Addition of rental income due to the difference found out in Form No. 26AS

IN THE INCOME TAX APPELLATE TRIBUNAL
“A’’ BENCH: BANGALORE

BEFORE SHRI N.V. VASUDEVAN, VICE PRESIDENT
AND
SHRI B.R. BASKARAN, ACCOUNTANT MEMBER

ITA No.2012/Bang/2016
 Assessment Year: 2011-12

M/s. UKN Properties Pvt. Ltd.
No.12, St. Patricks Arcade
Residency Road, Richmond Town
Bangalore 560 025.
PAN NO : AAACU3584A
APPELLANT 

Vs. 

DCIT Circle-7(1)(1)
Bangalore
RESPONDENT

Appellant by : Shri Narendra Sharma, A.R.
Respondent by : Shri Kannan Narayanan, D.R.

Date of Hearing : 24.06.2021
Date of Pronouncement : 02.07.2021

O R D E R

PER B.R. BASKARAN, ACCOUNTANT MEMBER:

The appeal filed by the assessee is directed against the order dated 31.8.2016 passed by Ld. CIT(A)-7, Bengaluru and it relates to the assessment year 2011-12.

2. The grounds urged by the assessee give rise to the following issues:-

a) Disallowance made u/s 14A of the Act.
 
b) Disallowance made u/s 40(a)(ia) of the Act

c) Addition of rental income due to the difference found out in form no.26-AS 

3. The assessee is engaged in the business of development of Real Estate.

4. The first issue urged by the assessee relates to disallowance u/s 14A of the Act. The A.O. noticed that the assessee has received share income from partnership firm to the extent of Rs.1.63 crores and claimed the sum as exempt u/s 10(2A) of the Act. The assessee did not make any disallowance u/s 14A of the Act. Accordingly, the A.O. computed disallowance by applying the provisions of rule 8D of the I.T. Rules. The A.O. disallowed a sum of Rs.13.56 lakhs out of interest expenditure under Rule 8D(2)(ii) of the Act and also disallowed a sum of Rs.6.91 lakhs out of general expenses under Rule 8D(2)(iii) of the Act. Thus, the aggregate disallowance made by the A.O. u/s 14A of the Act was Rs.20.47 lakhs. The Ld. CIT(A) also confirmed the same.

5. The Ld. A.R. submitted that own funds and interest free funds available with the assessee during the year under consideration has exceeded the value of investments made in the partnership firm and hence no disallowance out of interest expenditure under Rule 8D (2)(ii) is warranted, as per the decision rendered by Hon’ble jurisdictional Karnataka High Court in the case of CIT Vs. Micro Labs Ltd. 383 ITR 490. With regard to the disallowance out of general expenses, the Ld. A.R. submitted that the assessee has received share income from one partnership firm only and the assessee has not incurred any expenditure for earning share income. Accordingly, he submitted that no disallowance under Rule 8D(2)(iii) is called for. In the alternative the Ld. A.R. submitted that the A.O. should have considered only those investments which have yielded exempt income for the purpose of computing average value of investments, while computing disallowance u/r 8D(2)(iii) of I T Rules. For this proposition the Ld. 

To know more in details find the attachment file