ITO WD 21(1)(1), MUMBAI V. DIPAK C. RUIA, MUMBAI

ITA 1539/MUM/2010

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 3809 (ITAT-MUMBAI)
• Duration Of Justice: 8 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-11-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2006-2007
• Appeal Filed On: 26-02-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AMOL KAMAT
• Assessee Lawyers: M SUBRAMANIUM
• Keywords: Commercial expediency

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, D, MUMBAI BEFORE SHRI R.S.SYAL, ACCOUNTANT MEMBER AND SHRI VIJAY PAL RAO, JUDICIAL MEMBER ITA NO. 1539/MUM/2010 (ASSESSMENT YEARS: 2006-07) INCOME TAX OFFICER WARD 21(1)(1), R NO.603, 6 TH FL PRATYAKSHAKAR BHAVAN, BANDRA KURLA COMPLEX BANDRA, MUMBAI . APPELLANT VS DIPAK C RUIA SHOP NO.4, SHREE YAMUNA APT. VILE PARLE (E), MUMBAI-400057 PAN: AAAPR7291J RESPONDENT APPELLANT BY : SHRI AMOL KAMAT RESPONDENT BY : SHRI M SUBRAMANIU M. O R D E R PER VIJAY PAL RAO,JM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST TH E ORDER DATED 24.12.2009 OF CIT(A)-32, MUMBAI FOR THE ASSES SMENT YEAR 2006-07. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS IN THIS APPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETI NG THE ADDITION OF ` .21,20,770/- MADE ON ACCOUNT OF INTEREST PAYMENT; ITA NO. 1539/MUM/2010 (ASSESSMENT YEARS: 2006-07) 2 2. IN DOING SO, THE LD. CIT(A) HAS ERRED IN NOT APPRECIATING THAT THE ASESEEE HAS TO ESTABLISH THE BUSINESS/COMMERCIAL EXPEDIENCY FOR ALLOWANCE OF DEDUCTION OF INTEREST U/S 36(1) OF THE ACT. THE DECISION OF THE SUPREME COURT IN THE CASE OF S A. BUILDER, 158 TAXMAN 74 (SC) IS CITED IN SUPPORT OF THE SAME 3. WE HAVE HEARD THE LEARNED DR AS WELL AS THE LEAR NED AR AND CONSIDERED THE RELEVANT RECORD. THE AO DISALLO WED THE INTEREST PAYMENT OF ` .21,20,770/- ON THE GROUND THAT THE FUNDS WERE NOT USED FOR THE PURPOSE OF BUSINESS. 4. ON APPEAL, THE LEARNED CIT(A) HAS DECIDED THIS I SSUE BY HOLDING AS UNDER : 4.2 THE FACT OF THE MATTER IS THAT THE APPELLANT H AS BORROWED IN HIS INDIVIDUAL CAPACITY AND INVESTED TH E AMOUNT IN HIS PARTNERSHIP FIRMS, PRIVATE LIMITED COMPANY AND PROPRIETARY CONCERN. THE APPELLANT IS PAYING INTEREST TO THE PARTIES FROM WHOM THE LOANS HAVE BEEN RECEIVED. THE APPELLANT IS ALSO RECEIVED INTEREST FROM THE CONCERNS WITH WHOM THE CAPITAL HA D BEEN DEPLOYED. THE DETAILS OF CAPITAL INVESTMENT BY APPELLANT IS AS UNDER : 1 CAPITAL ACCOUNT WITH PAPER AND ALLIED (PARTNER) ` .36,02,545 2 CAPITAL ACCOUNT WITH PAPER AGE (PARTNERS) `.92,35,575 3 CAPITAL ACCOUNT WITH PRECIOUS MARKETING CORP.(PROP) `.44,78,5754 4 LOAN TO M/S UTILITY PAPER INDUSTRIES PVT LTD(DIRECTOR) `.55,32,545 TOTAL RS2,25,49,240 4. THE APPELLANT HAS RECEIVED INTEREST ON THE ABOVE CAPITAL OF ` .20,15,376/- FROM THEE CONCERNS. THEREFORE, IT IS INCORRECT APPRECIATION OF THE FAC TS ON THE PART OF THE LD. AO WHICH HAS RESULTED INTO THIS ADDITION. IF ANY DISALLOWANCE WAS TO BE MADE, THE L D. ITA NO. 1539/MUM/2010 (ASSESSMENT YEARS: 2006-07) 3 AO WAS OBLIGED TO ESTABLISH NEXUS BETWEEN THE INTEREST BEARING BORROWING AND NON INTEREST BEARING DEPOSITS. THIS HAS NOT BEEN CASE HENCE AND ACCORDISNGLY6 THE ADDITION CANNOT BE SUSTAINED. TH E AO IS DIRECTED TO DELETE THE ADDITION OF ` .21,20,770/- ON ACCOUNT OF INTEREST PAID TO VARIOUS LENDERS 5. AT THE OUTSET, WE NOTE THAT THE IDENTICAL ISSUE HAS BEEN CONSIDERED AND DECIDED BY THIS TRIBUNAL IN ASSESS EES OWN CASE FOR THE ASSESSMENT YEAR 2005-06 IN ITA NO.5503/MUM/2008, ORDER DATED 20.8.2010. IN PARAGRA PH 9, THE TRIBUNAL HAS HELD AS UNDER : 9. WE HAVE HEARD THE RIVAL SUBMISSION AND PERUSED THE RECORD. FROM THE PERUSAL OF RECORDS, WE FIND THAT THE ASESEEE HAD SUBMITTED ALL THE DOCUMENTARY EVIDENCE BEFORE THE CIT(A) ALONG WITH THE PROFIT AND LOSS ACCOUNT FOR THE PERIOD 1 ST APRIL TO TILT THE DATE OF SURVEY AND FROM THE DATE OF SURVEY TO 31 ST MARCH, WHEREIN THE ASSESSEE HAD SPECIFICALLY MENTIONED THE AMOUNT IN QUESTION AS MISCELLANEOUS INCOME. HENCE, THE CIT(A) DIRECTED THE AO TO DELE TE THE ADDITION OF THE SAID AMOUNTS TO AVOID DOUBLE TAXATION. WITH REGARD TO THE INTEREST PAYMENT ALSO, THE CIT(A) OBSERVED THAT DUE TO THE INCORRECT APPRECIAT ION OF THE FACT ON THE PART OF THE AO ONLY IT RESULTED INTO THAT ADDITION. THEREFORE, THE CIT(A) DIRECTED THE AO TO DELETE THE ADDITION OF ` .21,17,486/- ON ACCOUNT OF INTEREST PAID TO VARIOUS LENDERS. IN VIEW OF THE AB OVE DISCUSSION, WE DO NOT FIND ANY MERIT IN DISTURBING THE ORDER OF THE CIT(A) IN DIRECTING THE AO TO DELETE THE ADDITIONS MADE IN RESPECT OF UNDISCLOSED INCOME OF ` .7,59,365/- AND INTEREST PAID OF ` .21,17,486. FOR THE REASONS AFORESAID, WE CONFIRM THE ORDER OF CIT(A) AND DISMISS THE GROUND OF APPEAL RAISED BY THE REVENUE 6. SINCE, THERE IS NO CHANGE IN THE FACTS AND CIRCU MSTANCES IN THE CASE IN HAND AND THE CASE DECIDED BY THIS T RIBUNAL IN ITA NO. 1539/MUM/2010 (ASSESSMENT YEARS: 2006-07) 4 ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2005-0 6. TO MAINTAIN THE CONSISTENCY WITH THE TRIBUNAL ORDER, W E FOLLOW THE ORDER OF THIS TRIBUNAL IN ASSESSEES OWN CASE CITED ABOVE AND DISMISS THE APPEAL FILED BY THE REVENUE. 7. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D.. PRONOUNCED IN THE OPEN COURT ON 19.11.2010 SD SD (R.S.SYAL) (VIJ AY PAL RAO) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 19 TH NOV 2010 SRL:21110 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT CONCERNED 4. CIT(A) CONCERNED 5. DR CONCERNED BENCH BY ORDER TRUE COPY ASSTT. REGISTRAR, ITAT, MUMBAI