Dr. Shashank Hiralal Rathod, Ahmedabad V. The Income tax Officer,Ward-9(3), Ahmedabad

ITA 1587/AHD/2009

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 7745 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-07-2009
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 18-05-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D S CHAUDHARY
• Assessee Lawyers: R T SHAH

Judgement Text

IN THE INCOME_TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD BEFORE SHRI T.K.SHARMA AND SHRI D.C.AGRAWAL ITA NO.1587/ AHD/2009 (ASSESSMENT YEAR : 2006-07) DR. SHASHANK HIRALAL RATHOD C/O EYECARE HOSPITAL ANSHI AVENUE, B/H KETAV PETROL PUMP, AMBAWADI, AHMEDABAD. VS INCOME TAX OFFICER WARD -9(3) AAYKAR BHAVAN, AHMEDABAD. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI R.T.SHAH, A.R. RESPONDENT BY : SHRI D.S.CHAUDHARY, D.R. ( (( ( )/ )/)/ )/ ORDER PER AGRAWAL, AM: THIS IS AN APPEAL FILED BY THE ASSESSEE RAISING FOLLOWING GROUND: DISALLOWANCE OF INTEREST OF RS.51007/- PAID TO SHRI ABH ISHEK RATOD AND OF RS.50846/- TO SHRI SHASHANK H. RATHOD (HUF) AGG REGATING TO RS.101853/- ON THE ALLEGED GROUND THAT LOAN OF RS. 425609/- AS ON 31.03.2006 FROM SHRI ABHISHEK RATHOD AND RS.423717 /- FROM SHRI SHASHANK H. RATHOD (HUF) AS ON 31.03.2006 WERE ADV ANCED TO APPELLANTS WIFE SMT. BINA SHASHANK RATHOD ON ASSUMPTI ONS WITHOUT ANY MATERIAL BE DELETED. THE APPELLANT SUBMI TS THAT ADVANCES TO SMT. BINA SHASHANK RATHOD RS.2695165/- WERE OUT OF PROFITS EARNED YEAR TO YEAR AGGREGATING TO RS.3787763 /- BY APPELLANT. THERE ARE NO SUCH DISALLOWANCE IN EARLIER YE ARS. 2. FACTS OF THE CASE ARE THAT ASSESSEE IS OPHTHALMOLOGIST AND EYE SURGEON. HE HAD CLAIMED TO HAVE PAID INTEREST OF RS.51, 007/- TO SON ABHISHEK RATHOD AND RS.50,846/- ON LOAN STANDING AGAIN ST DR. S. RATHOD HUF. IT WAS CLAIMED THAT A SUM OF RS. 26,95,165/- PAID B Y THE ASSESSEE AS INTEREST FREE ADVANCE TO HIS WIFE SMT. BINA SHASHANK RATHOD WHEREAS ASSESSEE HAD PAID INTEREST ON THE LOAN STANDING IN THE NA ME OF HIS SON AND HIS HUF. THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS 2 TRANSFERRED HIS ENTIRE CURRENT YEARS INCOME ALSO TO HIS W IFE SMT. BINA SHASHANK RATHOD WHEREAS HE HAS NOT SQUARED UP LOANS STAN DING IN THE NAME OF HIS SON AND HUF AND HAS PAID INTEREST THREON. IN FACT, THE ASSESSEE HAD CLAIMED TOTAL INTEREST EXPENDITURE OF RS.9,62 ,110/- OUT OF WHICH THE ASSESSING OFFICER DISALLOWED A SUM OF RS.1,01,853/ - BEING INTEREST PAID TO HIS SON AND HUF. 3. THE LD. CIT(A) DISMISSED THE APPEAL OF THE ASSESSEE BY HOLDING THAT THE ASSESSEE HAS NOT CHARGED ANY INTEREST ON ADVANCES GIVEN TO HIS WIFE WHEREAS HE HAS PAID INTEREST TO HIS ON AND HUF. 4. BEFORE US, THE LD. A.R. FOR THE ASSESSEE SUBMITTED THA T THE ASSESSEE IS RUNNING A CURRENT ACCOUNT WITH HIS WIFE TO WHOM HE IS TRANSFERRING ALL HIS EARNINGS AND WITHDRAWING MONEY FOR HIS NEEDS. HIS WIF E IS RUNNING EYE CARE HOSPITAL AND, THEREFORE, FUNDS OF THE ASSESSEE ARE BEING UTILIZED FOR RUNNING THE HOSPITAL. THUS, THERE IS A BUSINESS CONNE CTION WITH THE FUNDS GIVEN BY THE ASSESSEE TO HIS WIFE. FURTHER, ASSESSEE H AD BORROWED THE MONEY FROM HIS SON AND HUF IN SOME EARLIER YEARS (A BOUT 10 YEARS BACK) FOR THE PURCHASE OF PLANT AND MACHINERY FOR THE H OSPITAL ON WHICH ASSESSEE IS PAYING INTEREST. THIS CLAIM WAS ALLOWED BY THE DEPARTMENT IN EARLIER YEARS AND, THEREFORE, THERE IS NO REASON WHY T HIS CLAIM SHOULD NOT BE ALLOWED FOR THIS YEAR ALSO. 5. AGAINST THIS, THE LD. D.R. SUBMITTED THAT BUSINESS NECE SSITY OF INCURRING EXPENDITURE SHOULD BE ESTABLISHED EVERY YEAR. MERELY BECAUSE ASSESSEE MIGHT HAVE BORROWED FUNDS IN SOME EARLIER YEARS F OR THE PURCHASE OF PLANT AND MACHINERY, WHICH CONNECTION IS NOT ESTABLISHED SO FAR, IT DOES NOT MEAN THAT BUSINESS CONNECTION WILL CONTIN UE EVERY YEAR WHEN ASSESSEE HAD SUFFICIENT INTEREST FREE FUNDS WHICH SHOUL D HAVE BEEN USED TO SQUARE UP THE LOAN TAKEN FROM HIS SON AND HUF. 3 6. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE RESTORE THE MATTER TO THE FILE OF THE ASSESSING OFFICER, WHO WILL GIVE AN OPP ORTUNITY TO THE ASSESSEE TO SHOW THAT LOAN WAS BORROWED FROM HIS SON AND HUF FOR BUSINESS PURPOSES IN SOME EARLIER YEARS. THE ASSESSEE WILL AL SO ESTABLISH BUSINESS CONNECTION IN THE CURRENT YEAR ALSO FOR CONTINUIN G TO RETAIN THAT LOAN AND, THEREFORE, TO PROVE THAT PAYMENT OF INTER EST WAS A COMMERCIAL NECESSITY EVEN DURING THIS YEAR. IN OUR CONSIDERED VIEW, NO QUANTUM OF EXPENDITURE CAN BE ALLOWED WITHOUT SHOWING BUSINESS CONN ECTION. BUSINESS CONNECTION IN ONE YEAR CANNOT BE ALLOWED TO HOLD THE FIELD IN PERPETUITY IN ALL SUBSEQUENT YEARS. SUCH BUSINESS CONNECTIO N HAS TO BE ESTABLISHED EVERY YEAR. 7. AS A RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED BUT FOR STATISTICAL PURPOSES. THE ORDER WAS PRONOUNCED IN THE OPEN COURT ON .7.2009. (T.K.SHARMA) JUDICIAL MEMBER (D.C.AGRAWAL) ACCOUNTANT MEMBER AHMEDABAD, DATED: .7.2009 PSP* COPY TO : (1) THE ASSESSEE (2) THE ASSESSING OFFICER (3) THE CIT(A) CONCERNED, (4) THE CIT, CONCERNED, (5) THE DR, ITAT, AHMEDABAD, (6) GUARD FILE. BY ORDER ASSTT. REGISTRAR / D EPUTY REGISTRAR ITAT, AHMEDABAD BENCHES AHMEDABAD.