ASHUTOSH KUMAR HUF,MUMBAI V. ACIT-24(1), MUMBAI

ITA 892/MUM/2025

AI Insights

The case involves two separate appeals by Ashutosh Kumar HUF against the orders of the CIT(A), NFAC, Delhi, for the assessment years 2016-17 and 2017-18. The primary issue in both appeals was the disallowance of interest expenditure claimed by the assessee against the interest income earned from bank deposits. The Assessing Officer (AO) had disallowed the interest expenditure on the grounds that there was no direct nexus between the interest income and the interest expenses. The CIT(A) upheld this disallowance, limiting allowable expenses to commission and remuneration to bankers. However, the tribunal, referencing a penalty order which acknowledged the direct nexus between the borrowed and invested funds, overturned the CIT(A)'s decision and allowed the deductions claimed by the assessee.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 705675 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-07-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Assessment Year: 2017-2018
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ADITYA M. RAI; DR
• Assessee Lawyers: MADHUR AGARWAL; FENIL BHATT; ARS
• Section: 271(1)(c)

Judgement Text

" | आयकर अपील य अ धकरण \u000eयायपीठ, 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. 3275/Mum/2025 Assessment Year: 2016-17 & I.T.A. No. 892/Mum/2025 Assessment Year: 2017-18 Ashutosh Kumar HUF Bunglow No. 92 RSC 2, SVP Nagar Versova Andheri (West) Maharashtra - 400053 [PAN: AAKHA3180R] Vs CIT(Appeals), NFAC, Delhi/ ACIT-24(1) अपीलाथ / (Appellant) \u000e\u000f यथ / (Respondent) Assessee by : Shri Madhur Agarwal & Shri Fenil Bhatt, A/Rs Revenue by : Shri Aditya M. Rai, Sr. D/R सुनवाई की तारीख/Date of Hearing : 30/06/2025 घोषणा की तारीख /Date of Pronouncement: 02/07/2025 आदेश/O R D E R PER NARENDRA KUMAR BILLAIYA, AM: I.T.A. No. 3275/Mum/2025 & I.T.A. No. 892/Mum/2025 are two separate appeals by the assessee preferred against two separate orders dt. 06/01/2024 and 13/12/2024 by NFAC, Delhi [hereinafter “the ld. CIT(A)”] pertaining to AYs 2016-17 and 2017- 18 respectively. I.T.A. No. 3275/Mum/2025 & I.T.A. No. 892/Mum/2025 2 2. Since underlying facts are identical in both the appeals, they were heard together and are disposed off by this common order for the sake of convenience and brevity. 3. The common grievance in both the appeals relate to the addition on account of interest claimed as deduction from income from other sources u/s 57 of the Act. 4. Briefly stated, the facts of the case are that the assessee borrowed interest bearing funds from M/s. Shree Ashtavinayak LFS Infra Private Limited. During the year under consideration, the assessee declared gross interest income under the head income from other sources, interest being accrued/earned from bank fixed deposits and bank interest. Against this interest income, the assessee has claimed interest expenditure being interest paid to M/s. Shree Ashtavinayak LFS Infra Private Limited. 5. The AO was of the firm belief that such payment of interest cannot allowed as deduction u/s 57 of the Act as the assessee could not prove direct nexus between the interest income and the interest expenses claimed. 6. When the additions were challenged before the ld. CIT(A), the ld. CIT(A) changed the colour of disallowance and confirmed the additions holding that the only allowable expenses are commission and renumeration to the bankers. 7. We have given a thoughtful consideration to the orders of the authorities below. We have also the benefit of penalty order dated I.T.A. No. 3275/Mum/2025 & I.T.A. No. 892/Mum/2025 3 19/03/2025 framed u/s 271(1)(c) of the Act in which the AO has dropped the penalty having found direct nexus between the borrowed funds and the invested funds. Taking a leaf out of the aforementioned penalty order and after giving a thoughtful consideration to the orders of the authorities below, we are of the considered view that there is a direct nexus between the interest earned by the assessee and the interest paid to M/s. Shree Ashtavinayak LFS Infra Private Limited. Having found direct nexus, we are of the considered view that interest payment as claimed by the assessee has to be allowed as deduction and we order accordingly. Both the appeals are accordingly allowed. 8. In the result, both the appeals of the assessee are allowed. Order pronounced in the Court on 2nd July, 2025 at Mumbai. Sd/- Sd/- (SANDEEP SINGH KARHAIL) (NARENDRA KUMAR BILLAIYA) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai, Dated 02/07/2025 *SC SrPs *SC SrPs *SC SrPs *SC SrPs I.T.A. No. 3275/Mum/2025 & I.T.A. No. 892/Mum/2025 4 आदेश की \u0014ितिलिप अ\u0019ेिषत /Copy of the Order forwarded to : 1. अपीलाथ\u001b / The Appellant 2. \u0014 थ\u001b / The Respondent 3. संबंिधत आयकर आयु! / Concerned Pr. CIT 4. आयकर आयु! ) अपील ( / The CIT(A)- 5. िवभागीय \u0014ितिनिध ,आयकर अपीलीय अिधकरण, मुंबई /DR,ITAT, Mumbai, 6. गाड% फाई/ Guard file. आदेशानुसार/ BY ORDER TRUE COPY Assistant Registrar आयकर अपीलीय अिधकरण ITAT, Mumbai "