and the same was also passed on to the buyer by way of the same cheque of dated 8.6.2006 because as per the details available on page No.3 and 4 of the paper book, one cheque No.618356 for Rs.5,72,806/- was received by that party from the assessee on 5.6.2006. As per the details of this amount, it is on account of rental income received by the assessee from December, 2005 to May, 2006 after deducting TDS of Rs.1,21,076/-. As per the assessment order for assessment year 2007-08 submitted by the assessee before us, it is seen that the Assessing Officer has not made any addition in the income of the assessee on account of rent for the month of April and May, 2006. Hence, it is seen that the Assessing Officer has accepted the claim of the assessee in the subsequent year that the rental income from this property does not belong to the assessee although the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (supra), if the issue is being decided in subsequent year in favour of the assessee and against the revenue, different view cannot be taken in the preceding year. Hence, this judgment of Hon'ble Punjab and Haryana High Court becomes applicable under these facts of the present case and as per the same, the claim of the assessee has to be accepted in the present year also that rental income from December, 2005 to March, 2006 also did not accrue to the assessee. The third important point is that even if it is held that rental income is assessable in the hands of the assessee then this amount of Rs.4,63,338/- paid by the assessee to Shri PJ Singh has to be reduced from the capital gain tax in the hands of the assessee in the subsequent year i.e. assessment year 2007-08 and as a result, the short term capital gain of Rs.3,77,756/- declared by the assessee in that year will be converted into short term capital loss of Rs.85,632/- and the difference in tax in that year will work out to Rs.1,36,764/- in assessment year 2007-08. Tax payable by the assessee in that year will go down by this amount whereas the tax liability created by the Assessing Officer in the present year is only of Rs.1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to March, 2006 because if the income is not taxed in the hands of this assessee, credit for TDS cannot be allowed. But if this rental income for December, 2005 to March, 2006 has not been declared by the buyer in its return of income then such rental income has to be taxed in the hands of this assessee. The Assessing Officer should pass necessary order as per law as per above discussion after providing adequate opportunity of being heard to the assessee. We want to make it clear that burden is on the assessee to bring evidence on record establishing that the buyer has declared this income in its return of income for this assessment year. This ground is allowed for statistical purposes. 9. Ground No.3 of the appeal is as under:- "That in the facts and circumstances of the case of the appellant, the order of Ld in allowing part relief of only Rs.29,166/- in respect of disallowance of interest paid at Rs.2,51,507/- to M/s DSPL is arbitrary, illegal void and uncalled." 10. Brief facts of the case are that the assessee declared interest income of Rs.73,630/- against the gross interest income of Rs.9,87,808/- by reducing Rs.2,51,507/- on account of interest paid. The assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee has earned interest income for one month only on this basis that the bank has credited interest up to 31.1.2006 only on 4.2.2006 although there was credit balance after that also up to 31.3.2006. Under this factual position, we find that on this amount of Rs.1 crore, the assessee was earning interest income from the Ist day of credit in the same Savings Bank A/c i.e. on 20.12.005. Even for the period after 31.1.2006, interest income must be there on this account although the same is not credited by the bank till 31.3.2006. Interest for the period from 1.2.2006 up to 31.3.2006 must have been credited by bank in the next year being interest for 1.2.2006 to 31.7.2006. The Assessing Officer could have brought to tax such interest income in the present year for 1.2.2006 to 31.3.2006 but this was not done but even than, it cannot be said that the assessee was not earning income in this period. Now, the question is whether for the interest bearing borrowed funds which was utilized for earning interest income, deduction on account of interest payment is allowable only to the extent of actual interest income thereon or the whole amount of interest payment should be allowed. In our c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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