Case Law Details
Mansha Textiles Pvt. Ltd. Vs ITO (ITAT Ahmedabad)
Introduction: The case of “Mansha Textiles Pvt. Ltd. vs ITO” was heard by the ITAT Ahmedabad and pertains to an appeal filed by the assessee against the order of the Ld. CIT(A) for Assessment Year 2011-12. The main issue revolves around the deduction claimed under section 24(b) of the Income Tax Act for interest paid on a loan taken against a rented property.
Analysis: The appeal was filed against the assessment order passed by the Assessing Officer, which disallowed the deduction claimed by the assessee under section 24(b) of the Income Tax Act for interest paid on a loan taken against a property leased from Noida Authority. The dispute arose because the lease deed was unsigned and there was a lack of response from the Noida Authority due to an ongoing dispute.
The ITAT examined the issue and acknowledged that the Revenue had treated the income receivable from the assessee as assessable. The ITAT concluded that since the income was being charged for, interest deduction under section 24(b) should be allowed, as it is applicable when interest is paid on a loan availed against a rented property.
Conclusion: The decision in the “Mansha Textiles vs ITO” case highlights the importance of considering the specific circumstances and legal provisions when assessing deductions. The ITAT’s ruling supports the principle that if income is receivable and approved, interest deduction on the loan associated with the property should be allowed. This decision provides clarity on the eligibility of interest deduction in cases involving leased properties and loans, promoting a fair and consistent approach to taxation.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
The appeal filed by the assessee is against the order passed by the Ld. Commissioner of Income Tax (Appeals), (in short “Ld. CIT(A)”), National Faceless Appeal Centre, (in short “NFAC”), Delhi on 29.03.2023 for A.Y. 2011-12.
2. The grounds of appeal raised by the assessee are as under:
“1. Ld. CIT(A) (NFAC) erred in law and on facts in confirming order of AO framing assessment beyond a period of 4 years by invoking provisions of Section 147 of the Act on change of opinion in absence of any failure on the part of the appellant to disclose truly and fully all materials facts.
2. CIT(A) (NFAC) erred in law and on facts dismissing appeal of the appellant challenging second reassessment framed by AO in absence of any fresh material coming in his possession to justify the same.
3. CIT(A) (NFAC) erred in law and on facts confirming reassessment framed by AO disallowing deduction u/s 24(b) when no addition made on the grounds recorded in the reasons for which assessment was reopened is not tenable as held by judicial authorities.
4. CIT(A) (NFAC) erred in law and on facts in dismissing the appeal filed by the appellant simply on the basis that no written submissions were filed in response to notices issued by appellate authority.
5. CIT(A) (NFAC) erred in law and on facts in confirming action of AO disallowing deduction claimed u/s 24(b) of the Act not granting adequate opportunity of making good the submissions to the appellant.
6. Both the lower authorities erred in law and on facts to appreciate that the provisions of section 43B are not applicable to the facts of the case since the conditions for allowing interest expenses under the head income from House property is interest payable and not actual payment of interest.
7. Levy interest u/s 234A & 234B of the Act is unjustified.”
3. The assessee company filed its original return of income for A.Y. 2011-12 on 04.02.2013 declaring total income at Rs. NIL. Thereafter, notice under Section 148 of the Act was issued on 13.03.2015. Subsequently, income was assessed under Section 143(3) r.w.s. 147 of the Income Tax Act on 27.10.2015 determining total income at Rs. 47,03,360/-. Thereafter, the case was reopened under Section 147 of the Act by issuing notice under Section 148 dated 3.03.2018 after recording the reasons for doing so and the same was served to the assessee on 30.03.2018. In response to the said notice under Section 148 the assessee filed its return of income on 01.12.2018 declaring total income at Rs. 3,80,760/-. Notice under Section 143(2) was issued on 03.12.2018. In response to these statutory notices the assessee filed balance sheet along with its annexures. The Assessing Officer called for copy of lease deed and working of interest payable to Noida Authority, Uttar Pradesh for which the assessee has filed its reply. After taking into consideration the assessee’s submissions and the evidences the Assessing Officer observed that the lease deed as unsigned by both lessor and lessee and the assessee do not proof with the evidences related to interest actually paid to Noida Authority. The Assessing Officer, therefore, held that the assessee is entitled only for deduction under Section 24A of the Act that is deduction at 30% on rent income received and denied the claim of deduction under Section 24(b) of the Act and thus made addition of Rs. 20,15,727/-.
4. Being aggrieved by the assessment order the assessee filed appeal before the Ld. CIT(A). The Ld. CIT(A) dismissed the appeal of the assessee.
5. The Ld. A.R. submitted that as related to Ground Nos. 1 & 2 the Assessing Officer has already passed order under Section 143(3) r.w.s. 147 in respect of reopening on 27.10.2015 determining the total income at Rs. 47,02,360/- and the second reopening is also on the same issue. The Ld. A.R. submitted that though the Assessing Officer has passed the said order on earlier occasion the same cannot again reopen after four years by invoking provisions of Section 147 of the Act. The Ld. A.R. in respect of merit submitted that though the Noidia Authority has not responded the Assessing Officer has already assessed the said income as assessee’s income and therefore, again on the second proceedings the same cannot be treated as income of the assessee thereby imposing double taxation. The Ld. A.R. submitted that the interest claimed by the assessee should have been allowed.
6. There was a dispute between the Noida Authority and the assessee and therefore, the Noida Authority has not given any reply or details but the fact remains that the Income Tax Department / Revenue has determined this is rental income receivable, therefore, interest should have been allowed. Charging for income receivables thereby income approve then the interest has to be allowed.
7. The Ld. D.R. submitted that Section 43(B) is not applicable in the present case as the assessee claimed deduction under Section 24(b) on the interest paid on loan availed against the rented property taken on lease from the Noida Authority but the lease deed was unsigned and therefore, the CIT(A) as well as the Assessing Officer was right in disallowance the said claim of the assessee. The Ld. D.R. relied upon the assessment order and the order of the CIT(A).
8. Heard both the parties and perused all the relevant material available on record. As regards the Ground Nos. 1 to 4 in respect of challenge to the reopening under Section 147 the contention of the Ld. A.R. that it is on the very same fact appears to be not totally plausible as the Assessing Officer has recorded the proper reason for second reassessment. The reasons were separate from the earlier reopening and therefore, Ground Nos. 1 to 4 are dismissed. On merit, the assessee claim deduction under Section 24(b) on the interest paid on the loan availed against the rented property taken on lease from Noida Authority. The Noida Authority and the assessee had certain dispute but it is undisputed fact that the assessee has taken loan for the said property and was liable to pay interest to Noida Authority. Since the Assessing Officer has assessed the income receivables from the assessee then the said income receivables was supposed to be in respect of loan taken for the property from Noida Authority for which the assessee is paying the interest. Thus, corollary of the assessee / Ld. A.R. appears to be correct. Therefore, Ground Nos. 5 & 6 allowed. As regards Ground No. 7 the same are consequential in nature hence not adjudicated at this juncture.
9. In result, appeal of the assessee is partly allowed.
This Order pronounced in Open Court on 14/07/2023
