Mohan Bir Singh, Chandigarh V. DCIT, Chandigarh

ITA 1099/CHANDI/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 2368 (ITAT-CHANDIGARH)
• Duration Of Justice: 6 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-05-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 08-05-2013
• Assessment Year: 2003-2004
• Appeal Filed On: 26-10-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Assessee Lawyers: S K MUKHI
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH B, CHANDIGARH BEFORE SHRI T.R. SOOD, A.M AND MS. SUSHMA CHOWLA, J M ITAS NO. 1099 TO 1105/CHD/2012 ASSESSMENT YEAR : 2003-04 TO 2009-10 MOHAN BIR SINGH V D.C.I.T. CENTRAL CIRCLE I H NO. 152 CHANDIGARH SECTOR 9B CHANDIGARH ABZPS 6057 P (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI S.K. MUKHI RESPONDENT BY: SHRI MANJIT SINGH DATE OF HEARING 21.5.2013 DATE OF PRONOUNCEMENT 22.5.2013 O R D E R PER BENCH THESE APPEALS ARE DIRECTED AGAINST THE ORDERS PASSE D BY THE LD. CIT(A)(CENTRAL), GURGAON DATED 27.9.2012. 2. IN ALL THESE APPEAL THE ASSESSEE HAS RAISED IDEN TICAL GROUNDS BUT FRAMED THE SAME IN A VERY STRANGE WAY, THEREFORE, THE LD. COUNSEL OF THE ASSESSEE AT THE TIME OF HEAR ING, SUBMITTED THAT ONLY DISPUTE INVOLVED IS REGARDING D ISALLOWANCE OF INTEREST PAID ON LOANS TAKEN BY THE ASSESSEE WHI CH HAVE BEEN INVESTED IN THE FIRM. 3. AFTER HEARING BOTH THE PARTIES WE FIND THAT DURI NG ASSESSMENT PROCEEDINGS THE AO NOTICED THAT THE ASSE SSEE HAS TAKEN CERTAIN LOANS WHICH WERE INVESTED IN THE FIRM . HOWEVER, THE ASSESSEE COULD NOT PROVE THE NEXUS BETWEEN THE AMOUNT 2 INVESTED AND THE AMOUNT BORROWED AND ACCORDINGLY T HE INTEREST ON SUCH LOANS STANDS DISALLOWED. 4. BEFORE US, IT WAS SUBMITTED THAT IDENTICAL ISSUE CAME UP FOR CONSIDERATION BEFORE THE TRIBUNAL IN ITAS NO. 1 078 TO 1084/CHD/2012 IN CASE OF RAJ BIR SINGH V DCIT BY WH ICH ORDERS HAVE BEEN REMANDED BACK TO THE ASSESSING OFFICER TO VERIFY THE NEXUS. IT WAS FURTHER SUBMITTED THAT SINCE THE ISS UE IS IDENTICAL, THEREFORE, THE DECISION IN CASE OF AMA R BIR SINGH V DCIT (SUPRA) MAY BE FOLLOWED. HOWEVER, IT WAS POIN TED OUT BY THE LD. COUNSEL OF THE ASSESSEE THAT THE TRIBUNAL H AS RESTRICTED ALLOWANCE OF INTEREST ONLY TO THE EXTENT TO WHICH I NTEREST HAS BEEN RECEIVED BY THE ASSESSEE FROM THE PARTNERSHIP FIRM, WHICH IS NOT CORRECT. HE SUBMITTED THAT THE ASSESSEE HAD INCOME FROM PARTNERSHIP FIRM BY WAY OF SALARY AS WELL AS S HARE OF PROFIT WHICH WAS ALSO EARNED BECAUSE OF THE INVESTMENT MAD E, THEREFORE, ALLOWANCE ON ACCOUNT OF INTEREST CANNO T BE RESTRICTED TO THE RECEIPT OF INTEREST. 5 ON THE OTHER HAND, THE LD. DR FOR THE REVENUE STR ONGLY SUPPORTED THE ORDER OF LD. CIT(A). IT IS FURTHER PO INTED OUT THAT NO DEDUCTION CAN BE GIVEN ON ACCOUNT OF INTEREST A GAINST THE SHARE OF PROFIT FROM THE FIRM BECAUSE THE SAME IS E XEMPT AND AMOUNT RECEIVED BY THE ASSESSEE ON ACCOUNT OF SALA RY BECAUSE THE SAME IS RECEIVED BECAUSE OF THE WORKING AS PARTNER. 6 AFTER CONSIDERING THE RIVAL SUBMISSIONS WE FIND THAT IDENTICAL ISSUE CAME UP BEFORE THE TRIBUNAL AND TH E SAME WAS ADJUDICATED VIDE PARA 5 WHICH IS AS UNDER: 3 WE HAVE HEARD THE RIVAL SUBMISSIONS CAREFULLY AND FIND THAT THOUGH IN CASE OF ANOTHER PARTNER I.E. SMT. M OHINI SINGH V DCIT (SUPRA) THIS ISSUE HAS BEEN SET ASIDE FOR RE- EXAMIANTION BUT IN SOME OF THE YEARS IT WAS NOTICED THAT INTEREST EXPENDITURE IS MORE THAN THE INTEREST INCO ME WHICH IS NOT POSSIBLE. FOR EXAMPLE IN ASSESSMENT Y EAR 2008-09 INTEREST INCOME EARNED BY THE ASSESSEE IS R S. 2,30,156/- AS PER PAGE 17 OF THE PAPER BOOK WHEREAS THE INTEREST PAID TO OTHERS IS RS. 1,91,713/- AND INTER EST PAID TO BANK IS RS. 1,54,336/- TOTALING RS. 3,46,049/-. WHEN THIS WAS POINTED OUT TO THE LD. COUNSEL OF THE ASSE SSEE HE FAIRLY CONCEDED THAT IN NO CASE DEDUCTION ON ACCOUN T OF INTEREST COULD EXCEED THE INTEREST INCOME. THE TRI BUNAL HAS SET ASIDE THE MATTER TO THE FILE OF ASSESSING O FFICER FOR RE-EXAMINATION OF THE MATTER BASICALLY TO EXAMI NE THE NEXUS. WE, THEREFORE, SET ASIDE THE ORDER OF THE LD. CIT(A) AND RESTORE THE MATTER TO THE FILE OF ASSESS ING OFFICER FOR RE-EXAMINATION OF THE ISSUE WITH A DIRE CTION TO ALLOW INTEREST, IF THE NEXUS IS PROVED. HOWEVER, I N NO CASE ALLOWANCE OF INTEREST SHOULD BE ALLOWED TO EXC EED THE INTEREST INCOME EARNED BY THE ASSESSEE FROM THE FIRM WHERE HE IS PARTNER. 7. WE DO NOT FIND ANY MERIT IN THE CONTENTION THAT ALLOWANCE OF INTEREST CANNOT BE RESTRICTED TO THE AMOUNT OF I NTEREST RECEIVED BY THE ASSESSEE. AS FAR AS PROFIT RECEIVE D BY ANY PARTNER FROM A FIRM THE SAME IS EXEMPT U/S 10(2A) O F THE ACT WHICH MEANS SUCH INCOME WILL NOT FORM PART OF TOTAL INCOME AND THEREFORE, NO EXPENDITURE CAN BE ALLOWED U/S 14A OF THE ACT. SIMILARLY REMUNERATION RECEIVED BY ANY PARTNER FROM A PARTNERSHIP FIRM, IS RECEIVED ONLY IF SUCH PARTNER IS SHOWN TO BE WORKING PARTNER. THAT MEANS SUCH SALARY OR COMMISS ION ETC. IS RECEIVED FOR ACTUAL WORKING AND HAS NOTHING TO DO W ITH THE INVESTMENT MADE BY SUCH PARTNER AND ACCORDINGLY TH E PARTNER IS NOT REQUIRED TO BORROW MONEY FOR EARNING REMUNER ATION FROM A PARTNERSHIP FORM. THE ASSESSEE HAS ALSO RECEIVED SOME INTEREST FROM FDR ETC. BUT AGAIN NO DEDUCTION CAN B E ALLOWED IN RESPECT OF INTEREST EXPENDITURE AGAINST THE INC OME FROM INTEREST ON FDRS BECAUSE IT CANNOT BE SAID THAT THE AMOUNT HAS BEEN BORROWED FOR MAKING SUCH FDRS. THIS POSITION O F LAW WAS 4 UPHELD BY HON'BLE APEX COURT IN CASE OF CIT V. DR. V.P. GOPINATHAN (2001) 248 ITR 449 (S.C) WHEREIN IT WAS HELD AS UNDER: THAT THE INTEREST THAT THE ASSESSEE RECEIVED FROM THE BANK ON THE FIXED DEPOSIT WAS INCOME IN HIS HANDS A ND IT COULD STAND DIMINISHED ONLY IF THERE WAS A PROVISIO N OF LAW PERMITTING SUCH DIMINUTION. THERE WAS NO SUCH PROVISION OF LAW AND THE INTEREST ON THE LOAN TAKEN FROM THE BANK DID NOT REDUCE HIS INCOME BY WAY OF INTERE ST ON THE FIXED DEPOSIT. THEREFORE, FOLLOWING THE DECISION IN CASE OF RAJ B IR SINGH V DCIT, ITAS NO. 1078 TO 1084/CHD/2012 WE SET ASIDE T HE ORDER OF LD. CIT(A) AND REMAND THE ISSUE BACK TO THE FILE OF ASSESSING OFFICER WITH THE DIRECTION TO FIND OUT WHETHER ANY NEXUS WAS THERE BETWEEN THE AMOUNT BORROWED AND INTEREST INCO ME RECEIVED BY THE ASSESSEE FROM PARTNERSHIP FIRM. HO WEVER, EVEN IF THE NEXUS IS PROVED, THE DEDUCTION ON ACCOU NT OF INTEREST WAS NOT TO BE ALLOWED TO EXCEED THE INTERE ST INCOME EARNED BY THE ASSESSEE FROM FIRM WHERE HE IS A PART NER. 8 IN THE RESULT, APPEALS OF THE ASSESSEE ARE ALLOWE D FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON 22.5.2013 SD/- SD/- (SUSHMA CHOWLA) (T.R. SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 22.5.2013 SURESH COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT/THE C IT(A)/THE DR 5