Appeal details
Counselvise Citation
[2019] 115 COUNSELVISE.COM (IT) 4298 (ITAT-MUMBAI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
1 year(s) 21 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
13-03-2019
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
B
Assessment Year
2011-2012
Appeal Filed On
22-02-2018
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B , MUMBAI BEFORE S HRI SHAMIM YAHYA (AM ) AND SHRI RAM LAL NEGI (JM) ITA NO. 1026/MUM/2018 ASSESSMENT Y EAR: 2011 - 12 M/S BHARAT VIRJI GALA, 267/71, NARSHI NATHA STREET, MASJID BUNDER, MUMBAI - 400009 PA N: AAIPG5312M VS. THE ASSTT. COMMISSIONER OF INCOME TAX, 17(1 ), 1 ST FLOOR, ROOM NO. 135, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 400020 (APPELLANT) (RESPONDENT) ASSESSEE BY : MRS. RUCHI M. RATHOD ( AR ) REVENUE BY : SHRI RITESH MISHRA (DR ) DATE OF HEARING: 12 /03 /201 9 DATE OF PRONOUNCEMENT: 13 / 03 /201 9 O R D E R PER RAM LAL NEGI, JM THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER DATED 20.11.2017 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) - 28 (FOR SHORT THE CIT(A) , MUMBAI, FOR THE ASSESSMENT YEAR 2011 - 12 , WHEREBY THE LD. CIT(A) HAS DISMISSED T HE APPEAL FILED BY THE ASSESSEE AGAINST THE ASSESSMENT ORDER PASSED U/S 143 (3) OF THE INCOME TAX ACT, 1961 (FOR SHORT THE AC T). 2. BRIEF FACTS OF THE CASE ARE THAT THE APPELLANT/ASSESSEE HAVING SOURCE OF INCOME FROM BUSINESS OF DIFFERENT PARTNERSHIP FIRMS BEING THE PARTNER OF THE FIRMS , FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION DECLARING THE TOTA L INCOME OF RS. 48,22,640/ - . SINCE, THE CASE WAS SELECTED FOR SCRUTINY, THE AO ISSUED NOTICES U/S 143 (2) AND 142 (1) OF THE ACT. IN RESPONSE TO THE SAID NOTICES, THE AUTHORIZED REPRESENTATIVE (AR) OF THE ASSESSEE APPEARED BEFORE THE AO AND FURNISHED THE D ETAIL S CALLED FOR. IT WAS NOTICED THAT THE ASSESSEE HAD RECEIVED INTEREST OF RS. 41,44,481/ - UNDER THE HEAD INCOME FROM OTHER SOURCES. THE ASSESSEE CLAIMED EXPENSES ON ACCOUNT OF 2 ITA NO . 1026 / MUM/2018 ASSESSMENT YEAR: 2011 - 12 INTEREST PAYMENT OF RS. 5,29,160/ - AND BANK CHARGES OF RS. 3,580/ - AND SHOW N NET INCOME OF RS. 37,14,963/ - . ACCORDINGLY, THE AO ASKED THE ASSESSEE TO EXPLAIN THE EXPENDITURE ON WHICH THE INTEREST WAS PAID IN ORDER TO ASCERTAIN THE NEXUS BETWEEN INTEREST RECEIVED AND INTEREST PAID. THE AO REJECTING THE CONTENTION OF THE ASSESSEE D ISALLOWED THE EXPENDITURE AND ADDED THE SAID AMOUNT TO THE INCOME OF THE ASSESSE. THE ASSESSEE CHALLENGED THE ASSESSMENT ORDER BEFORE THE CIT (A). THE LD. CIT (A) AFTER HEARING THE ASSESSEE DISMISSED THE APPEAL OF THE ASSESSEE AND CONFIRMED THE ADDITION MA DE BY THE AO. THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 3. THE ASSESSEE HAS CHALLENGED THE IMPUGNED ORDER BY RAISING THE FOLLOWING EFFECTIVE GROUND OF APPEAL: - THE LEARNED CIT (A) ERRED IN NOT GRANTING PROPER REASONABLE OPPORTUNITY OF BEING HEARD A ND ERRED IN CONFIRMING MECHANICALLY INTEREST AMOUNT PAID TO 6 PARTIES RS. 529160/ - AS INCOME MADE BY THE RESPONDENT 4. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE LD. CIT (A) HAS WRONGLY CONFIRMED THE ADDITION MADE BY THE AO ON ACCOUN T OF DISALLOWANCE OF INTEREST PAID TO THE DIFFERENT PARTIES . THE LD. COUNSEL RELYING ON THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. RAJENDRA PRASAD MODI 115 ITR 519 (SC), M/S S.A. BUILDERS [ (2007) 1 SC 781] AND ORDER PASSED BY THE ITA T, MUMBAI, IN THE CASE OF SH. ROSHAN SETHIA VS. ACIT, ITA NO. 5860/M/2012 DATED 10.05.2015, SUBMITTED THAT SINCE THE FINDINGS OF THE LD. CIT (A) ARE CONTRARY TO THE LAW LAID DOWN BY THE HONBLE SUPREME COURT IN THE AFORESAID CASES, THE SAME IS LIABLE TO BE SET ASIDE. 5. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESENTATIVE (DR) RELYING ON THE CONCURRENT ORDERS PASSED BY THE AUTHORITIES BELOW SUBMITTED THAT THERE IS NO INFIRMITY IN THE ORDER OF THE LD. CIT (A) AS THE SAME HAS BEEN PASSED IN ACCORDANCE WITH THE LAW LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. V.P GOPINATH, 248 ITR 449 (SC) AND THE VARIOUS DECISIONS OF THE TRIBUNAL , THERE IS NO MERIT IN THE APPEAL OF THE ASSESSEE. 3 ITA NO . 1026 / MUM/2018 ASSESSMENT YEAR: 2011 - 12 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ENTIRE MATERIAL ON RECORD INCLUDING THE CASES RELIED UPON BY THE PARTIES. THE O NLY GROUND RAISED BY THE ASSESSEE IS THAT THE LD. CIT (A) HAS WRONGLY CONFIRMED THE ADDITION MADE BY THE AO ON ACCOUNT OF DISALLOWANCE OF INTEREST EXPENDITURE CLAIMED BY THE ASSESSEE. THE LD. COUNSEL FURTHER CONTENDED THAT THE CIT(A) HAS ALLOWED THE SIMILAR CLAIM IN THE ASSESSMENT YEAR 2007 - 08 MAINLY ON THE GROUND THAT THE AO HAS MADE DISALLOWANCE ON THE BASIS OF ASSUMPTION AND PRESUMPTION. IN THE PRESENT CASE THE LD . CIT(A) HAS NO T GI VEN ANY REASON FOR DISALLOWING THE IDENTICAL CLAIM PERTAINING TO THE ASSESSMENT YEAR UNDER CONSIDERATION . THE LD. COUNSEL F URTHER CONTENDED THAT THE BORROWED FUNDS WERE UTILIZED FOR THE PURPOSE OF BUSINESS. ON THE OTHER HAND, THE AO HAS NOT BROUGHT ON RECO RD ANY EVIDENCE TO CONCLUDE THAT THE BORROWED FUNDS WERE DIVERTED FOR THE PERSONAL PURPOSES. IT IS NOT THE CASE OF THE REVENUE THAT THE ASSESSEE HAD NOT PAID THE AMOUNT OF INTEREST IN QUESTION. THEREFORE, THE ONLY ISSUE TO BE ADJUDICATED IS WHETHER THE ASS ESSEE IS ENTITLED TO CLAIM THE INTEREST EXPENDITURE U/S 57 OF THE ACT. THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. RAJENDRA PRASAD MODI AND CIT VS. RAGHUNANDAN PRASAD MODI (SUPRA) HAS HELD THAT WHAT SECTION 57 (III) REQUIRES IS THAT THE EXPENDITURE MU ST BE LAID OUT OR INCURRED WHOLLY AN D EXCLUSIVELY FOR THE PURPOSE OF MAKING OR EARNING INCOME . THE SECTION DOES NOT REQUIRE THAT THE PURPOSE MUST BE FULFILLED IN ORDER TO QUALIFY THE EXPENDITURE FOR DEDUCTION. THE RELEVANT PARAS OF THE JUDGMENT READ AS UND ER: - WHAT S. 57(III) REQUIRES IS THAT THE EXPENDITURE MUST LAID OUT OR EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF MAKING OR EARNING INCOME. IT IS THE PURPOSE OF THE EXPENDITURE THAT IS RELEVANT IN DETERMINING THE APPLICABILITY OF S. 57(III) AND TH AT PURPOSE MUST BE MAKING OR EARNING OF INCOME S. 57(III) DOES NOT REQUIRE THAT THIS PURPOSE MUST BE FULFILLED IN ORDER TO QUALIFY THE EXPENDITURE FOE DEDUCTION. IT DOES NOT SAY THAT THE EXPENDITURE SHALL BE DEDUCTIBLE ONLY IF ANY INCOME IS MADE OR EARNED. THERE IS IN FACT NOTHING IN THE 4 ITA NO . 1026 / MUM/2018 ASSESSMENT YEAR: 2011 - 12 LANGUAGE OF S. 57(III) TO SUGGEST THAT THE PURPOSE FOR WHICH THE EXPENDITURE IS MADE SHOULD FRUCTIFY INTO ANY BENEFIT BY WAY OF RETURN IN THE SHAPE OF INCOME. THE PLAIN NATURAL CONSTRUCTION OF THE LANGUAGE OF S. 57(III) IRR ESISTIBLY LEADS TO THE CONCLUSION THAT TO BRING A CASE WITHIN THE SECTION, IT IS NOT NECESSARY THAT ANY INCOME SHOULD IN FACT HAVE BEEN EARNED AS A RESULT OF THE EXPENDITURE. IT MAY BE POINTED OUT THAT AN IDENTICAL VIEW WAS TAKEN BY THIS COURT IN EASTERN I NVESTMENTS LTD. V. CIT [1951] ITR 1,4 (SC), WHERE INTERPRETING THE CORRESPONDING PROVISION IN S. 12(2) OF THE INDIAN I.T. ACT, 1922, WHICH WAS IPSISSIMA VERBA IN THE SAME TERMS AS S. 57(III), BOSE J, SPEAKING ON BEHALF OF THE COURT OBSERVED: IT IS NOT NE CESSARY TO SHOW THAT THE EXPENDITURE WAS A PROFITABLE ONE OR THAT IN FACT ANY PROFIT WAS EARNED. IT IS INDEED DIFFICULT TO SEE HOW, AFTER THIS OBSERVATION OF THE COURT, THERE CAN BE ANY SCOPE FOR CONTROVERSY IN REGARD TO THE INTERPRETATION OF S. 57(III). 7. IN VIEW OF THE FACTS OF THE CASE AND THE LAW LAID DOWN BY THE HONBLE SUPREME COURT IN THE AFORESAID CASE, WE ARE OF THE CONSIDERED VIEW THAT THE ORDER PASSED BY THE LD.CIT (A) IS ERRONEOUS AS THE AO HAS MADE THE ADDITION IN QUESTION WITHOUT ASSIGN ING ANY COGENT AND CONVINCING REASON . MOREOVER, THE AO HAS FAILED TO POINT OUT ANY EVIDENCE TO REBUT THE CONTENTION OF THE ASSESSEE THAT THE EXPENDITURE WAS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF MAKING AND EARNING OF INCOME, THE SAME WAS NOT I N THE NATURE OF CAPITAL EXPENDITURE, IT WAS NOT IN THE NATURE OF PERSONAL EXPENDITURE AND THE SAME WAS INCURRED IN THE RELEVANT ASSESSMENT YEAR. IN OUR CONSIDERED VIEW THE FACTS OF THE CASE S RELIED UPON BY THE AUTHORITIES BELOW ARE DIFFERENT FROM THE FACTS OF THE PRESENT CASE. WE FURTHER NOTICE THAT THE COORDINATE BENCH HAS DECIDED THE SIMILAR ISSUE IN FAVOUR OF THE ASSESSEE IN THE CASE OF SHRI ROSHAN SETHIA VS. ACIT, MUMBAI ITA NO. 5860/MUM/2012 FOR THE A.Y. 2009 - 10 BY FOLLOWING THE JUDGMENT OF THE HONBL E SUPREME COURT IN THE CASE OF RAJENDRA PRASAD MODI VS. CIT (SUPRA). SINCE, THE ISSUE INVOLVED IN THIS CASE IS COVERED IN 5 ITA NO . 1026 / MUM/2018 ASSESSMENT YEAR: 2011 - 12 FAVOUR OF THE ASSESSEE BY THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE DISCUSSED ABOVE, W E ALLOW THE SOLE GROUND OF THE APPEA L OF THE ASSESSEE AND SET ASIDE THE ORDER PASSED BY THE LD. CIT (A) AND FURTHER DIRECT THE AO TO DELETE THE ADDIT ION . IN THE RESULT, APPEAL FILED BY THE ASSESSEE FOR ASSESSMENT YEAR 2011 - 2012 IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 1 3 TH MARCH , 2019 . SD/ - SD/ - ( SHAMIM YAHYA ) ( RAM LAL NEGI ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; DATED: 13 / 03 / 201 9 ALINDRA, PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . / BY ORDER, //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI
