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TMI Blog2023 (11) TMI 690X X X X Extracts X X X X X X X X Extracts X X X X ..... sion carried on at any other place, he has to reside at that other place in a building not belonging to him. In such situation, the annual value of such house shall be taken to be NIL. The first proviso has specifically relates to the situation discussed in section 23 sub-section 2 of the Act, where the individual can claim deduction not exceeding ₹ 30,000/-. The second Proviso is also in relation to first proviso, wherein the above said individual has acquired a constructed with the borrowed capital [within five years from the end of the Financial Year in which capital was borrowed] the amount of deduction shall not exceed two lakhs rupees. The third proviso is also closely linked to the proviso 1 and 2 and gives certain contingencies in order to claim the deduction mentioned in proviso 1 and 2 therefore all the proviso mentioned in section 24(b) are relation to an individual who intend to claim deduction u/s. 23(2) of the Act. Therefore, the proviso contained in section 24(b) is not applicable to assessee who borrows the capital for the purpose of earing income by letting out the property under the head income from house property . Therefore, the interpretation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iness of Commercial leasing which includes IT Park an IT/ITES SEZ, Construction of Residential Flats and Sales, Hospitality Business. Assessing Officer passed the Assessment Order u/s. 143(3) of the Act on 25.12.2019 accepting the return of income filed by the assessee. Ld. Pr.CIT, Mumbai -2, while examining the records, observed that assessment order dated 25.12.2019 passed by the Assessing Officer is erroneous in so far as it is prejudicial to the interest of the revenue, and requires revision. Accordingly, he issued show cause notice to the assessee and recorded the reasons for revision. In the reasons recorded Ld. Pr.CIT mentioned that assessee has claimed deduction u/s. 24(b) of the Act of ₹. 11,83,44,908/- and assessee has not furnished documentary evidences in support of its claim during the assessment proceedings. Further, he mentioned that on perusal of notices issued u/s 142(1) dated 30.09.2019 and 10.12.2019, that Assessing Officer has not raised any query on deduction claimed u/s 24(b) in its return of income. The Assessing Officer did not make any further verification on this issues. He also mentioned that as per the provisions of section 24(b) no deduction is to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ur Honour to grant us a period of around 8-9 days to furnish the same. 6. Be that as it may, we invite your Honour's attention to the fact that the finance cost debited to the profit and loss account is Rs. 20,19,03,981/-. The said amount along with other expenses have been apportioned between the income from house property' and 'income from business and profession' - a detailed working of apportionment of expenditure between various heads of income forms part of our statement showing computation of total income, which was filed with the Assessing Officer during the course of the assessment proceedings vide letter dated 03 October 2019 a copy of the said letter along with the statement showing computation of total income is also forwarded herewith for your Honour's ready reference- refer Appendix-I . 7. For your Honour's ready reference, we reproduced hereunder the apportionment of the finance cost from the aforesaid statement showing computation of total income Debited to the profit and loss account Claimed under business income Claimed under house property income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is prejudicial to the interests of the Revenue 3. In this case the Assessment Order dated 25 December 2019 passed is neither erroneous nor is prejudicial to the interest of the revenue since the same has been passed in accordance with the provisions of the Income-tax Act, 1961. 4. In this connection your Honour's attention is invited to the meaning of the term Erroneous Assessment' as given on page 542 of Black 's Law Dictionary: 'Erroneous Assessment refers to an assessment that deviates from the law and is therefore invalid and is a defect that is jurisdictional in its nature, and does not refer to the judgment of the Assessing Officer in fixing the amount of valuation of the property. Similarly 'erroneous judgment' means 'one rendered according to course and practice of court, but contrary to law, upon mistaken view of law, or upon erroneous application of legal principles 5. Here, we would point out that we have debited interest expense of Rs. 20.19 crores to the profit and loss account and a detailed facts about the loan taken from HSBC Bank, the mortgage of asset against the loan, details of interest on the loan, repayab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for acquisition or construction of properties in connection with which rental income is received and deduction u/s. 24(b) of the Act is claimed. 6. Further, Ld. Pr.CIT observed that in submissions assessee has stated that purpose of the loan is to finance of existing term loan, additional capital expenditure or any other loan as per RBI guidelines . He observed that there is no mention of any building or property for acquisition or construction of which the loan would be used. Further, he observed that the assessee has submitted an email confirmation from bank about payment of interest made by assessee however, he observed that confirmation by Bank about payment of interest does not constitute Certificate as per section 24(b) of the Act. 7. Further, he observed that the assessee has not submitted supporting documents or any other relevant details regarding when the impugned property was acquired/constructed and there is no record to show that the utilization of the loan for the purpose of property acquired or constructed. Further, he observed that in Para No. 7 of its submission dated 15.3.2022, assessee has apportioned interest cost in both the head of income i.e., Income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s. 24(b); 2:1 The Principal Commissioner of Income-tax has erred in holding that the interest expenditure of Rs. 11,83,44,905/- is not allowable u/s. 24(b) of the Income-tax Act, 1961. 2:2 The Appellant submits that considering the facts and circumstances of its case and the law prevailing on the subject the interest expenses amounting to Rs. 11,83,44,908/- is allowable under the head income from house property' while computing its total income for the year and the stand taken by the Principal Commissioner of Income-tax in this regard is erroneous and not in accordance with law. Without prejudice to the foregoing: 2:3 The Principal Commissioner of Income-tax has erred in not allowing the alternate plea of the Appellant that if the interest expenditure is considered as not allowable u/s. 24(b) of the Income-tax Act, 1961, the same may be allowed as business expenditure u/s. 37 of the Income-tax Act, 1961 while computing the taxable income of the Appellant for the year. 3:0 Re: General 3:1 The Appellant craves leave to add, alter, amend, substitute and/or modify in any manner whatsoever modify all or any of the foregoing grounds of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rred the total interest expenditure of ₹. 19.75 crores and brought to our notice Page No. 204 of the Paper Book which is computation of statement of property income in which assessee has claimed interest deduction u/s. 24(b) of the Act and the basis of allocation. Ld. AR of the assessee has submitted that without prejudice that even if the interest expenditure claimed by the assessee is not allowed u/s. 24(b) still assessee is eligible to claim the deduction u/s. 37 of the Act. 14. Considered the rival submissions and material placed on record, we observe that while verifying the assessment records the Ld. Pr.CIT observed that assessee has claimed interest expenditure u/s. 24(b) of the Act and according to him assessee has not submitted any information before the Assessing Officer to claim the same u/s. 24(b) and accordingly, he invoked third proviso to section 24(b) observing that in order to claim the expenditure u/s. 24(b) of the Act, assessee has to furnish certificate from the lender from whom the capital is borrowed and specify the amount of interest payable by the assessee for the purpose of acquisition or construction of the property or conversion of the whole or a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e facts on record, we observe that assessee is in business of construction and letting of the property as well as maintenance of the property, in such combined business, it is normal in the construction business to borrow the capital for the overall business and apportion the same based on the head of income. It is not in dispute that assessee has paid the relevant interest to the bank. 18. We observe from the record that Assessing Officer has collected the information from the assessee and as per the assessment records there is no evidences to show that Assessing Officer has verified the same in detail. However, the assessee has submitted all the relevant information, the basis of allocation before the Assessing Officer. Even otherwise if we consider that Assessing Officer has not verified the claim made by the assessee it can be considered as erroneous order. However, in order to invoke provisions of section 263 of the Act, both conditions has to be satisfied, not just erroneous, even the condition, prejudicial to the revenue. But as per the discussion in the above paragraph we do not agree with the Ld. Pr.CIT that the condition of prejudicial to the interest of the Revenue is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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