Shri Alap Somabhai Patel, Ahmedabad V. The Dy.CIT, Circle-8, Ahmedabad

ITA 1462/AHD/2014

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 5791 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 10 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-03-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 09-08-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 13-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MUDIT NAGPAL HEARING CONCLUDED
• Section: 143(3)

Judgement Text

ITA NO.1462/AHD/2014 ASSESSMENT YEAR: 2010-11 PAGE 1 OF 3 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH, AHMEDABAD [CORAM: PRAMOD KUMAR AM AND S S GODARA JM] ITA NO.1462/AHD/2014 ASSESSMENT YEAR: 2010-11 ALAP SOMABHAI PATEL ..................APPELLANT 13, SUBHASH SOCIETY, B/H. ISHWAR BHUVAN, NAVRANGPURA, AHMEDABAD 380 009. [PAN : AETPP 8910 M] VS. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE - 8, AHMEDABAD . ............................RESPONDENT APPEARANCES BY KARAN SHAH FOR THE APPELLANT MUDIT NAGPAL FOR THE RESPONDENT HEARING CONCLUDED ON: 04.01.2018 ORDER PRONOUNCED ON : 28.03.2018 O R D E R PER PRAMOD KUMAR, AM: 1. BY WAY OF THIS APPEAL, THE ASSESSEE APPELLANT HA S CHALLENGED CORRECTNESS OF LEARNED CIT(A)S ORDER DATED 14 TH MARCH 2014, IN THE MATTER OF ASSESSMENT UNDER SECTION 143(3) OF THE INCOME TAX ACT 1961 (THE ACT HEREINAFTER), FOR THE ASSESSMENT YEAR 2010-11. 2. GRIEVANCES RAISED BY THE APPELLANT ARE AS FOLLOW S :- 1. THE LD. CIT(A) HAS GROSSLY ERRED IN LAW AND ON FACTS IN DISMISSING THE APPEAL. HE OUGHT TO HAVE ALLOWED THE APPEAL FULLY IN ACCORDANCE WITH THE GROUNDS OF APPEAL RAISED BY THE APPELLANT BEFORE HI M. I. DISALLOWANCE OF INTEREST EXPENSES RS.11,08,656/- 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE DISALLOWANCE OF RS.11,08,656/- AS MADE BY THE A.O. ON ACCOUNT OF INTEREST ITA NO.1462/AHD/2014 ASSESSMENT YEAR: 2010-11 PAGE 2 OF 3 EXPENDITURE WHILE MAKING AN OBSERVATION THAT IT IS CLEAR THAT THE LOANS ON WHICH INTEREST WAS PAID WERE NOT UTILISED IN GIVING LOANS ON WHICH INTEREST WAS EARNED. 2. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN FAILING TO CONSIDER THE FACT THAT THE APPELLANT IS HAVING SUFFICIENT CAPITAL AND INTEREST FREE FUNDS AT HIS DISPOSAL TO ADVANCE FOR PURCHASE OF ASSETS. 3. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN FAILING TO PROPERLY THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE O F CIT VS. RELIANCE UTILITIES & POWER LIMITED, 313 ITR 340 AND ALSO THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF S.A. BUILDERS LIMITED VS. CIT (APPEALS) & ANR 288 ITR 1 (SC). THE APPELLANT THEREFORE RESPECTFULLY PRAYS THAT THE DISALLOWANCE OF INTEREST EXPENSES OF RS.11,08,656/- CONFIRMED BY THE LD. CIT (A) MAY KINDLY BE DELETED. 3. TO ADJUDICATE ON THE GRIEVANCE OF THE ASSESSEE, ONLY A FEW MATERIAL FACTS NEED TO BE TAKEN NOTE OF. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS PAID RS.11,08,656/- O N ACCOUNT OF INTEREST PAID, AND THE ASSESSEE HAS ALSO EARNED INTEREST INCOME OF RS.24,3 5,417/-. THE ASSESSEE CLAIMED DEDUCTION OF RS.11,08,656/- FOR EARNING THE SAID IN COME OF RS.24,35,417/- OFFERED TO TAX UNDER THE HEAD INCOME FROM OTHER SOURCES. THE ASSE SSING OFFICER DECLINED THE DEDUCTION ON THE GROUND THAT THERE IS NOTHING TO EV IDENCE DIRECT RELATIONSHIP BETWEEN THE FUNDS BORROWED AND FUNDS ADVANCED AND, AS SUCH, COST OF BORROWING FUNDS CANNOT BE ALLOWED AS A DEDUCTION FROM EARNING FROM THE FUN DS ADVANCED. AGGRIEVED, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LEARNED CIT (A) BUT WITHOUT ANY SUCCESS. THE ASSESSEE IS NOT SATISFIED AND IS IN FURTHER APPEAL BEFORE US. 4. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF APPLIC ABLE LEGAL POSITION. 5. IT IS CLEARLY DISCERNABLE FROM HONBLE BOMBAY HI GH COURTS JUDGEMENT IN THE CASE OF CIT VS. RELIANCE UTILITIES & POWER LIMITED (313 ITR 340) THAT PRESUMPTION TO BE TAKEN, IN SUCH SITUATIONS I.E. USE OF MIXED FUNDS , IS REQUIRED TO BE TAKEN IN A LIBERAL MANNER AND THE AMBIGUITY IS TO BE RESOLVED IN A MAN NER ADVANTAGEOUS TO THE CASES, AND A ONE TO ONE RELATIONSHIP BETWEEN FUNDS BORROWE D AND FUNDS USED FOR THE INTENDED PURPOSES IS NOT A SINE QUA NON FOR DEDUCTION. ACCO RDINGLY, WHEN BORROWED FUNDS ON WHICH INTEREST IS PAID ARE LESS THAN THE FUNDS DEPL OYED TO INTEREST INCOME, AND THE USE OF FUNDS IS MIXED AS IN THIS CASE, DEDUCTION OF SUC H INTEREST IS PERMISSIBLE. IT IS NOT NECESSARY TO ESTABLISH ONE TO ONE AND DIRECT NEXUS OF BORROWED FUNDS IN SUCH A CASE. ITA NO.1462/AHD/2014 ASSESSMENT YEAR: 2010-11 PAGE 3 OF 3 6. IN THE LIGHT OF THE ABOVE DISCUSSIONS, AND BEARI NG IN MIND ENTIRETY OF THE CASE, WE UPHOLD THE PLEA OF THE ASSESSEE. THE DISALLOWANCE THUS STANDS DELETED. 7. IN THE RESULT, THE APPEAL IS ALLOWED. PRONOUNCE D IN THE OPEN COURT ON THIS 28 TH DAY OF MARCH, 2018. SD/- SD/- S S GODARA PRAMOD KUMAR (JUDICIAL MEMBER) (ACCOUNTANT MEM BER) DATED: 28 TH MARCH, 2018 PBN/* COPIES TO: (1) THE APPELLANT (2) THE RESPOND ENT (3) CIT (4) CIT(A) (5) DR (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD