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Sri Sarfaraz Hussainali Lakhani, vs. DCIT, Circle-16(1), HYDERABAD
May, 03rd 2019


                   I.T.A. No. 1682/HYD/2017
                    Assessment Year: 2013-14

      Sri Sarfaraz Hussainali           DCIT, Circle-16(1),
      Lakhani,                          HYDERABAD
      SECUNDERABAD                 Vs
      [PAN: ABEPL9890L]

             (Appellant)                    (Respondent)

            For Assessee    : Shri Sanjay Mutha, AR
            For Revenue     : Shri Nilanjan Dey, DR

             Date of Hearing       : 04-04-2019
             Date of Pronouncement : 03-05-2019



       This is assessee's appeal for the AY. 2013-14, against the
order of    the   Commissioner of       Income   Tax (Appeals)-4,
Hyderabad, dated 17-07-2017.

2.     Brief facts of the case are that the assessee, an individual
and Director of M/s. LSC Steels Pvt. Ltd., and also proprietor
of Kuber Steels, filed his return of income for the AY. 2013-14
on 05-10-2013, admitting total income at Rs. 18,08,110/-.
                             :- 2 -:
                                                ITA. No. 1682/Hyd/2017

3.   During the assessment proceedings u/s. 143(3) of the
Income Tax Act [Act], the Assessing Officer observed that
assessee has offered interest income from LSC Steels of Rs.
3,48,430/- and after claiming a set-off of interest expenditure
of Rs. 15,01,360/- under the head `income from other
sources'. The assessee was, therefore, required to furnish the
details of the expenditure claimed. The assessee explained that
the interest was paid for the loans taken for acquisition of the
property located at Dundigal village and loans were obtained
from his family members. He submitted that interest was paid
to the family members for loans taken for purchase of
property. The assessee furnished a copy of the bank statement
and also the confirmations from the relevant parties. The
Assessing Officer observed that the assessee has taken a loan
from State Bank of India for purchase of the said property and
the interest thereon has been allowed as a deduction u/s.
24(b) of the Act. However, for the claim of interest payment of
Rs. 15,01,360/-, he held that it is not allowable to be set-off
against the interest income under the head `income from other
sources' as the same was not incurred for earning of the
interest income. He therefore disallowed the same.

3.1. Aggrieved, the assessee preferred an appeal before the
CIT(A), who confirmed the order of Assessing Officer and the
assessee is in second appeal before us.

4.   The Ld. Counsel for the assessee, reiterating the
submissions made before the authorities below, submitted
                             :- 3 -:
                                                   ITA. No. 1682/Hyd/2017

that the assessee and his brother had purchased the property
for a total consideration of Rs. 4,57,58,530/-, including
registration   charges and   the       assessee's share     was     Rs.
2,28,79,115/-. He submitted that in addition to obtaining a
loan from State Bank of India, assessee had also procured
loans from family members and as per the custom in the
family, he has paid interest to the family members on the said
loans. He submitted that assessee's parents who had advanced
the loans had also offered interest income to tax in their
returns of income. He has filed copies of the returns of income
and also computation of income of the parents as well as the
relatives, who have advanced the loans to assessee. He also
submitted that the same amount cannot be brought to tax in
the hands of the assessee as well as his parents. He therefore
prayed that the interest expenditure of Rs. 15 Lakhs be
allowed against the income from house property u/s. 24(b) of
the Act.

5.   The Ld.DR was also heard, who supported the orders of
authorities below.

6.   Having regard to the rival contentions and material on
record, we find that the assessee has claimed interest
expenditure to be set-off against the income from other
sources. However, the same cannot be allowed since it is the
interest incurred for securing of house property. Therefore, the
assessee is eligible to claim the same from income from house
                                :- 4 -:
                                                    ITA. No. 1682/Hyd/2017

property, if any, earned by the assessee during the relevant
assessment year.

6.1. As far as the interest portion which has been disallowed
is concerned, we find that the parents of assessee, who have
advanced loans to the assessee, have offered the interest to tax
in their returns of income and the copies of their returns have
been filed before us in the form of a Paper Book. Thus, we
agree with the contentions of assessee that the same amount
cannot be taxed in the hands of assessee as well as recipients
of the interest. Therefore, since the parents have offered the
income to tax, we hold that no disallowance or addition can be
made in the hands of assessee. Grounds are accordingly

7.       In the result, the appeal of assessee is allowed.

       Order pronounced in the open court on 3 rd May, 2019

              Sd/-                                    Sd/-
 (S. RIFAUR RAHMAN)                          (P. MADHAVI DEVI)
ACCOUNTANT MEMBER                            JUDICIAL MEMBER
Hyderabad, Dated 3rd May, 2019
                             :- 5 -:
                                            ITA. No. 1682/Hyd/2017

Copy to :

1. Sri Sarfaraz Hussainali Lakhani, Secunderabad. C/o.
Sanjay Mutha & Co., 905/1, Babukhan Estate,
Basheerbagh, Hyderabad.

2. DCIT, Circle-16(1), Hyderabad.

3. CIT(Appeals)-4, Hyderabad.

4. Pr.CIT-4, Hyderabad.

5. D.R. ITAT, Hyderabad.

6. Guard File.
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