M/S. MAPLE RELATORS PVT. LTD., MUMBAI V. ITO 10(2)(3), MUMBAI

ITA 1718/MUM/2023

AI Insights

The case involves M/s. Maple Realtors Pvt. Ltd., which appealed against the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, for the assessment year 2016-17. The primary issue was the disallowance of interest expenditure of Rs. 4,05,206 by the Assessing Officer, which was confirmed by the CIT(A). The Assessing Officer had disallowed the interest expenditure on the grounds that the assessee failed to establish a nexus between the interest-bearing loans taken and the interest-bearing loans given. The Tribunal, after reviewing the submissions and evidence provided by the assessee, including ledger confirmations and bank statements, concluded that the assessee had indeed established the necessary nexus and directed the Assessing Officer to allow the deduction.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 300133 (ITAT-MUMBAI)
• Duration Of Justice: 2 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-08-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 08-08-2023
• Assessment Year: 2016-2017
• Appeal Filed On: 15-05-2023
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 143(3); 142(1); 250; 143(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH, MUMBAI BEFORE SHRI B.R. BASKARAN, ACCOUNTANT MEMBER AND SHRI SANDEEP SINGH KARHAIL, JUDICIAL MEMBER ITA no.1718/Mum./2023 (Assessment Year : 2016–17) M/s. Maple Realtors Pvt. Ltd. Man Excellenza S.V. Road Opp. Juhu Airport Entrance Ville Parle (West), Mumbai 400 056 PAN – AAECM1328C ................ Appellant v/s Income Tax Officer Ward–10(2)(3), Mumbai ................ Respondent Assessee by : Shri Nishit Gandhi Revenue by : Shri Prashant Barate Date of Hearing – 09/08/2023 Date of Order – 14/08/2023 O R D E R PER SANDEEP SINGH KARHAIL, J.M. The present appeal has been filed by the assessee challenging the impugned order dated 13/03/2023, passed under section 250 of the Income Tax Act, 1961 ("the Act") by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, [“learned CIT(A)”], for the assessment year 2016–17. 2. The sole ground raised by the assessee, in its appeal, is reproduced as under:- “i. In the facts and in the circumstances of the case the Assessing Officer erred in not giving deduction of interest paid of Rs.4,05,206/- against the interest received and the learned Commissioner erred in confirming the stand taken by A.O. and dismissing the appeal without giving relief for deduction for interest paid of Rs. 4,05,206/- on borrowing of loan from parties.” M/s. Maple Realtors Pvt. Ltd. ITA no.1718/Mum./2023 Page | 2 3. In the larger interest of justice, the slight delay of 4 days in filing the present appeal is condoned. During the hearing, the learned Departmental Representative (“learned DR”) also did not raise any objection against the condonation of the aforesaid delay. 4. The only dispute raised by the assessee is against disallowance of interest expenditure of Rs. 4,05,206. 5. The brief facts of the case as emanating from the record are: The assessee is a private limited company and is engaged in the business of builders and developers. For the year under consideration, the assessee filed its return of income on 17/10/2016 declaring a total income of Rs. Nil. The return filed by the assessee was selected for scrutiny and statutory notices under section 143(2) as well as section 142(1) of the Act were issued and served on the assessee. During the assessment proceedings, it was observed that the assessee has received only interest income of Rs. 5,54,257 from Maple Infra Projects and has no other business income as per the profit and loss account. It was further observed that out of the total expenses claimed by the assessee, it has claimed interest expenses of Rs. 4,05,206 paid to various parties. During the assessment proceedings, the assessee was asked to prove the nexus between the loans taken and given. In response thereto, the assessee provided the ledgers of the parties from whom the loan was taken and ledger of the party to whom the loan was given in order to establish the nexus. The Assessing Officer (“AO”) vide order dated 06/12/2018 passed under section 143(3) of the Act held that the assessee has not discharged the onus of establishing the nexus of the interest-bearing loan taken by the assessee with the interest-bearing loans given by the assessee. Accordingly, the AO disallowed the interest expenditure of Rs. 4,05,206 claimed by the assessee. The learned CIT(A), vide impugned order, dismissed the appeal filed by the assessee. Being aggrieved, the assessee is in appeal before us. 6. During the hearing, the learned Authorised Representative (“learned AR”) submitted that the assessee has borrowed from several parties on which M/s. Maple Realtors Pvt. Ltd. ITA no.1718/Mum./2023 Page | 3 interest was paid and the assessee has earned interest income on a loan given to its group concern, namely Maple Infra Projects Limited. The learned AR referred to the chart on pages 3-5 of the paper book and submitted that before giving loans to its group concern on which it earned interest income, the assessee received the interest-bearing funds from several parties. 7. On the other hand, learned DR vehemently relied upon the orders passed by the lower authorities and submitted that the assessee has not proved the nexus between the interest income and interest expenditure. 8. We have considered the submissions of both sides and perused the material available on record. From the perusal of the computation of income forming part of the paper book on pages 10-11, we find that the assessee has declared interest income of Rs. 5,54,257 under the head “income from other sources” and against the said income, the assessee claimed an expenditure of Rs. 4,37,785, thus declaring total income of Rs. 1,16,472 under the head “income from other sources”. Further, from the financial statement of the assessee on page 29, we find that the assessee incurred interest expenditure of Rs. 4,05,206. As noted above, as per the assessee it has borrowed funds from several parties on which interest was paid and the said fund was given as a loan to its group concern on which assessee earned the interest income. As per the assessee, the differential amount was offered for taxation. In support of its submission, we find that the assessee has furnished the ledger confirmation of the loan creditors as well as the loan debtor. Further, from pages 41-48 the assessee has also furnished its bank statement and bank ledger in order to substantiate the nexus between the interest income and interest expenditure. From the perusal of aforesaid documents, we find merit in the submissions of the assessee that the funds received on which interest was paid were used for the purpose of granting the loan to its group concern on which interest was earned. Accordingly, we are of the view that the interest expenditure is wholly and exclusively for the purpose of earning interest income. Therefore, we direct the AO to grant the deduction of interest expenditure of Rs. 4,05,206 paid by the assessee, while computing the income M/s. Maple Realtors Pvt. Ltd. ITA no.1718/Mum./2023 Page | 4 under the head “income from other sources”. As a result, the impugned order passed by the learned CIT(A) is set aside and sole ground raised by the assessee is allowed. 9. In the result, the appeal by the assessee is allowed. Order pronounced in the open Court on 14/08/2023 Sd/- B.R. BASKARAN ACCOUNTANT MEMBER Sd/- SANDEEP SINGH KARHAIL JUDICIAL MEMBER MUMBAI, DATED: 14/08/2023 Copy of the order forwarded to: (1) The Assessee; (2) The Revenue; (3) The PCIT / CIT (Judicial); (4) The DR, ITAT, Mumbai; and (5) Guard file. True Copy By Order Pradeep J. Chowdhury Sr. Private Secretary Assistant Registrar ITAT, Mumbai