IN INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A, MUMBAI BEFORE SHRI G.S.PANNU, ACCOUNTANT MEMBER AND SHRI RAMLAL NEGI, JUDICIAL MEMBER ITA No. 3097/Mum/2013 (Assessment Year 2008-09) Smt. Kalpana N.Jain, C/o. G.P.Mehta & Co- CA s 807,Tulsiani Chambers, 212, Nariman Point, Mumbai 400 021. PAN:AAEPJ 6964G ...... Appellant Vs. ITO, Ward 15(2)(2), Mumbai 400 020 .... Respondent Appellant by : Shri G.P.Mehta Respondent by : Shri A.Ramachandran Date of hearing : 07/09/2016 Date of pronouncement : 21/09/2016 ORDER PER G.S.PANNU,A.M: captioned appeal filed by assessee pertaining to assessment year 2008-09 is directed against order passed by CIT(A)- 26 Mumbai dated 07/02/2013 which in turn arises out of order passed by Assessing Officer under section 143(3) of Income Tax Act, 1961 (in short Act ) dated 12/11/2010. 2. In this appeal, assessee has contested disallowance of interest expenditure of Rs.2,52,000/- and Rs.2,57,058/- claimed while 2 ITA No. 3097/Mum/2013 (Assessment Year 2008-09) computing income from house property and business income respectively. 3. In brief, relevant facts are that assessee individual filed her return of income for assessment year 2008-09 declaring total income at Rs.38,850/-, which was subject to scrutiny assessment, whereby total income has been assessed at Rs.6,43,270/-. In return of income assessee declared salary income as director of concern, house property income from let-out property as well as self-occupied property and also business income by way of loans from proprietary concern, share of profit from partnership firm M/s. Plastika Enterprises and interest on capital with said firm M/s. Plastika Enterprises apart income from other sources. Assessing Officer noticed that assessee had earned interest from banks and other concerns and was also paying interest borrowings from certain individuals, net effect was outflow of Rs.5,09,058/- on account of interest. In return of income, assessee allocated aforesaid outflow towards rental income Rs.2,50,000/- and balance with respect to contribution to capital invested in partnership firm M/s. Plastika Enterprises and in proprietary concern, Just Right - Rs.2,57,058/-. aforesaid deductions claimed while computing income from house property and business income respectively have been denied by lower authorities, against which, assessee is in appeal before Tribunal. 4. With respect to deduction of Rs.2,52,000/- claimed against rental income from property at Gita Industrial Estate, it has 3 ITA No. 3097/Mum/2013 (Assessment Year 2008-09) been pointed out by Ld. Representative for assessee that said property was acquired by assessee in assessment year 1999- 2000 by raising interest free loan from M/s. Plastika Enterprises, partnership firm. It was pointed out that subsequently in assessment year 2001-02 assessee raised interest bearing loans, which were utilized to repay interest free loan taken from M/s. Plastika Enterprises for acquisition of property. Ld. Representative for assessee pointed out that in assessment year 2001-02, assessee had claimed deduction of interest paid on borrowed funds while computing income under head house property, which stood allowed in assessment finalized under section 143(3) of Act dated 31/01/2003. Similarly, it is pointed out that in assessment year 2003-04 also such interest payment stood allowed in assessment made under section 143(3) of Act. Under these circumstances, it is pointed out that lower authorities are not justified in making impugned disallowance. 5. On other hand, Ld. Departmental Representative pointed out that there was no evidence to prove that property acquired was out of borrowed funds, therefore, claim has been rightly denied. 6. We have carefully considered rival submissions and find no justification to sustain disallowance of Rs.2,52,000/- representing interest expenditure. Quite clearly, in earlier years similar expenditure has been allowed as deduction against rental income earned from letting out of property in terms of section 24(b) of Act. Following earlier orders, and in absence of any change in 4 ITA No. 3097/Mum/2013 (Assessment Year 2008-09) facts or law brought out by Revenue, it is directed that deduction of Rs.2,52,000/- on account of interest be allowed against rental income. Thus, on this aspect assessee succeeds. 7. other issue is with regard to claim for deduction of interest of Rs.2,57,058/- while computing business income. It has been pointed out that said expenditure is incurred for borrowing deployed in capital of partnership firm M/s. Plastika Enterprises as well as capital used in proprietary concern. In this context, it was pointed out that during year assessee had earned interest on capital deployed in partnership firm at Rs.1,98,578/- and that so far as share of profit from partnership firm is concerned, there has been loss of Rs.1,13,085/- during year. It is pointed out that such loss has been excluded while computing total income and, therefore, no exempt income has been earned from partnership firm. On this aspect, we find that lower authorities have not advanced any credible reason to deny claim of assessee, which is hereby directed to be allowed. Thus, on this aspect also assessee succeeds. 8. In result, appeal of assessee is allowed. Order pronounced in open court on 21/09/2016 Sd/- Sd/- (RAMLAL NEGI) (G.S. PANNU) JUDICIAL MEMBER ACCOCUNTANT MEMBER Mumbai, Dated 21/09/2016 Vm, Sr. PS 5 ITA No. 3097/Mum/2013 (Assessment Year 2008-09) Copy of Order forwarded to : 1. Appellant , 2. Respondent. 3. CIT(A)- 4. CIT 5. DR, ITAT, Mumbai 6. Guard file. BY ORDER, //True Copy// (Dy./Asstt. Registrar) ITAT, Mumbai Kalpana N.Jain v. ITO, Ward-15(2)(2), Mumbai