Priya Mahajan v. Commissioner Of Income Tax (Appeals), Chandigarh And Another

ITA No. 384 of 2015 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 384 of 2015 Date of Decision: 26.11.2015 Priya Mahajan ....Appellant. Versus Commissioner of Income Tax (Appeals), Chandigarh and another ...Respondents. 1.Whether the Reporters of the local papers may be allowed to see the judgment?the judgment? 2.To be referred to the Reporters or not? Yes 3.Whether the judgment should be reported in the Digest? CORAM:-HON'BLE MR. JUSTICE AJAY KUMAR MITTAL.HON'BLE MR. JUSTICE RAMENDRA JAIN. PRESENT: Mr. Aman Bansal, Advocate for the appellant. AJAY KUMAR MITTAL, J. 1.This appeal has been preferred by the assessee underSection 260A of the Income Tax Act, 1961 (in short “the Act”) against theorders dated 16.6.2015 (Annexure A-3) passed by the Income TaxAppellate Tribunal, Chandigarh Benches “SMC”, Chandigarh (hereinafterreferred to as “the Tribunal”) in ITA No. 1221/Chd/2012, for theassessment year 2008-09, dated 22.8.2012 (Annexure A-2) passed bythe Commissioner of Income Tax (Appeals) [for brevity “the CIT(A)”] anddated 5.10.2010 (Annexure A-1) passed by respondent No.2. Thefollowing substantial questions of law have been claimed by theassessee:- (i) (ii) (iii) (iv) (v) Whether in facts and circumstances of thepresent case, the Ld. Authorities have erred indisallowing 75% of the deduction u/s 24(b) ofthe Income Tax Act, 1961 without appreciatingthat the appellant/assessee had solely re-paidthe entire interest and principal since the date ofborrowing?present case, the Ld. Authorities have erred indisallowing 75% of the deduction u/s 24(b) ofthe Income Tax Act, 1961 without appreciatingthat the appellant/assessee had solely re-paidthe entire interest and principal since the date ofborrowing? Whether in facts and circumstances of thepresent case, the Ld. Authorities below haveerred in misinterpreting the provisions ofSection 45 of the Transfer of Property Act as theinvestment was made out of the separate fundbelonging to the appellant/assessee? Whether in facts and circumstances of thepresent case, the Ld. Authorities below havefailed to appreciate that any provision fordeduction/relief/incentive has to be construedliberally? Whether in facts and circumstances of thepresent case, the Ld. Authorities below havefailed to quash the initiation of penaltyproceedings under section 271(1)(c) of the Actwithout any cogent reason?present case, the Ld. Authorities below havefailed to quash the initiation of penaltyproceedings under section 271(1)(c) of the Actwithout any cogent reason? Whether in facts and circumstances of thecase, the Ld. Authorities below have erred inacting only on the basis of assumptions andpresumptions and after ignoring the wellcase, the Ld. Authorities below have erred inacting only on the basis of assumptions andpresumptions and after ignoring the well ITA No. 384 of 2015 reasoned material/evidence which was broughton record by the appellant/assessee?on record by the appellant/assessee? (vi)Whether in facts and circumstances of thecase, the action of the authorities below, theimpugned orders are sustainable in the eyes oflaw?case, the action of the authorities below, theimpugned orders are sustainable in the eyes oflaw? Whether in facts and circumstances of thecase, the Ld. Authorities below have erred inacting only on the basis of assumptions andpresumptions and after ignoring the wellcase, the Ld. Authorities below have erred inacting only on the basis of assumptions andpresumptions and after ignoring the well ITA No. 384 of 2015 reasoned material/evidence which was broughton record by the appellant/assessee?on record by the appellant/assessee? (vi)Whether in facts and circumstances of thecase, the action of the authorities below, theimpugned orders are sustainable in the eyes oflaw?case, the action of the authorities below, theimpugned orders are sustainable in the eyes oflaw? 2.Briefly stated, the facts necessary for adjudication of theinstant appeal as narrated therein may be noticed. The assessee filedher return of income on 31.7.2008 for the assessment year 2008-09declaring the income at ` 7,44,834/-. The said return was processedunder Section 143(1) of the Act on 10.4.2009. Subsequently, theassessee filed a revised return on 18.1.2009 declaring the income at` 3,08,663/-. The case was taken up for scrutiny and notice underSection 143(2) of the Act was issued on 30.9.2009. A questionnairealong with notice under Section 143(2)/142(1) of the Act was issued on15.2.2010. The assessee claimed deduction of interest on housing loanof ` 6,86,971/- under Section 24(b) of the Act for the property bearingHouse No. 3557, Sector-69, Mohali. The Assessing Officer framed theassessment vide order dated 5.10.2010 (Annexure A-1) and made anaddition of ` 5,15,228/- after allowing only 1/4[th] of the total interestpayment out of ` 6,86,971/- under Section 24(b) of the Act. Feelingaggrieved by the assessment order, the assessee filed an appeal beforethe CIT(A) who vide order dated 22.8.2012 (Annexure A-2) dismissedthe appeal. Still dissatisfied, the assessee filed an appeal before theTribunal. The Tribunal vide order dated 16.6.2015 (Annexure A-3)dismissed the appeal which gave rise to the assessee to approach thisCourt by way of instant appeal. 3.After hearing learned counsel for the appellant-assessee,we do not find any merit in the appeal. 4.The Assessing Officer had noticed that there were four co-sharers in the house in question and the loan was taken jointly by themin their names. Since the share of the individual was not specified in thesale deed, the logical conclusion was that everyone had equal share inthe property. As per Section 45 of the Transfer of Property Act, 1882 (inshort “the 1882 Act”), if the consideration is paid out of common fund,belonging to a number of persons, they are entitled to interest in theproperty identical to the interest to which they were respectively entitledin the fund. The assessee had not produced any evidence that she hadinvested for purchase/construction of the house in question. TheAssessing Officer had observed that the interest paid on the loan was tobe divided among four co-owners as per the provisions of Section 45 ofthe 1882 Act and, thus, allowed only 1/4[th] of the total interest payment tothe assessee. On appeal, the CIT(A) held that the house loan has beentaken jointly by all the four co-owners in whose names the houseproperty was purchased and, therefore, the interest paid on the loan wasto be divided among the four co-owners as per the provisions of Section45 of the 1882 Act. Further, it was held that the Assessing Officer wasright in restricting the interest under Section 24(b) of the Act to 25%.The relevant findings recorded by the CIT(A) read thus:- “2.3. I have considered the submissions of the Ld.Counsel. For the sake of ready reference, provisionsof section 45 of the Transfer of Property Act arereproduced below:- “Where immovable property is transferred for “2.3. I have considered the submissions of the Ld.Counsel. For the sake of ready reference, provisionsof section 45 of the Transfer of Property Act arereproduced below:- “Where immovable property is transferred for consideration to two or more persons and suchconsideration is paid out of a fund belonging tothem in common, they are, in the absence of acontract to the contrary, respectively entitled tointerests in such property identical, as nearly asmay be, with the interests to which they wererespectively entitled in the fund; and, where suchconsideration is paid out of separate fundsbelonging to them respectively, they are, in theabsence of a contract to the contrary, respectivelyentitled to interests in such property in proportionto the shares of the consideration which theyrespectively advanced. In the absence of evidence as to the interests inthe fund to which they were respectively entitled,or as to the shares which they respectivelyadvanced, such persons shall be presumed to beequally interested in the property.” 2.3.1. Thus, if consideration is paid out of a commonfund, belonging to a number of persons, they areentitled to interest in the property identical to theinterest to which they were respectively entitled in thefund. The appellant has claimed that she hasinvested for purchase/construction of the impugnedhouse property, but no evidence in this regard hasbeen produced. Further, the house loan has beentaken jointly by all the four co-owners in whose names the house property was jointly purchased.Hence, the interest paid on the loan is to be dividedamong the four co-owners as per the provisions ofSection 45 of the Transfer of Property Act. 2.3.2. In the case of Sh. C.K. Malik (82 TTJ 836), theshares of individual co-owners were specified and sothe rent was divided among the co-owners asprovided in section 45 of the Transfer of Property Act.Thus, the facts in the case of Sh. C.K. Malik (supra)are distinguishable to the facts of this case. In theinstant case, the shares of co-owners are notspecified and so the house property as well as thehousing loan is to be taken as jointly held by all theco-owners and interest claimed u/s 24(b) is also to beequally divided. The allowable interest to theappellant u/s 24(b) is also to be equally divided. Theallowance interest to the appellant u/s 24(b) willaccordingly be 25% of the entire interest and theAssessing Officer has rightly restricted it to 25%. Theaction of the Assessing Officer is upheld and thegrounds of appeal Nos. 1 to 5 are dismissed.” 5.The Tribunal had affirmed the aforesaid findings of the CIT(A) by observing that the plot in question was purchased by four personsand the housing loan had also been taken jointly by the said fourpersons, therefore, the allowable interest to the assessee was 25% ofthe entire interest. Further, it was held that the Assessing Officer as wellas the CIT(A) were justified in holding that since the individual shares were not specified in the sale deed, the logical conclusion was thateveryone had equal share in the property. It was also recorded thateven the assessee had failed to produce any evidence on recordregarding her claim that she alone had invested for purchase/construction of the house property. The Tribunal had recorded as under:- 5.The Tribunal had affirmed the aforesaid findings of the CIT(A) by observing that the plot in question was purchased by four personsand the housing loan had also been taken jointly by the said fourpersons, therefore, the allowable interest to the assessee was 25% ofthe entire interest. Further, it was held that the Assessing Officer as wellas the CIT(A) were justified in holding that since the individual shares were not specified in the sale deed, the logical conclusion was thateveryone had equal share in the property. It was also recorded thateven the assessee had failed to produce any evidence on recordregarding her claim that she alone had invested for purchase/construction of the house property. The Tribunal had recorded as under:- “9.I have carefully considered the rivalsubmissions and have also perused the materialsavailable on record. There is no doubt that so far asthe facts of the present case are concerned, theassessee had claimed deduction on interest ofhousing of ` 6,86,971/- u/s 24(b) of the Act. There isno dispute that plot in question was purchased by fourpersons and the housing loan was also taken bysame four persons. It is true that in the sale deed theshare of individual is not specified. The language ofsection 45 of the Transfer of Property Act, 1882 isabundantly clear and provides that where immovableproperty is transferred for a consideration to two ormore persons, such consideration is paid out of fundsbelonging to them in common, they are entitled tointerest in such property identical as nearly as may bewith the interest to which they were respectivelyentitled in the fund. If such consideration is paid outof the separate funds belonging to them respectively,then such persons will be entitled to interest in suchproperty in proportion to the shares of theconsideration which they respectively advanced. The last requirement of section is that in the absence ofevidence as to the interest in the funds to which theywere respectively entitled or as to the shares whichthey respectively advanced, such persons shall bepresumed to be equally interested for the property. Inthe case of Saiyed Abdullah v. Ahmad AIR 1929 All.817, the Hon'ble Allahabad High Court held that 'in theabsence of specification of the shares purchased bytwo persons in the sale deed, it must be held that bothpurchased equal shares.' In the instant case the plotwas purchased by four persons and their shares werenot specified in the sale deed. Even the housing loanhad also been taken jointly by the same four persons,therefore, in my considered opinion, the authoritiesbelow were justified in holding that since the individualshares were not specified in the sale deed, the logicalconclusion is that everyone had equal share in theproperty. It is also relevant to state here that theassessee has claimed that she has invested forpurchase/construction of the house property, but noevidence in support of this stand is available onrecords. Considering the entire facts andcircumstances of the present case, I fully agree withthe observations of the CIT(A) that the allowableinterest to the assessee will be 25% of the entireinterest and the Assessing Officer was justified in hisaction.” ITA No. 384 of 2015 -9- 6.The authorities below on appreciation of material on recordhave concurrently recorded that the assessee was entitled to 1/4[th]deduction, i.e. 25% of the entire interest. Learned counsel for theassessee was not able to demonstrate that the approach of theauthorities below was erroneous or perverse or that the findings of factrecorded were based on misreading or misappreciation of evidence onrecord. The view of the Assessing Officer, the CIT(A) and the Tribunal isa plausible view based on material on record which warrant nointerference by this Court. 7.In view of the above, no substantial question of law arises inthis appeal. Accordingly, the instant appeal is dismissed. ITA No. 384 of 2015 -9- 6.The authorities below on appreciation of material on recordhave concurrently recorded that the assessee was entitled to 1/4[th]deduction, i.e. 25% of the entire interest. Learned counsel for theassessee was not able to demonstrate that the approach of theauthorities below was erroneous or perverse or that the findings of factrecorded were based on misreading or misappreciation of evidence onrecord. The view of the Assessing Officer, the CIT(A) and the Tribunal isa plausible view based on material on record which warrant nointerference by this Court. 7.In view of the above, no substantial question of law arises inthis appeal. Accordingly, the instant appeal is dismissed. (AJAY KUMAR MITTAL) JUDGE November 26, 2015(RAMENDRA JAIN) gbs JUDGE