A.AnnaMalai, CHENNAI V. ACIT, CHENNAI

ITA 1352/CHNY/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 7654 (ITAT-CHENNAI)
• Duration Of Justice: 9 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-02-2017
• Appeal Filed By: Assessee
• Bench Allotted: C
• Next Hearing Date: 01-02-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 17-05-2016
• Court: TRIBUNAL
• Department Lawyers: K N DHANDA
• Assessee Lawyers: A S SRIRAMAN

Judgement Text

, C/ SMC , IN THE INCOME TAX APPELLATE TRIBUNAL C/SMC BENCH, CHENNAI . , BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER ./ I.T.A.NO.1352 /MDS./2016 ( / ASSESSMENT YEAR :2011-12) SHRI A.ANNAMALAI, NEW NO.23, OLD NO.11, ANDERSON STREET,CHENNAI 600 001. VS. THE ACIT, BUSINESS CIRCLE VIII, CHENNAI 600 006. PAN ADWPA 6792 N ( / APPELLANT ) ( / RESPONDENT ) ! ' # / APPELLANT BY : MR.A.S.SRIRAMAN,ADVOCATE $% ! ' # / RESPONDENT BY : MR.K.N.DHANDAPANI,JCIT,DR & ' ' ( ) / DATE OF HEARING : 01.02.2017 *+ ' ( ) /DATE OF PRONOUNCEMENT : 22.02.2017 / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER: THIS APPEAL IS FILED BY THE ASSESSEE, AGGRIEVED B Y THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(A)-13, CHENN AI DATED 29.02.2016 PERTAINING TO ASSESSMENT YEAR 2011-1 2. 2. THE MAIN GRIEVANCE OF THE ASSESSEE IN THIS APPE AL IS WITH REGARD TO NON-SETTING OFF OF INTEREST PAID OUT OF I NTEREST RECEIVED BY THE ASSESSEE. ITA NO. 1352/MDS/2016 2 3. THE FACTS OF THE ISSUE ARE THAT THE ASSESSEE CL AIMED AN AMOUNT OF ` 12,82,488/- INCURRED TOWARDS INTEREST, OUT OF INTER EST RECEIPT OF ` 20,60,509/- FROM VARIOUS BANKS. THE AO OBSERVED TH AT INTEREST PAID BY THE ASSESSEE HAVE NO NEXUS WITH TH E INTEREST RECEIVED BY THE ASSESSEE AND BROUGHT THE INTEREST P AYMENT OF ` 12,82,488/- TO TAX. AGGRIEVED WITH THE ORDER OF AO , THE ASSESSEE WENT IN APPEAL BEFORE THE LD.CIT(A), WHO CONFIRMED THE ACTION OF AO. AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. 4. BEFORE US, LD.A.R SUBMITTED THAT THE ASSESSEE H AD LOAN AND INVESTED THE AMOUNT IN THE BUSINESS CONCERNED WHERE HE HAS SUBSTANTIATED STAKE OVER THE YEARS UTILIZING THE BO RROWED FUNDS. HE KEPT ON EARNING FROM THE CONCERN. ACCORDING TO HIM, THERE IS A DIRECT LINK BETWEEN INTEREST INCURRED AND INTEREST EARNED AND TO BE SET OFF OF EACH OTHER. 5. ON THE OTHER HAND, LD.D.R SUBMITTED THAT THE AS SESSEE IS A DIRECTOR IN M/S.ROSE FLOWER (P) COMPANY, ENGAGED IN THE PAPER TRADING BUSINESS AND THE ACTIVITY OF ACCEPTING DEPO SITS AND PAYING INTEREST THEREON AS CLAIMED IS NOT AN ACTIVITY AND IT IS ENGAGED FOR RECEIVING INTEREST/SERVICE CHARGES, ASSESSEE HAS MA DE INTEREST ITA NO. 1352/MDS/2016 3 PAYMENTS TO THE RELATED PERSONS OF THE BUSINESS CON CERNED AND DEPOSITS ARE NOT TAKEN FOR INVESTING IN THE BUSINES S OR EARNING SERVICE CHARGES FROM THE BUSINESS ASSOCIATE AND DEDUCTION U /S.57(III) OF THE ACT CANNOT BE GRANTED TO THE ASSESSEE AS THERE IS AN INTEREST PAYMENT, NO NEXUS WITH THE INTEREST EARNED BY THE ASSESSEE. ACCORDING TO LD.D.R, ASSESSEE HAS TAKEN LOAN FROM L IC HOUSING AND INTEREST THEREON ALREADY ALLOWED UNDER THE HEAD IN COME FROM HOUSE PROPERTY AND LIC HOUSING IS NOT AVAILABLE FOR INVE STMENT IN BUSINESS AND IT CANNOT BE ALLOWED. 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THE LD.A.R MADE A PLEA THAT IN THE SUBSEQUE NT ASSESSMENT YEAR 2012-13, THE DEPARTMENT HAS ACCEPTED THE SET OFF OF INTEREST PAID OUT OF INTEREST RECEIPT. IN OUR OPINION, AN ER ROR OF SUBSEQUENT YEAR, COMMITTED BY THE LOWER AUTHORITIES CANNOT GIV E THE RIGHT TO THE ASSESSEE TO CLAIM BEFORE THE TRIBUNAL TO COMMIT THE SAME KIND OF MISTAKE. AS SUCH, WE REJECT THIS CLAIM. FURTHER, IT IS NOT THE CASE OF THE ASSESSEE THAT IT WAS PAYING THE INTEREST TO FAC ILITATE FOR EARNING OF INTEREST INCOME. THE INTEREST THAT THE ASSESSEE REC EIVED WAS INCOME IN HIS HANDS, IT COULD STAND DIMINISHED ONLY IF THE RE WAS A PROVISION IN ITA NO. 1352/MDS/2016 4 LAW PERMITTING SUCH DIMINUTION. THERE IS NONE, AND, THEREFORE, THE AMOUNT PAID BY THE ASSESSEE AS INTEREST ON THE LOAN CANNOT BE REDUCED FROM THE INTEREST RECEIPT AS IT HAS NO NEXU S WITH EARNING OF INCOME. MORE SO, THIS VIEW IS SUPPORTED BY THE JU DGEMENT OF APEX COURT IN THE CASE OF DR. V. P. GOPINATHAN IN [2001] 248 ITR 449 (SC) WHEREIN HELD THAT:- THE INTEREST THAT THE ASSESSEE RECEIVED FROM THE B ANK ON THE FIXED DEPOSIT WAS INCOME IN HIS HANDS AND IT COULD STAND DIMINISHED ONLY IF THERE WAS A PROVISION IN LAW PERMITTING SUCH DIM INUTION. THERE WAS NO SUCH PROVISION OF LAW AND THE INTEREST ON THE LO AN TAKEN FROM THE BANK DID NOT REDUCE HIS INCOME BY WAY OF INTEREST O N THE FIXED DEPOSIT. 7. IN THE RESULT, THE APPEAL OF ASSESSEE IS DISMIS SED. ORDER PRONOUNCED ON 22 ND FEBRUARY, 2017 AT CHENNAI. SD/- ( ) ( CHANDRA POOJARI ) /ACCOUNTANT MEMBER CHENNAI, DATED THE 22 ND FEBRUARY, 2017 . K S SUNDARAM. , ' $(-. /.( / COPY TO: 1 . ! / APPELLANT 3. & 0( () / CIT(A) 5. .3 4 $(5 / DR 2. $% ! / RESPONDENT 4. & 0( / CIT 6. 4 6 7 ' / GF