Shri Pranay V. Shah,., Bhavnagar V. The Income Tax Officer, Ward-2(2), Bhavnagar

ITA 18/AHD/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 8161 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 10 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-11-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 04-01-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANTONY PARIATH
• Assessee Lawyers: T P HEMANI

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD SMC BENC H (BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER & SHRI S. S. GODARA, JUDICIAL MEMBER) ITA. NO: 18/AHD/2016 (ASSESSMENT YEAR: 2012-13) SHRI PRANAY V. SHAH, 301, BSIDES SAMRT CHAMBERS KHARGATE, BHAVNAGAR- 364001 V/S INCOME TAX OFFICER, WARD- 2 (2), BHAVNAGAR (APPELLANT) (RESPONDENT) PAN: AAACE4190N APPELLANT BY : SHRI T. P. HEMANI, AR RESPONDENT BY : SHRI ANTONY PARIATH, SR. D.R . ( )/ ORDER DATE OF HEARING : 15 -11-201 7 DATE OF PRONOUNCEMENT : -11-2017 PER N.K. BILLAIYA, ACCOUNTANT MEMBER 1. THIS APPEAL BY THE ASSESSEE IS PREFERRED AGAINST TH E ORDER OF THE LD. CIT(A)-6, AHMEDABAD DATED 23.09.2015 PERTAINING TO A.Y. 2012- 13. ITA NO. 18/A HD/2016 . A.Y. 2012-1 3 2 2. THE SUM AND SUBSTANCE OF THE GRIEVANCE OF THE ASSES SEE IS THAT THE LD. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF INTEREST EX PENSES OF RS. 9,49,494/-. 3. THE ASSESSEE FILED ITS RETURN ELECTRONICALLY ON 24. 12.2012 DECLARING TOTAL INCOME AT RS. 5,60,720/-. THE RETURN WAS SELECTED FOR SCRU TINY ASSESSMENT AND ACCORDINGLY STATUTORY NOTICES WERE ISSUED AND SERVE D UPON THE ASSESSEE. 4. DURING THE COURSE OF THE SCRUTINY ASSESSMENT PROCEE DINGS, THE A.O. NOTICED THAT THE ASSESSEE HAS CLAIMED DEDUCTION OF RS. 9,49 ,494/- ON ACCOUNT OF INTEREST EXPENSES ON LOANS. THE A.O. FOUND THAT THE SAME HAS BEEN CLAIMED AS DEDUCTION FROM THE INCOME SHOWN UNDER THE HEAD INC OME FROM OTHER SOURCES. THE A.O. WAS OF THE OPINION THAT THE PROV ISION OF SECTION 57(III) OF THE ACT ALLOWS DEDUCTION ONLY WHEN THE PURPOSE IS R ELATABLE TO THE ACTIVITY OF THE ASSESSEE IN EARNING SUCH INCOME. THE A.O. FOUND THAT THERE WAS NO DIRECT NEXUS BETWEEN THE AMOUNTS OF INTEREST RECEIVED AND INTEREST PAID AND, THEREFORE, FORM A BELIEF THAT THE SAME CANNOT B ALL OWED AS DEDUCTION. 5. THE A.O. ASKED THE ASSESSEE TO JUSTIFY ITS CLAIM OF DEDUCTION OF INTEREST EXPENSES OF RS. 9,49,494/-. ASSESSEE FILED A DETAIL ED REPLY STATING THAT IT IS IN THE BUSINESS OF FINANCE AND THEREFORE THE MONEY BORROWE D WERE ADVANCED TO VARIOUS PARTIES AND ON THE BORROWED FUNDS, THE ASSE SSEE HAD PAID INTEREST WHEREAS ON THE MONEY ADVANCED TO VARIOUS PARTIES, T HE ASSESSEE HAS EARNED INTEREST. THE ASSESSEE CLAIMED THAT THERE IS A DIRE CT NEXUS BETWEEN THE INTEREST EARNED AND INTEREST PAID AND THEREFORE THE DEDUCTIO N IS TO BE ALLOWED. 6. THE REPLY FIELD BY THE ASSESSEE DID NOT FIND ANY FA VOUR WITH THE A.O. WHO PROCEEDED BY DISALLOWING THE EXPENSES OF RS. 9,49,4 94/-. ITA NO. 18/A HD/2016 . A.Y. 2012-1 3 3 7. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) B UT WITHOUT ANY SUCCESS. 8. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE REITERA TED WHAT HAS BEEN STATED BEFORE THE LOWER AUTHORITIES. PER CONTRA, THE LD. D .R. STRONGLY SUPPORTED THE FINDINGS OF THE A.O. 9. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE ORD ERS OF THE AUTHORITIES BELOW. THE UNDISPUTED FACT IS THAT THE ASSESSEE IS IN THE BUSINESS OF FINANCE AND THEREFORE IN PURSUANCE OF ITS BUSINESS ACTIVITIES, THE ASSESSEE HAS BORROWED FUNDS AND HAS ADVANCED THE SAME TO VARIOUS PARTIES. IN THE COMPUTATION OF INCOME UNDER THE HEAD INCOME FROM OTHER SOURCES, THE ASSESSEE HAS SHOWN INCOME OF RS. 6,53,773/-. WE FIND THAT THE ASSESSEE HAS SHOWN INTEREST EARNED ON LOANS AND ADVANCES AT RS. 15,91,426/-. WE FURTHE R FIND THAT THE ASSESSEE HAS PAID INTEREST ON LOANS AT RS. 9,49,494/-. THESE FAC TS ARE AS EXHIBITED ON PAGE 42 OF THE PAPER BOOK. WE FIND THAT IN EARNING THE INTE REST INCOME OF RS. 15.91 LACS, THE ASSESSEE HAS PAID INTEREST OF RS. 9.49 LACS. EX HIBIT 42 CLEARLY SHOWS THE LINK BETWEEN EARNING INTEREST INCOME AND THE PAYMENT OF INTEREST. IN OUR CONSIDERED OPINION, THE ASSESSEE SATISFIES THE CONDITIONS LAID DOWN IN SECTION 57(III) OF THE ACT AND IS THEREFORE ELIGIBLE FOR THE CLAIM OF DEDU CTION OF INTEREST. WE ACCORDINGLY DIRECT THE A.O. TO ALLOW THE CLAIM OF D EDUCTION OF INTEREST OF RS. 9,49,494/-. APPEAL FILED BY THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN OPEN COURT ON 17 - 11- 20 17 SD/- SD/- (S. S. GODARA) (N. K. BILLAIYA) JUDICIAL MEMBER TRUE COPY ACCOUNTANT MEMBER AHMEDABAD: DATED 17 /11/2017