PRITI K SANGHAVI, MUMBAI V. ITO 10(2)(2), MUMBAI

ITA 1580/MUM/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 79246 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 3 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-06-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 11-06-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 06-03-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SHRIKANT NAMDEO
• Assessee Lawyers: ANIL MEHTA
• Keywords: Salary income
• Section: 143(3)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI . , , , BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA , JUD ICIAL MEMBER . / ITA NO. 1580 /MUM./ 2012 ( / ASSESSMENT YEAR : 2 0 0 9 10 ) MRS. PRITI K. SANGHAVI 3/4, HARIKRUPA, 10 TH ROAD CHAMBUR, MUMBAI 400 071 .. / APPELLANT V/S INCOME TAX OFFICER WARD 1 0(2)(2), AAYAKAR BHAVAN 101, M.K. ROAD, MUMBAI 400 020 .... / RESPONDENT ./ PERMANENT ACCOUNT NUMBER APCPS6454H / ASSESSEE BY : MR. ANIL MEHTA / REVENUE BY : MR. SHRIKANT NAM DEO / DATE OF HEARING 11 .06.2014 / DATE OF ORDE R 25.06.2014 / ORDER , / PER AMIT SHUKLA , J.M. THE PRESENT APPEAL HA S BEEN PREFERRED BY THE ASSESSEE , CHALLENGING THE IMPUGN ED ORDER DATED 3 RD JANUARY 2012 , PASSED BY THE LEARNED COMMISSIONER (APPEALS) XX II , MUMBAI , FOR THE QUANTUM OF MRS. PRITI K. SANGHAVI 2 ASSESSMENT PASSED UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (FOR SHORT 'THE ACT' ) FOR THE ASSESSMENT YEAR 200 9 10 , ON THE FOLLOWING GROUND S: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(A) ERRED IN DISALLOWING INTEREST PAID ` 4,53,210 AS HAVING NO NEXUS WITH THE INTEREST INCOME EARNED. 2. THE LEARNED CIT(A) ERRED IN APPRECIATING THE FACTS THAT THE FUNDS BO RROWED FROM INDIVIDUAL LENDERS HAVE BEEN ADVANCED TO M/S. SSAPL AND HAS EARNED INTEREST INCOME ON FUNDS SO BORROWED. 3. THE LEARNED CIT(A) HAS ERRED IN NOT CONSIDERING THE GROUND OF APPEAL OF NOT ALLOWING PROFESSION FEES PAID ` 3,750 WITHOUT ASSIGNING ANY REASONS. 2 . FACTS IN BRIEF : THE ASSESSEE IS AN INDIVIDUAL HAVING INCOME FROM SALARY AS A DIRECTOR OF THE COMPANY M/S. SANGHVI SHOE ACCESSORIES PVT. LTD. BESIDES THIS, SHE IS ALSO HAVING INCOME FROM HOUSE PROPERTY AND INTEREST INCOME. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS EARNED INTEREST INCOME OF ` 5,75,173 FROM BANK, BOND AND LOAN GIVEN TO THE COMPANY M/S. SANGHVI SHOE ACCESSORIES PVT. LTD. AGAINST SUCH INTEREST INCOME, THE ASSESSEE HAS CLAIMED DEDU CTION OF ` 4,53,210, WHICH CONSISTED OF INTEREST ON LOAN TAKEN FROM VARIOUS PERSONS OF ` 4,48,640, PROFESSIONAL FEES OF ` 3,750 AND BANK CHARGES OF ` 820. THE INTEREST INCOME WAS SHOWN UNDER THE HEAD INCOME FROM OTHER SOURCES . THE ASSESSING MRS. PRITI K. SANGHAVI 3 OFFICER HELD THAT THERE IS NO NEXUS BETWEEN THE INTEREST EARNED AND INTEREST EXPENDITURE AND, THEREFORE, DEDUCTION UNDER SECTION 57 (III) , CANNOT BE ALLOWED . 3 . BEFORE THE LEARNED COMMISSIONER (APPEALS), THE ASSESSEE SUBMITTED THAT THERE IS A DIRECT NEXUS BETWEEN THE FUND S BORROWED FROM VARIOUS PERSONS AND THE AMOUNT INVESTED IN M/S. SANGHVI SHOE ACCESSORIES PVT. LTD. , AND, THEREFORE, INTEREST PAID IS AN ADMISSIBLE DEDUCTION UNDER SECTION 57 (III) I.E., FOR THE EARNING OF INTEREST INCOME. IN THE STATEMENT OF FACTS FILED BEF ORE THE LEARNED COMMISSIONER (APPEALS), THE ASSESSEE HA D CONTENDED THAT IT HAS TAKEN LOAN OF SUMS AGGREGATING TO ` 26,50,000, FROM FIVE PERSONS TO WHOM INTEREST @ 15% TO 18% HAVE BEEN PAID. THE ASSESSEE HAS ALSO GIVEN LOAN OF SUMS AGGREGATING TO ` 27,50,00 0, TO M/S. SANGHVI SHOE ACCESSORIES PVT. LTD., ON WHICH SHE HAS RECEIVED INTEREST. THE DETAILS OF INTEREST RECEIVED AND INTEREST PAID WAS GIVEN IN THE FOLLOWING MANNER: INTEREST RECEIVED FROM M/S. SANGHAVI SHOE ACCESSO RIES PVT. LTD. ` 492757 OTHER INTE REST FROM BOND, ETC. ` 82396 TOTAL INTEREST INCOME ` 575153 LESS: INTEREST, ETC. PAID TO PRINCIPAL ` 900000 J.S. MEHTA @ 18% ` 161260 ` 250000 N.M. MEHTA (HUF) @ 18% ` 37725 ` 250000 J.S. MEHTA (HUF) @ 18% ` 31931 MRS. PRITI K. SANGHAVI 4 ` 1000000 VINODA TRIVEDI @ 1 5% ` 149999 ` 250000 R.A. TRIVEDI @ 15% ` 31438 JAYANTILAL INVESTMENT @ 15% ` 36287 ` 448640 ` 2650000 NET INTEREST INCOME ` 126513 4 . THE LEARNED COMMISSIONER (APPEALS), ON A PERUSAL OF THE BANK STATEMENT OF THE AXIS BANK BELONGING TO THE ASSESSE E WHICH WAS FILED BEFORE HIM, NOTED AS UNDER: 2.3 . I FIND THAT BEFORE GIVING LOAN OF ` 11,50,000 TO SANGHVAVI SHOE ACCESSORIES, THE BALANCE IN THE SAID AMOUNT AS ON 18.03.2008 WAS ONLY ` 2,71,511 AND HENCE THE ASSESSEE COULD NOT HAVE GIVEN THIS MU CH OF AMOUNT AS CLAIMED. AFTER GIVING THIS AMOUNT AS LOAN THE BALANCE HAS TURNED TO A NEGATIVE FIGURE. FURTHER, LOAN OF ` 12,50,000 HAS BEEN RECEIVED BY THE ASSESSEE FROM V.R. TRIVEDI AND R.A. TRIVEDI, HUF, ON 29.03.2008, WHILE LOAN GIVEN IS ON 28.03.2008 AND HENCE THERE IS NO NEXUS BETWEEN THE TWO AS CLAIMED. BASED ON THE AFORESAID OBSERVATIONS ON THE BANK DETAILS, HE HELD THAT THE FIGURE OF GIVING LOAN AND TAKING OF THE LOAN ARE NOT DIRECTLY RELATABLE AND, HENCE, THE FINDING OF THE ASSESSING OFFICER THA T THERE IS NO NEXUS BETWEEN THE TWO IS CORRECT AND, THEREFORE, HE HAS RIGHTLY DISALLOWED THE INTEREST CLAIMED UNDER SECTION 57( III ). 5 . BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED A COPY OF THE BANK STATEMENT OF THE AXIS BANK AND POINTED OUT TH E VARIOUS DATES ON WHICH THE ASSESSEE HAS TAKEN LOAN FROM VARIOUS PERSONS AND MRS. PRITI K. SANGHAVI 5 LOAN GIVEN TO COMPANY M/S. SANGHVI SHOE ACCESSORIES PVT. LTD. THE RELEVANT DETAILS IN THIS REGARD WERE FURNISHED AS UNDER: LOAN GIVEN TO SSAPL SOURCES OF LOAN GIVEN TO SSAPL D ATE AMOUNT ( ` ) DATE AMOUNT ( ` ) LOAN TAKEN FROM 16.03.2008 11,50,000 14.03.2008 2,50,000 N.M. MEHTA HUF 14.03.2008 5,00,000 14.03.2008 4,00,000 11,50,000 11,50,000 28.03.2008 1,00,000 25.03.2008 2,50,000 J.S. MEHTA HUF 28.03.2008 2,50,000 25. 03.2008 2,50,000 R.A. TRIVEDI HUF 02.04.2008 12,50,000 27.03.2008 10,00,000 V.R. TRIVEDI 16,00,000 15,00,000 6 . THUS, HE SUBMITTED THAT THERE IS A DIRECT NEXUS BETWEEN THE LOAN TAKEN AND THE LOAN GIVEN AND, THEREFORE, THE INTEREST PAID SHOULD BE ALLOWE D UNDER SECTION 57(III). HE FURTHER CLARIFIED THAT THE LEARNED COMMISSIONER (APPEALS), WHILE TAKING NOTE OF THE VARIOUS CREDIT ENTRIES, HAS FAILED TO CONSIDER THE AMOUNT SHOWN BY THE BANK ON ACCOUNT OF AUTOSWEEP. THE LEARNED COMMISSIONER (APPEALS) HAS GONE BY THE FACT THAT WHILE GIVING THE AMOUNT OF LOAN TO THE COMPANY, THE ASSESSEE WAS NOT HAVING SUFFICIENT BALANCE IN THE BANK ACCOUNT. THIS FACT IS INCORRECT WHICH IS EVIDENT FROM THE FACT THAT THE SUM OF ` 8,30,000, WAS DEBITED ON ACCOUNT OF AUTOSWEEP AND WHEN THE LOAN WAS GIVEN, THE SAID AMOUNT WAS REFLECTED BACK IN THE ACCOUNT. SIMILARLY, AT THE TIME OF MRS. PRITI K. SANGHAVI 6 GIVING THE LOAN OF ` 12.50 LAKHS TO THE COMPANY ON 28 TH MARCH 2008, AN AMOUNT OF ` 12.90 LAKHS WAS ON ACCOUNT OF AUTOSWEEP WHICH WAS RE BUTTED BACK IN THE ACCOUNT FOR MAKING THE PAYMENT. THUS, HE SUBMITTED THAT , FACTUALLY ALSO, THE FINDINGS OF THE LEARNED COMMISSIONER (APPEALS) CANNOT BE APPRECIATED. 7 . THE LEARNED DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HAND, STRONGLY RELIED UPON THE ORDER OF THE LEARNED CO MMISSIONER (APPEALS). 8 . WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IT IS AN UNDISPUTED FACT THAT THE INTEREST INCOME EARNED BY THE ASSESSEE IS TO BE ASSESSED AS INCOME FROM OTHER SOURCES . IF ANY EXPEND ITURE HAS BEEN INCURRED FOR EARNING OF SUCH INCOME, THE SAME IS TO BE ALLOWED AS DEDUCTION UNDER SECTION 57(III), WHILE COMPUTING THE TAXABLE INCOME. THE ASSESSEE HAD SHOWN TOTAL INTEREST INCOME OF ` 5,75,153, WHICH WAS MAINLY FROM INTEREST RECEIVED FROM M /S. SANGHVI SHOE ACCESSORIES PVT. LTD., AS PER THE DETAILS GIVEN ABOVE. THE ASSESSEES CASE HAS BEEN THAT SHE HAS GIVEN LOAN OF SUMS AGGREGATING TO ` 27,50,000, TO THE SAID COMPANY OUT OF LOAN TAKEN FROM FIVE PERSONS FOR SUMS AGGREGATING TO ` 26,50,000 (AS PER THE DETAILS MENTIONED ABOVE). O N THESE LOANS, SHE HAD PAID INTEREST OF ` 4,48,640, WHICH HAS BEEN CLAIMED AS DEDUCTION FOR THE PURPOSE OF EARNING OF THE INTEREST INCOME. ON A PERUSAL OF THE INTEREST INCOME, AS MRS. PRITI K. SANGHAVI 7 FILED BEFORE US, WHICH HAS ALSO BEEN NOTE D BY THE LEARNED COMMISSIONER (APPEALS), IT IS SEEN THAT ON 14 TH MARCH 2008, THE ASSESSEE HAS TAKEN LOAN OF ` 11.50 LAKHS WHICH WAS CREDITED IN THE BANK ACCOUNT OF THE ASSESSEE ON 17 TH MARCH 2008. ON 17 TH MARCH 2008 ITSELF, AN AMOUNT OF ` 8,30,000, WAS DEB ITED BY WAY OF AUTOSWEEP BY THE BANK AND, RESULTANTLY, THE CREDIT BALANCE WAS SHOWING LESSER AMOUNT WHICH WAS ` 2,75,512, AS NOTED BY THE LEARNED COMMISSIONER (APPEALS). ON 19 TH MARCH 2008, THE AMOUNT OF 11.50 LAKHS HAS BEEN DEBITED IN THE ACCOUNT OF THE A SSESSEE ON ACCOUNT OF CLEARANCE OF CHEQUE PAID TO M/S. SANGHVI SHOE ACCESSORIES PVT. LTD. THE LEARNED COMMISSIONER (APPEALS) HAS DRAWN ADVERSE INFERENCE MAINLY ON THE GROUND THAT AS ON THE DATE OF PAYMENT OT HE COMPANY, THE ASSESSEE WAS NOT HAVING SUFFICIE NT CREDIT BALANCE. HOWEVER, HE HAS NOT TAKEN INTO COGNIZANCE THE FACT THAT AUTOSWEEP AMOUNT OF ` 8.30 LAKHS HAS BEEN REMITTED BACK AT THE TIME OF CLEARING THE SAID AMOUNT OF CHEQUE OF ` 11.50 LAKHS. THUS, THERE IS NO DISCREPANCY WITH REGARD TO THE AVAILABI LITY OF BALANCE AVAILABLE WITH THE ASSESSEE IN HER BANK ACCOUNT AT THE TIME OF GIVING OF THE LOAN. FROM THE PROXIMITY OF THE DATES, IT CAN BE SEEN THAT THERE IS A DIRECT NEXUS BETWEEN THE LOAN TAKEN AND LOAN GIVEN. SIMILARLY, THE ASSESSEE HAS RECEIVED SUM OF ` 15 LAKHS ON 27 TH MARCH 2008 AND 28 TH MARCH 2008, FROM THREE PERSONS AND THE SAME HAVE BEEN GIVEN TO THE COMPANY ON 28 TH MARCH 2008 AND 2 ND APRIL 2008. AT THAT TIME ALSO, A MRS. PRITI K. SANGHAVI 8 SUM OF ` 12,90,000, WHICH WAS DEBITED BY WAY OF AUTOSWEEP BY THE BANK AND THE S AME HAS BEEN REMITTED BACK AT THE TIME OF CLEARANCE OF THE CHEQUE. THUS, THE CONTENTION OF THE LEARNED COUNSEL BEFORE US APPEARS TO BE FACTUALLY CORRECT AND THE FINDINGS OF THE LEARNED COMMISSIONER (APPEALS) AS NOTED ABOVE, GETS VITIATED FROM THE FACTS AND MATERIAL PLACED ON RECORD. THUS, WE SET ASIDE THE IMPUGNED ORDER PASSED BY THE LEARNED COMMISSIONER (APPEALS) AND HOLD THAT THERE IS A DIRECT NEXUS BETWEEN THE LOAN RECEIVED AND THE LOAN GIVEN AND , THEREFORE, THE INTEREST PAID BY THE ASSESSEE HAS TO BE AL LOWED FROM THE INTEREST INCOME AS THERE IS A DIRECT NEXUS. 9 . SIMILARLY, THE AMOUNT OF BANK CHARGES FOR A SUM OF ` 280, IS ALSO DIRECTLY RELATABLE TO EARNING OF THE INCOME FROM OTHER SOURCES. HOWEVER, R EGARDING PROFESSIONAL FEES OF ` 3,750, NOTHING HAS BEEN PLACED BEFORE US ON RECORD AS TO WHAT WA S THE NATURE OF SUCH PROFESSIONAL FEES , AS IT HAS NEITHER BEEN MENTIONED BY THE ASSESSING OFFICER / LEARNED CIT(A) NOR BY THE ASSESSEE . IN THE ABSENCE OF ANY SUCH EXPLANATION OR RECORD, , THE DISALLOWANCE WITH REGARD TO PROFESSIONAL FEES OF ` 3,750, STANDS CONFIRMED. IN THE RESULT, T HE DISALLOWANCE OF INTEREST OF ` 4,48,640, AND BANK CHARGES OF ` 820, STANDS DELETED AND THE CLAIM OF PROFESSIONAL FEES OF ` 3,750 STANDS CONFIRMED. THUS, THE GROUNDS RAISED BY THE ASSESSEE ARE TREATED AS PARTLY ALLOWED. MRS. PRITI K. SANGHAVI 9 10 . 11 . IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOWED. 25 TH JUNE 2014 ORDER PRONOUNCED IN THE OPEN COURT O N 25 TH JUNE 2014 SD/ - . D. KARUNAKARA RAO ACCOUNTANT MEMBER SD/ - AMIT SHUKLA JUDICIAL MEMBER MUMBAI, DATED : 25 TH JUNE 2014 / COPY OF THE ORDER FORWARDED TO : ( 1 ) / THE ASSESSEE ; ( 2 ) / THE REVENUE; ( 3 ) ( ) / THE CIT(A ) ; ( 4 ) / THE CIT, MUMBAI CITY CONCERNED ; ( 5 ) , , / THE DR, ITAT, MUMBAI ; ( 6 ) / GUARD FILE . / TRUE COPY / BY ORDER . / PRADEEP J. CHOWDHURY / SR. PRIVATE SECRETARY / / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI