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TMI Blog2013 (5) TMI 932X X X X Extracts X X X X X X X X Extracts X X X X ..... facts are that the assessee, an individual engaged in the business of trading in iron and steel etc while declaring a total income of ₹ 1,10,95,946/- had shown an income of ₹ 1,08,00,000/- as income from house property on account of leasing/renting out a property at Panval to M/s Sanyo Resorts Pvt. Ltd. The assessee had claimed standard deduction of ₹ 32,40,000/- under section 24(a) of the Act and offered ₹ 75,60,000/- as net house property income. However, in the assessment framed under section 143(3), the AO treated the impugned income as income from other sources for the reason that the building which is existing on the plot are not even worth to live or to be let out to someone for residential purposes and has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... RCC structure. The assessee along with others thus has become co-owners of a bigger piece of land which is in fact by joining all these plots which all are next to each other. The assessee has purchased along with others the non agricultural plots from various different parties. Out of these few are only plots whereas two plots are with RCC structure on the same. The details of these schedules i.e. 10th and 11th forming part of the lease rent agreement are given as under: THE TENTH SCHEDULE HEREINABOVE REFERRED TO PVL3-05344-2006 ALL that piece or parcel of Non-agricultural land or grounds situated lying and being village-Kolkhe, Tal. Panvel, Dist. Raigad within the limits of Grampanchayat Kolkhe, Panchayat Samiti Panvel as fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 239 Godown 464.68 240 Godown 278.81 In the 11th Schedule of agreement there are four RCC old structures and one existing residential structure with 5 bedrooms with total area of 1858.72 sq.mtr. shown. Total area of the big plot which is 106920 sq.mtrs. when compared with built up part is disproportionate as there is very small area in form of RCC structure The land being appurtenant to building, though disproportionately big, still during the year the nature of income having been derived from a big plot of land with some godowns on it which is undisputedly asset with share of appellant in it has to be assessed as Income from House Property. It is rele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the funds as follows: (i) Own capital ₹ 1,90,56,736 (ii) Unsecured loan ₹ 4,73,88,441 (iii) O.D. loan ₹ 29,26,774 ------------------- Rs.6,93,71,951 Application of funds are shown as under: Fixed assets (a) Immovable property ₹ 1,48,14,915 (b) Investment ₹ 2,34,10,820 (c) Share ₹ 3,18,500 (d) Interest free loans ₹ 1,83,44,071 ---------------- Rs.5,68,88,306 The AO, in the assessment framed u/s 143(3), disallowed a proportionate interest payment which he worked out at ₹ 15,20,277/-. The working of the proportionate interest by AO is as under: Total interest paid x Interest free loans and advances Total available fund ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .54 crores. The balance loans of ₹ 3.19 crores are interest free. Thus the total interest free funds available with the assessee are ₹ 5.09 crores. In the case of CIT Vs. Reliance Utilities and Power Ltd. (2009) 313 ITR 340, the Bombay High Court has held that if there are funds available, both interest free and free and overdraft and or loans taken, then the presumption is that the investments would be out of interest free funds generated or available with company, provided said funds are sufficient to meet investment and hence no disallowance can be made. While following the said ratio, the fact that the assessee has interest free funds available are ₹ 5.09 crores cannot be disputed. However, neither the AO nor the Ld.CI ..... X X X X Extracts X X X X X X X X Extracts X X X X
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