9911796707
TMI Blog2021 (8) TMI 793X X X X Extracts X X X X X X X X Extracts X X X X ..... Decided in favour of assessee for statistical purposes. Income from house property - Annual Lettable Value (ALV) - notional lettable value of the 3 house properties of which one was sold during the year, while for the others were being used by the assessee for the purpose of his business and profession - HELD THAT:- it is the claim of the assessee that the aforementioned three properties in question were being used by him for business purposes. As we have while adjudicating the assessee s claim for deduction of interest expenditure qua the loans raised by him for acquiring the aforementioned properties, therein, restored the matter to the file of the A.O for re-adjudicating the issue after making necessary verifications after considering the additional evidence filed by the assessee before us, therefore, as a corollary thereto the present issue i.e saddling the asssessee with tax qua the ALV of the said properties which as claimed by him had been acquired and were being used by him during the year under consideration for his business purposes, in all fairness, also requires to be restored to the file of the A.O. Accordingly, the A.O is directed to verify as to whether or not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,77,140/- as Expenditure incurred for earning Professional Income. 3. The Hon ble CIT(A) as well as Ld. A.O erred in considering the Notional Income of ₹ 17,15,589/- on the 3 house Properties, of which one is sold during the year and others were used business and profession. 4. The Hon ble CIT(A) and the Ld. A.O failed to appreciate the fact that the Midas Banquet Hall was a depreciable asset falling within the block of asset and hence the sale of the said asset ought to have been calculated under Sec.50 of the I. T. Act. 2. Briefly stated, the assessee who is a film actor had e-filed a revised return of income for A.Y. 2014-15 on 30.11.2014, declaring a total income of Rs.Nil after claiming current year loss of ₹ 46,12,269/-. The return of income filed by the assessee was processed as such u/s 143(1) of the Act. Subsequently, the case of the assessee was selected for scrutiny assessment u/s 143(2) of the Act. 3. Assessment was framed by the A.O vide his order passed u/s 143(3), dated 31.12.2016 at an income of ₹ 2,45,48,460/- after inter alia making the following additions/disallowances: Sr. No. Particu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to shoot of models, Rehearshal, Audition, Look Test and etc. 6 to 12 3. The copies of Purchase Agreement and Sale Agreement of the Midas Banquet Hall. 13 to 66 Also, the assessee has filed an affidavit therein narrating the reasons due to which the aforesaid documents could not be filed before the lower authorities. It is the claim of the assessee that the aforementioned documentary evidence which have a strong bearing on the adjudication of the issues before us had remained omitted to be filed before the lower authorities, for the reason, that the respective counsels engaged by him for appearing on his behalf before the lower authorities, had either failed to communicate to him about the requisite details and documents that were required to be filed in the course of the proceedings before the lower authorities, and/or had adopted a lackadaisical approach resulting to non-furnishing of the said documents before the said respective authorities. It is further stated by the assessee that as he is a film artist and not technically qualified, therefore, not being aware of the fact that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 1,38,999/- 4. Interest on LAP ₹ 43,00,159/- 5. Interest on term loan ₹ 4,96,433/- Total ₹ 58,77,140/- Apropos the aforesaid claim for deduction of interest expenditure, it was observed by the A.O that the assessee had given certain interest free loan and advance of ₹ 62,91,560/- towards certain policy, besides making investments in certain fixed assets, viz. residential premises, banquet hall and other properties. Observing, that all the aforesaid assets were the personal assets of the assessee and had no nexus with his profession as that of an actor, the A.O called upon him to explain as to why the entire amount of his claim for deduction of interest expenditure may not be disallowed. In reply, the assessee vide his letter dated 09.12.2016 inter alia submitted a vague reply and failed to place on record any documentary evidence in support of his aforesaid claim for deduction of interest expenditure. Observing, that the reply filed by the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax Rules, 1962. It was observed by the CIT(A) that except for the interest expenditure of OD account paid to Axis Bank which was stated to have been utilized for pre-production of a film, viz. Poster Boys all other interest expenditure were in respect of properties that were purchased by the assessee. It was further noticed by him that the assessee had failed to furnish any material which would substantiate his claim that the aforementioned properties were used as a business property. Apropos the property at 14B Godrej Waldrof, it was observed by the CIT(A) that the same was admitted by the assessee to have been used for residential purposes. Backed by his aforesaid observations, the CIT(A) was of the view that the interest paid on borrowed funds that were utilized for acquisition of property i.e a residential or commercial property could only be allowed as a deduction u/s 36(1)(iii) of the Act where the said properties were used for the purpose of business. It was, thus, observed by the CIT(A) that in the absence of any supporting documents submitted either during the course of the assessment proceedings or in the course of the proceedings before him, the aforesaid claim for ded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... B ). Needless to say, the A.O while re-adjudicating the aforesaid issue shall afford a reasonable opportunity of being heard to the assessee who shall remain at a liberty to substantiate his aforementioned claim. Accordingly, the matter is set-aside to the file of the A.O for re-adjudication in terms of our aforesaid observations. The Ground of appeal No. 2 is allowed for statistical purposes. 10. We shall now take up the grievance of the assessee that the A.O had erred in considering the notional lettable value of the 3 house properties of which one was sold during the year, while for the others were being used by the assessee for the purpose of his business and profession. As is discernible from the assessment order, it was observed by the AO that the assessee owned the following immovable properties: Sr. No. Name of Property Value as per Balance sheet 1. Property at Waldrof (14B) office ₹ 2,20,57,530/- 2. Property at Waldrof (13B) Residential ₹ 2,20,57,530/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee for business purposes. In order to drive home his aforesaid claim, the ld. A.R once again took us through the relevant documents which were filed before us as additional evidence . It was the claim of the ld. A.R that as the aforementioned properties in question were being used by the assessee for business purposes, therefore, there was no question of subjecting their ALV to tax in his hands under the head Income from house property . 12. We have given a thoughtful consideration to the aforesaid issue in question before us. Section 22 of the Act carves out an innate exception, as per which the annual lettable value of such portion of a property owned by an assessee, which is occupied by him for the purpose of any business or profession carried on by him the profits of which are chargeable to income tax, cannot be brought to tax on a notional basis under the head Income from house property . As observed by us hereinabove, it is the claim of the assessee that the aforementioned three properties in question were being used by him for business purposes. As we have while adjudicating the assessee s claim for deduction of interest expenditure qua the loans raised b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (-) ₹ 1,75,00,000/-] towards LTCG in the hands of the assessee. On appeal, it was the claim of the assessee that as the property in question, viz. Midas Banquet Hall was a depreciable asset that formed part of the block of assets , therefore, the A.O loosing sight of the material fact as regards the existence of the block of assets post reduction of the value of part of the assets had wrongly made the addition in the hands of the assessee. The working of the details furnished by the assessee as regards the existence of the block of assets post reduction of the value of the property sold reads as under : Sr. No. Particulars Amount 1. Opening WDV 1,90,33,442/- 2. Addition during the year 3,05,77,620/- 3. Subtotal 4,96,11,062/- 4. Less: Amount Calculated by order as per Section 50C 3,90,63,000/- 5. Closing WDV 1,05,48 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lected the sale consideration of the said property at an amount of ₹ 4,25,00,000/- (as against the value adopted by the Stamp Valuation authority at ₹ 3,90,63,000/-). Also, we find, that the assessee s claim of having earned STCG of ₹ 3,01,01,488/- on sale of the aforesaid property under consideration, viz. Midas Banquet Hall (as per the assessee s Capital a/c ) had also not been dislodged by the A.O while treating the differential amount of ₹ 2,15,68,000/- (supra) [i.e ₹ 3,90,68,000/- (value adopted by the registrar for stamp duty valuation purpose) (minus) ₹ 1,75,00,000/- (sale consideration received by the assessee as per the A.O)] as LTCG in the hands of the assessee. Be that as it may, the assessee had rebutted the very basis for assessing the gain on the transfer of the property in question as LTCG in his hands. It is the claim of the assessee that as the property in question formed part of the block of assets , therefore, the profit arising on the sale of the same could only be be considered as per the provisions of Sec. 50 of the Act. In our considered view, the aforesaid claim of the assessee, though, principally correct, cannot howeve ..... X X X X Extracts X X X X X X X X Extracts X X X X
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