APURVA ASHWIN DESAI ,MUMBAI V. ITO WARD 27(3)(1) , MUMBAI

ITA 1265/MUM/2025

AI Insights

The case involves Apurva Ashwin Desai, an individual and partner in M/s. Sun VUB, who appealed against the order of the National Faceless Appeal Centre (NFAC), Delhi, which confirmed the addition of Rs. 71,39,907 to his income for the Assessment Year 2018-19. This addition was initially made by the AO due to the disallowance of interest claimed on borrowed capital, which was inadvertently claimed under 'income from other sources' instead of being deducted from the share of profit in the partnership firm. The Tribunal, after considering the facts and the arguments presented by the Departmental Representative, decided in favor of the assessee, emphasizing that the revenue should not benefit from the assessee's inadvertent error in classification.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 705408 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-07-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Assessment Year: 2018-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ADITYA M. RAI; DR

Judgement Text

"| आयकर अपील य अ धकरण यायपीठ, मुंबई | IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, MUMBAI BEFORE SHRI NARENDRA KUMAR BILLAIYA, HON’BLE ACCOUNTANT MEMBER & SHRI SANDEEP SINGH KARHAIL, HON’BLE JUDICIAL MEMBER I.T.A. No. 1265/Mum/2025 Assessment Year: 2018-19 Apurva Ashwin Desai 702 Raji CHS, Ave Lane 60Ft Road, Rajawadi Ghatkopar (E) Mumbai - 400077 [PAN: AABPD2306D] Vs ITO, Ward 27(3)(1), Mumbai अपीलाथ\u0012/ (Appellant) \u0014\u0015 यथ\u0012/ (Respondent) Assessee by : None Revenue by : Shri Aditya M. Rai, Sr. D/R सुनवाई क तार ख/Date of Hearing : 01/07/2025 घोषणा क तार ख /Date of Pronouncement: 03/07/2025 आदेश/O R D E R PER NARENDRA KUMAR BILLAIYA, AM: This appeal by the assessee is preferred against the order dated 03/02/2025 by NFAC, Delhi [hereinafter “the ld. CIT(A)”] pertaining to AY 2018-19. 2. The sum and substance of the grievance of the assessee is that the ld. CIT(A) erred in confirming the addition of Rs. 71,39,907/- made by the AO by disallowing the claim of interest paid on borrowed capital. 3. None appeared on behalf of the assessee in spite of notice. We decided to proceed ex-parte. The ld. D/R was heard at length. Case records carefully perused. I.T.A. No. 1265/Mum/2025 2 4. Briefly stated the facts of the case are that the assessee is an individual and is a partner in M/s. Sun VUB from which he derives income from share of profit. The assessee had borrowed funds for investing in partnership firm and on this borrowing, he has paid interest. The borrowing and the payment of interest has not been doubted but the claim of interest paid by the assessee on such borrowings has been disallowed for the simple reason that inadvertently, the same was claimed under the head “income from other sources”. 5. After giving a thoughtful consideration, we are of the considered view that once it has been accepted that the borrowed funds on which interest is paid is invested as capital in the partnership firm, any interest payment should be allowed as deduction from the share of profit and the interest received on capital. Merely because by an inadvertent mistake the interest has been show under the head “income from other sources”, the revenue should not be benefitted by such inadvertent error. We accordingly direct the AO to allow the claim of interest. 6. In the result, appeal of the assessee is allowed. Order pronounced in the Court on 3rd July, 2025 at Mumbai. Sd/- Sd/- (SANDEEP SINGH KARHAIL) (NARENDRA KUMAR BILLAIYA) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai, Dated 03/07/2025 *SC SrPs *SC SrPs *SC SrPs *SC SrPs I.T.A. No. 1265/Mum/2025 3 आदेश क \u0016\u0017त\u0018ल\u001aप अ े\u001aषत /Copy of the Order forwarded to : 1. अपीलाथ! / The Appellant 2. \u0016\"यथ! / The Respondent 3. संबं&धत आयकर आयु(त / Concerned Pr. CIT 4. आयकर आयु(त ) अपील ( / The CIT(A)- 5. \u001aवभागीय \u0016\u0017त\u0017न&ध ,आयकर अपीलीय अिधकरण, मुंबई /DR,ITAT, Mumbai, 6. गाड. फाई/ Guard file. आदेशानुसार/ BY ORDER, TRUE COPY Assistant Registrar आयकर अपील य अ&धकरण ITAT, Mumbai "