HARSHADKUMAR RAJNIKANT SHAH,VADODARA V. ITO WARD 3(1)(2), VADODARA

ITA 1536/AHD/2024

AI Insights

The case involves Harshadkumar Rajnikant Shah, the appellant, who appealed against the order of the Commissioner of Income Tax (Appeals) concerning the disallowance of interest claimed in the return of income for the Assessment Year 2017-18. The interest was on borrowed funds that were introduced as capital in a firm. The primary legal issue was whether the interest expenditure on such borrowed funds could be considered a business expenditure and thus deductible. The tribunal concluded that the introduction of capital in a firm is a capital investment and not a business activity of the individual, leading to the dismissal of the appeal.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 35063 (ITAT-AHMEDABAD)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-03-2025
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: KUSH MEHTA

Judgement Text

"THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “SMC” BENCH Before: Shri Sanjay Garg, Judicial Member Harshadkumar Rajnikant Shah, Opp Lohana Seva Mandal, Sadhana Nagar, Karelibaug, Vadodara-390018 PAN: ACVPS6519B (Appellant) Vs The Income Tax Officer, Ward-3(1)(2), Vadodara (Respondent) Assessee by: Shri Kush Mehta, A.R. Revenue by: None Date of hearing : 27-02-2025 Date of pronouncement : 20-03-2025 आदेश/ORDER The present appeal has been preferred by the assessee against the order dated 28-06-2024 passed by Commissioner of Income Tax (Appeals), Addl/JCIT(A)-12 Mumbai [hereinafter referred to as “CIT(A)”] arising out of the order passed u/s. 143(3)r.w.s. 147 of the Income Tax Act, 1961 (here-in-after referred to as “the Act”) relevant to the Assessment Year 2017-18. ITA No. 1536/Ahd/2024 Assessment Year 2013-14 I.T.A No. 1536/Ahd/2024 Harshadkumar Rajnikant Shah, A.Y. 2013-14 2 2. Adjournment application has been filed on behalf of the ld. D.R. stating therein that she was not well. Identical type of application has been filed in all the cases fixed for today. It will not be appropriate to adjourn all the matters. Since there is not any complicated issue involved in this appeal and the matter can be decided after going through the records and after hearing the ld. A.R., therefore, I proceed to decide this appeal. 3. The sole issue involved in this appeal relating to the disallowance of interest claimed by the assessee in the return of income. The ld. counsel for the assessee has submitted that the funds were borrowed by the assessee and that very funds were introduced as capital in the firm by the assessee. That the assessee earned remuneration and interest income on the capital and also share out of profits of the said firm. The ld. counsel for the assessee has submitted that the interest expenditure on the borrowed capital, which was introduced in the firm was for the business purpose and hence the same was rightly claimed as deduction. 4. I have considered the aforesaid contentions and have also gone through the records. In this case, the assessee has borrowed funds and the same were introduced in the firm as capital of the assessee. The introduction of capital in the firm can neither be said to be business activity of the assessee in I.T.A No. 1536/Ahd/2024 Harshadkumar Rajnikant Shah, A.Y. 2013-14 3 his individual capacity nor the said expenditure can be directly related to any income of the assessee for which the aforesaid interest expenditure can be said to have been incurred. Borrowing of funds and earning of interest in capital introduced in firm are separate activities. The introduction of capital in a firm is a capital investment of the assessee. The firm is a separate entity, therefore, the said interest expenditure can neither said to be related to the business expenditure of the firm nor of the assessee and same cannot be allowed as a deduction. There is no merit in the appeal and the same is dismissed. 5. In the result, the appeal of the assessee is dismissed. Order pronounced in the open court on 20-03-2025 Sd/- (SANJAY GARG) JUDICIAL MEMBER Ahmedabad : Dated 20/03/2025 आदेश क\u0006 \u0007\bत ल\fप अ\u000fे\fषत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से, I.T.A No. 1536/Ahd/2024 Harshadkumar Rajnikant Shah, A.Y. 2013-14 4 उप/सहायक पंजीकार आयकर अपील\u0012य अ\u0013धकरण, अहमदाबाद "