Jai Kishore Agarwal, Kolkata V. A.C.I.T.,Circle-1(2), Kolkata

ITA 1116/KOL/2019

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 8847 (ITAT-KOLKATA)
• Duration Of Justice: 6 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-11-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2015-2016
• Appeal Filed On: 10-05-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Capital expenditure; Set aside
• Section: 143(3); 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH (SMC), KOLKATA [BEFORE SHRI P.M. JAGTAP, VICE PRESIDENT (KZ)] I.T.A. NO. 1116/KOL/2019 ASSESSMENT YEAR: 2015-16 JAI KISHORE AGARWAL............................................................................APPELLANT FD-226, SALTLAKE CITY, SECTOR-III, KOLKATA 700 091. [PAN: AGUPA 5192 M] VS ACIT, CIRCLE-1(2) KOLKATA.................................RESPONDENT P-7, CHOWRINGHEE SQUARE, KOLKATA 700 069. APPEARANCES BY: SHRI S.K. AGARWAL, FCA APPEARING ON BEHALF OF THE ASSESSEE. SHRI JAYANTA KHANRA, JCIT, SR. DR APPEARING ON BEHALF OF THE REVENUE. DATE OF CONCLUDING THE HEARING : OCTOBER 22, 2019 DATE OF PRONOUNCING THE ORDER : NOVEMBER 22, 2019 ORDER THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LD. CIT(A) 1, KOLKATA DATED 14.03.2019 AND THE SOLITARY ISSUE INVOLVED THEREIN RELATES TO THE DISALLOWANCE OF RS. 43,79,292/- MADE BY THE AO AND CONFIRMED BY THE LD. CIT(A) ON ACCOUNT OF INTEREST EXPENSES. 2. THE ASSESSEE IN THE PRESENT CASE IS AN INDIVIDUAL WHO FILED HIS RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION AT RS. 4,43,310/-. IN THE SAID RETURN, INCOME UNDER THE HEAD INCOME FROM OTHER SOURCES WAS SHOWN BY THE ASSESSEE AT RS. 47,95,243/- WHICH COMPRISED OF INTEREST ON LOANS AS WELL AS INTEREST FROM BANK AND AFTER REDUCING A SUM OF RS. 41,68,992/- ON ACCOUNT OF INTEREST PAID ON THE LOAN BORROWED FROM M/S. PAYEL NIVESH & VINIYOG (P) LTD., THE NET AMOUNT WAS OFFERED TO TAX BY THE ASSESSEE. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS EXPLAINED ON BEHALF OF THE ASSESSEE THAT LOAN BORROWED FROM M/S. PAYEL NIVESH & VINIYOG (P) LTD. HAVING BEEN 2 I.T.A. NO. 1116/KOL/2019 ASSESSMENT YEAR: 2015-16 JAI KISHORE AGARWAL UTILISED FOR GIVING LOAN TO M/S. SHWETA VANIJYA (P) LTD. ON WHICH INTEREST INCOME WAS EARNED, INTEREST PAID ON LOAN BORROWED FROM M/S. PAYEL NIVESH & VINIYOG (P) LTD. WAS ELIGIBLE FOR DEDUCTION FROM THE INTEREST EARNED BY THE ASSESSEE ON LOAN GIVEN TO M/S. SHWETA VANIJYA (P) LTD. AS PER SECTION 57(III) OF THE INCOME TAX ACT, 1961. THIS STAND OF THE ASSESSEE WAS NOT FOUND ACCEPTABLE BY THE AO. ACCORDING TO HIM, NO DEDUCTION ON ACCOUNT OF INTEREST EXPENDITURE WAS ALLOWABLE AGAINST INCOME FROM OTHER SOURCES AS PER SECTION 57(III) OF THE ACT. HE ACCORDINGLY DISALLOWED THE CLAIM OF THE ASSESSEE FOR DEDUCTION ON ACCOUNT OF INTEREST AMOUNTING TO RS. 41,76,938/- IN THE ASSESSMENT COMPLETED U/S 143(3) VIDE AN ORDER DATED 29.12.2017. ON APPEAL, THE LD. CIT(A) CONFIRMED THE SAID DISALLOWANCE MADE BY THE AO OBSERVING THAT THE CLAIM OF THE ASSESSEE FOR NETTING OF INTEREST WAS NOT PERMISSIBLE UNDER THE PROVISIONS OF THE INCOME TAX ACT, 1961. AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE ASSESSEE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 3. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE LOAN TAKEN BY THE ASSESSEE FROM M/S. PAYEL NIVESH & VINIYOG (P) LTD. WAS UTILISED FOR GIVING LOAN TO OTHER PARTY ON INTEREST. HE CONTENDED THAT INTEREST PAID ON THE LOAN TAKEN BY THE ASSESSEE FROM M/S. PAYEL NIVESH & VINIYOG (P) LTD. THUS IS ALLOWABLE AS DEDUCTION AGAINST THE INTEREST INCOME RECEIVED BY THE ASSESSEE FROM THE LOAN GIVEN TO OTHER PARTY AS PER THE PROVISIONS OF SECTION 57(III) OF THE ACT. IN SUPPORT OF THIS CONTENTION, HE RELIED ON THE DECISION OF THE TRIBUNAL RENDERED IN THE CASE OF ITO VS M/S. BOROJALINGH TEA CO. JUTE HOUSE VIDE ITS ORDER DATED 06.12.2017 PASSED IN ITA NO. 1964 & 1965/KOL/2014. HE HAS ALSO SUBMITTED THAT THE SIMILAR CLAIM OF THE ASSESSEE FOR DEDUCTION ON 3 I.T.A. NO. 1116/KOL/2019 ASSESSMENT YEAR: 2015-16 JAI KISHORE AGARWAL ACCOUNT OF INTEREST WAS ALLOWED BY THE AO HIMSELF IN THE ASSESSMENT COMPLETED U/S 143(3) FOR THE IMMEDIATELY PRECEDING YEAR I.E. A.Y. 2014-15. 4. THE LD. DR, ON THE OTHER HAND, STRONGLY RELIED ON THE ORDERS OF THE AUTHORITIES BELOW IN SUPPORT OF THE REVENUES CASE THAT THERE BEING NO PROVISION IN THE INCOME TAX ACT TO ALLOW NETTING OF INTEREST AS CLAIMED BY THE ASSESSEE, THE DISALLOWANCE MADE BY THE AO AND CONFIRMED BY THE LD. CIT(A) ON ACCOUNT OF INTEREST EXPENDITURE IS FULLY JUSTIFIED. 5. I HAVE CONSIDERED THE RIVAL SUBMISSIONS AND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. IT IS OBSERVED THAT THE ASSESSEE COMPANY HAD EARNED INTEREST ON LOAN GIVEN TO THE THIRD PARTY AS WELL AS FROM BANK AND THE SAME WAS OFFERED TO TAX UNDER THE HEAD INCOME FROM OTHER SOURCES. THE CLAIM OF THE ASSESSEE IS THAT THE SAID LOAN ON WHICH INTEREST WAS EARNED HAVING BEEN GIVEN FROM THE LOAN BORROWED FROM M/S. PAYEL NIVESH & VINIYOG (P) LTD., INTEREST PAID TO M/S. PAYEL NIVESH & VINIYOG (P) LTD. IS ALLOWABLE AS DEDUCTION U/S 57(III) OF THE ACT. AS PER THE PROVISIONS OF SECTION 57(III) OF THE ACT, ANY EXPENDITURE, NOT BEING IN THE NATURE OF CAPITAL EXPENDITURE, LAID OUT OR EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF MAKING OR EARNING SUCH INCOME WHICH IS CHARGEABLE UNDER THE HEAD INCOME FROM OTHER SOURCES IS ELIGIBLE FOR DEDUCTION. IT IS THUS CLEAR THAT IF THE LOAN AVAILED BY THE ASSESSEE ON WHICH INTEREST IS PAID WAS UTILISED FOR THE PURPOSE OF GIVING INTEREST BEARING LOAN AND THE INTEREST EARNED ON SUCH LOAN IS DECLARED UNDER THE HEAD INCOME FROM OTHER SOURCES, THE INTEREST PAID BY THE ASSESSEE ON THE LOAN AVAILED IS TO BE TREATED AS 4 I.T.A. NO. 1116/KOL/2019 ASSESSMENT YEAR: 2015-16 JAI KISHORE AGARWAL EXPENDITURE LAID OUT AND EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF EARNING THE INTEREST INCOME AND THE SAME IS ALLOWABLE AS DEDUCTION AS PER SECTION 57(III) OF THE ACT. IT IS HOWEVER OBSERVED THAT THIS ASPECT REQUIRES VERIFICATION AS NEITHER THE AO NOR THE LD. CIT(A) HAS MADE SUCH VERIFICATION AND GIVEN ANY FINDING ON THIS ASPECT. EVEN IN THE ASSESSMENT COMPLETED BY THE AO U/S 143(3) FOR AY 2014-15, THERE IS NO SUCH FINDING ON THIS RELEVANT ASPECT. I, THEREFORE, SET ASIDE THE IMPUGNED ORDER PASSED BY THE LD. CIT(A) ON THIS ISSUE AND RESTORE THE MATTER TO THE FILE OF THE AO FOR DECIDING THE SAME AFRESH IN ACCORDANCE WITH SECTION 57(III) AFTER VERIFYING THE CLAIM OF THE ASSESSEE THAT THE LOAN AVAILED ON INTEREST WAS ENTIRELY UTILISED FOR GIVING LOANS TO THIRD PARTIES ON INTEREST. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 22 ND NOVEMBER, 2019. SD/- (P.M. JAGTAP) VICE PRESIDENT DATED: 22/11/2019 BISWAJIT, SR. PS COPY OF ORDER FORWARDED TO: 1. JAI KISHORE AGARWAL, FD-226, SALTLAKE CITY, SECTOR-III, KOLKATA 700 091. 2. ACIT, CIRCLE 1(2), KOLKATA. 3. THE CIT(A) 4. THE CIT 5. DR TRUE COPY, BY ORDER, ASSISTANT REGISTRAR / H.O.O. ITAT, KOLKATA