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TMI Blog2018 (12) TMI 1382X X X X Extracts X X X X X X X X Extracts X X X X ..... tween the interest bearing borrowed funds and utilization of the same towards the aforementioned properties, viz. (i) Dhapla House property; and (ii) Dhanwatay House property. We thus finding ourselves to be in agreement with the view taken by the CIT(A) - Decided against revenue Entitlement for claim of deduction of the interest expenditure u/s 24(b) in respect of the Dhanwatay House property, to the extent of his share of income from M/s M.D. Dhanwatay & others, AOP - Held that:- As given a thoughtful consideration to the observations of the A.O, and unable to persuade ourselves to subscribe to the interpretation of Sec. 67A(3) so accorded by him. Admittedly, the interest paid by a member on capital borrowed by him for the purpose of investment in the AOP shall, in computing his share chargeable under the head “Profit and gains of business or profession” is to be deducted from his said share of income. In case before us the claim of interest expenditure of the assessee, is not in context of any borrowed capital which had been utilized for making of an investment in the AOP. Rather, the aforesaid interest expenditure pertains to the capital which was borrowed by the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t from the tenants but it was deposited in the bank account of AOP namely M/s. M.D. Dhanwatay Others as the property was in dispute and the suit for partition of the property amongst the original co-owners and restraining the co-owners from intermeddling the suit property is pending in the Hon ble Bombay High Court. 3. On the facts and in the circumstances of the case and in law, Ld. CIT(A) erred in not following the ratio of decision of Hon ble Supreme Court in the case of Goetze (India) Ltd. vs. C.I.T. (284 ITR 323) wherein it was held that the claim of deduction cannot be entertained otherwise than by filing revised return of income. The appellant prays that the order of the Ld. CIT(A) on the above grounds be set aside and the order of the A.O be restored. The appellant craves leave to amend or alter any ground and/or add any other grounds which may be necessary. 2. Briefly stated, the assessee company had filed its return of income for A.Y 2010-11 on 30.09.2010, declaring total income of ₹ 12,34,630/-. The return of income was processed as such under Sec.143(1) of the Act. Subsequently, the case of the assessee was reopened under Sec. 147 to verify t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the name of M/s M.D Dhanwatay Others, AOP. It was thus observed by the A.O, that as the facts during the year under consideration remained the same, thus the rent received by the AOP was liable to be brought to tax in its hands. On the basis of his aforesaid observations, the A.O referring to Sec. 67A of the Act, observed that the share of profit in the form of rent in the hands of the assessee (as a member of the AOP), as per Sec. 67A(2) was liable to be assessed under the head Income from house property . On the basis of his aforesaid observations, the A.O concluded that as per Sec. 67A(3), any interest paid by a member on capital borrowed for investing in the AOP was to be deducted from his share of income chargeable under the head Profits and gains of business or profession . It was thus, in the backdrop of the aforesaid facts, observed by the A.O that no deduction of the interest expenditure was to be allowed against the share of income of the assessee from the AOP. Further, the A.O after necessary deliberations restricted the claim of deduction of interest in respect of Dhapla House property to an amount of ₹ 40,15,572/- and assessed the income at ₹ 83,84, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n its Original‟ return of income or in the return of income filed in compliance to notice issued under Sec. 148 of the Act, thus the CIT(A) had erred in allowing the same. In support of his aforesaid contention the ld. D.R relied on the judgment of the Hon‟ble Apex Court in the case of viz. Goetze (India) Ltd. Vs. CIT (2006) 284 ITR 323 (SC). It was averred by the ld. D.R that now when the assessee had failed to raise the aforesaid claim of interest expenditure, therein the only recourse available to it was to have raised the same by filing a revised return of income. Per contra, the ld. A.R relied on the order of the CIT(A). It was submitted by the ld. A.R that the CIT(A) had rightly followed the view as was earlier taken by him while disposing off the appeals of the assessee for A.Y 2008-09 and A.Y 2009-10. 6. We have heard the authorised representatives of both the parties, perused the orders of the lower authorities and the material available on record. We find that it is the claim of the assessee that it had in its return of income filed in compliance to Notice issued under Sec. 148 of the Act, had not only shown its income in respect of the Dhanwatay House Pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A), which thus had entitled the assessee for claim of deduction of the interest expenditure under Sec. 24(b) in respect of the Dhanwatay House Property, despite the fact that no such interest expenditure in respect of the said property was claimed in its return of income for the year under consideration. We are of the considered view that the reliance placed by the A.O on the judgment of the Hon‟ble Supreme Court in the case of Goetze (India) Ltd. Vs. CIT 284 ITR 323 (SC) is well in order, and as such the A.O is restrained from allowing any such claim of deduction which had not been raised by the assessee in its return of income. However, in our considered view, on a perusal of the aforesaid judgment of the Apex Court, it can safely be gathered that the said restriction in no way confines the powers of the appellate authorities. Our aforesaid view is fortified by the judgment of the Hon‟ble High Court of Bombay in the case of CIT Vs. Pruthvi Broker and Share Holders Ltd (2012) 349 ITR 336 (Bom). The Hon‟ble High Court in its aforesaid order had observed that though an A.O in the backdrop of the judgment of the Hon‟ble Supreme Court in the case of Goetze (Ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rsy between the revenue and the assessee. However, thereafter the A.O by taking support of Sec. 67A(3) had observed that any interest paid by a member on capital borrowed by him for the purpose of investment in the association or body shall, in computing his chargeable under the head Profits and gains of business and profession in respect of a share in the income of the association is to be deducted from his share. On the basis of the aforesaid observations, the A.O was of the view that now when share of income of the assessee from the AOP was to be assessed under the head Income from house property , thus its claim of interest expenditure under Sec. 24(b) could not be accepted. We have given a thoughtful consideration to the observations of the A.O, and unable to persuade ourselves to subscribe to the interpretation of Sec. 67A(3) so accorded by him. Admittedly, the interest paid by a member on capital borrowed by him for the purpose of investment in the AOP shall, in computing his share chargeable under the head Profit and gains of business or profession is to be deducted from his said share of income. However, in case before us the claim of interest expenditure of the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X
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