SHRI SUMIT GUPTA, Jaipur V. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-6, Jaipur

ITA 194/JPR/2019

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 2148 (ITAT-JAIPUR)
• Duration Of Justice: 5 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-07-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 18-02-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NEENA JEPH J DHK
• Keywords: Business income; Earning of tax free income; Proportionate interest; Rule 8D
• Section: 10(14); 14A; 56; 28

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCH A, JAIPUR JH FOT; IKY JKO] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE : SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM VK;DJ VIHY LA-@ ITA NO. 194, 195,196, & 197/JP/2019 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2011-12 TO 2014-15 SHRI SUMIT GUPTA 504, APEX MALL TONK ROAD, JAIPUR CUKE VS. THE ACIT CIRCLE-6,JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO .: ABPPG 3787 J VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT VK;DJ VIHY LA-@ ITA NO. 293/JP/2019 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2011-12 THE DCIT CIRCLE-6,JAIPUR CUKE VS. SHRI SUMIT GUPTA 504, APEX MALL TONK ROAD, JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO .: ABPPG 3787 J VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY :SHRI ROHAN SOGANI, CA AND SHRI RAJEEV SOGANI, CA JKTLO DH VKSJ LS@ REVENUE BY : SMT. NEENA JEPH, JCIT-DR LQUOKBZ DH RKJH[K@ DATE OF HEARING : 17/07/2019 ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 29 /07/2019 VKNS'K@ ORDER PER BENCH THESE FOUR APPEALS BY THE ASSESSEE FOR THE ASSESS MENT YEAR 2011- 12 TO 2014-15 ARE DIRECTED AGAINST THE RESPECTIVE O RDERS OF THE LD. CIT(A) ITA NO. 194/JP/2019 SHRI SUMIT GUPTA VS ACIT, CIRCLE-6, JAI PUR 2 DATED 24-12-2018 AND 9-01-2019. THE REVENUE HAS FIL ED THE CROSS APPEAL FOR THE ASSESSMENT YEAR 2011-12. FIRST , WE TAKE UP THE CROSS APPEALS FOR THE ASSESSMENT YEAR 2011-12 WHEREIN THE ASSESSEE AN D REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL. ITA NO.194/JP /2019 A.Y. 2011-12 (ASSESSEE) 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF AO IN MAKING DISALLOWANCE OF RS. 4,75,262/- U/S 14A OF THE I.T. ACT, 1961. THE ACTION OF THE LD. CIT(A) IS ILLEGAL, UNJUSTIFIED, A RBITRARY AND AGAINST THE FACTS OF THE CASE. RELIEF MAY PLEASE BE GRANTED BY QUASHING THE DISALLOWANCE MADE BY THE AO AND CONFIRMED BY THE LD . CIT(A). 2. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF AO IN MAKING DISALLOWANCE OF RS. 5,59,482/- I.E. RS. 2,95,724/- ON ACCOUNT OF INTEREST EXPENSES AND RS. 2,63,758/- ON ACCOUNT OF BROKERAGE EXPENSES. THE ACTION OF THE LD. CIT(A) IS ILLEGAL, UNJUSTIFIED, A RBITRARY AND AGAINST THE FACTS OF THE CASE. RELIEF MAY PLEASE BE GRANTED BY QUASHING THE DISALLOWANCE MADE BY THE AO AND CONFIRMED BY THE LD . CIT(A). 3. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF AO IN MAKING ADDITION OF RS. 2,87,233/-UNDER THE HEAD INCOME FROM OTHER SOUR CES ON ACCOUNT OF ALLEGED EXCESS CLAIM OF BROKERAGE EXPENSES. THE AC TION OF THE LD. CIT(A) IS ILLEGAL, UNJUSTIFIED, ARBITRARY AND AGAIN ST THE FACTS OF THE CASE. RELIEF MAY PLEASE BE GRANTED BY QUASHING THE DISALL OWANCE MADE BY THE AO AND CONFIRMED BY THE LD. CIT(A). ITA NO.293/JP /2019 A.Y. 2011-12 (REVENUE) 1. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) IS CORRECT IN DELETING THE ADDITION OF RS. 3,60,000/- MADE ON ACCOUNT OF RENTAL INCOME EARNED BY THE ASSESSEE DESPITE THE FACT THAT FIRM IS A SEPARATE ENTITY THAN INDIVIDUAL AND RENT RECEIVABLE FROM THE ITA NO. 194/JP/2019 SHRI SUMIT GUPTA VS ACIT, CIRCLE-6, JAI PUR 3 FIRM IN WHICH THE ASSESSEE IS A PARTNER IS TO BE CO NSIDERED UNDER THE HEAD INCOME FROM HOUSE PROPERTY. 2. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) IS CORRECT IN REDUCING THE DISALLOWA NCE OF EXPENDITURE FROM RS. 73,50,936/- TO RS. 68,75,674/-U/S 14A READ WITH RULE 8D(2)(II) WITHOUT APPRECIATING THE FACT THAT AS PER DEPARTMEN TAL CIRCULAR NO. 05/2014 DATED 11-02-2014 IT IS NOT NECESSARY FOR EX EMPT INCOME TO HAVE BEEN INCLUDED IN THE INCOME OF PARTICULAR YEAR FOR DISALLOWANCE U/S 14A. 2.1 THE GROUND NO. 1 OF THE ASSESSEES APPEAL AS WE LL AS GROUND NO. 2 OF THE REVENUES APPEAL ARE COMMON REGARDING DISALL OWANCE OF RS. 4,75,262/- MADE BY THE AO U/S 14A OF THE ACT READ WITH RULE 8D(2)(II) OF THE INCOME TAX RULES WHICH WAS RESTRICTED BY THE LD. CIT(A) TO THE EXTENT OF EXEMPT INCOME EARNED BY THE ASSESSEE. 2.2 THE ASSESSEE IS AN INDIVIDUAL AND PARTNER IN M/ S. UNIVERSAL GRANITES WHICH IS ENGAGED IN THE BUSINESS OF EXPORT OF TILES/GRANITES. DURING THE COURSE OF ASSESSMENT PROCEEDING, THE AO NOTED THAT THE ASSESSEE HAS NOT MADE ANY DISALLOWANCE U/S 14A OF T HE ACT IN SPITE OF THE FACT THAT THE ASSESSEE HAS EARNED EXEMPT INCOME OF RS. 4,75,262/- ON ACCOUNT OF DIVIDEND FROM SHARES AS WELL AS PROFIT F ROM PARTNERSHIP FIRM M/S. UNIVERSAL GRANITES. THE AO NOTED THAT THE ASSE SSEE HAS TAKEN LOAN ON WHICH INTEREST WAS PAID AT THE AVERAGE RATE OF 1 4.4% WHEREAS THE ITA NO. 194/JP/2019 SHRI SUMIT GUPTA VS ACIT, CIRCLE-6, JAI PUR 4 ASSESSEE HAS EARNED INTEREST ON CAPITAL FROM PARTNE RSHIP FIRM @ 12%. THE ASSESSEE OBJECTED TO THE DISALLOWANCE PROPOSED BY T HE AO U/S 14A OF THE ACT AND SUBMITTED THAT ASSESSEES OWNED INTEREST FR EE FUND IS MORE THAN THE INVESTMENT MADE IN THE MUTUAL FUNDS AS WELL AS SHARES IN THE COMPANY. FURTHER THE CAPITAL INTRODUCED IN THE PART NERSHIP FIRM AND INTEREST ON THE SAME IS A BUSINESS INCOME. THEREFOR E, THE INTEREST EXPENDITURE INCURRED IN RESPECT OF THE SAID AMOUNT CANNOT BE DISALLOWED. THE ASSESSEE HAS ALSO GIVEN DETAILS OF PROPORTIONAT E INTEREST EXPENDITURE ALLOCABLE TO THE INVESTMENT MADE IN THE PARTNERSHIP FIRM AS WELL AS SHARES OF THE COMPANY AND MUTUAL FUNDS AND THUS CONTENDED THAT WHEN ASSESSEE HAS ITSELF MADE SUO MOTU DISALLOWANCE OF RS. 39.04 LACS ON ACCOUNT OF INTEREST AND BROKERAGE EXPENSES THEN NO FURTHER DIS ALLOWANCE IS CALLED FOR. THE AO DID NOT ACCEPT THE CONTENTION OF THE ASSESSE E AND MADE DISALLOWANCE OF RS.59,27,485/- ON ACCOUNT OF INTERE ST EXPENDITURE CALCULATED AS PER RULE 8D(2)(II) OF THE INCOME TAX RULES AND RS. 14,23,451/- ON ACCOUNT OF INDIRECT AND ADMINISTRATI VE EXPENSES UNDER RULE 8D(2)(III) OF INCOME TAX RULES. THUS THE AO HAS MAD E TOTAL DISALLOWANCE OF RS. 73,50,936/- . THE ASSESSEE CHAL LENGED THE ACTION OF ITA NO. 194/JP/2019 SHRI SUMIT GUPTA VS ACIT, CIRCLE-6, JAI PUR 5 THE AO BEFORE THE LD. CIT(A) AND CONTENDED THAT THE ASSESSEE HAS ALREADY MADE DISALLOWANCE OF RS. 39.04 LACS ON ITS OWN ON A CCOUNT OF INTEREST AND BROKERAGE EXPENSES. THEREFORE, HAVING REGARD TO THE FUNDS USED FOR INVESTMENT, NO FURTHER DISALLOWANCE IS CALLED FOR O N ACCOUNT OF INTEREST EXPENDITURE. THE ASSESSEE ALSO CLAIMED THAT APART F ROM INTEREST EXPENDITURE, NO FURTHER INDIRECT ADMINISTRATIVE EXP ENDITURE HAS BEEN CLAIMED BY THE ASSESSEE AGAINST THE TAXABLE INCOME. THE LD. CIT(A) RESTRICTED THE DISALLOWANCE MADE BY THE AO U/S 14 O F THE ACT TO THE EXTENT OF EXEMPT INCOME OF RS. 4,75,262/-. THUS BOTH ASSES SEE AND REVENUE ARE AGGRIEVED BY THE ORDER OF THE LD. CIT(A) QUA THIS I SSUE AND RAISED THE ABOVE GROUNDS. 2.3 BEFORE US, THE LD.AR OF THE ASSESSEE HAS SUBMIT TED THAT AO AS WELL AS THE LD. CIT(A) HAVE NOT CONSIDERED THE SUO MOTU DISALLOWANCE MADE BY THE ASSESSEE OF RS. 39.04 LACS ON ACCOUNT OF INTERE ST AND BROKERAGE EXPENSES NOT PERTAINING TO TAXABLE INCOME. HE HAS R EFERRED TO THE TOTAL INTEREST AND BROKERAGE EXPENSES OF RS. 1,49,10,361/ - WHEREAS THE ASSESSEE HAS CLAIMED ONLY A SUM OF RS. 1,09,97,000/-. THEREF ORE, THE ASSESSEE HIMSELF HAS DISALLOWED A SUM OF RS. 39.04 LACS ON A CCOUNT OF INTEREST AND ITA NO. 194/JP/2019 SHRI SUMIT GUPTA VS ACIT, CIRCLE-6, JAI PUR 6 BROKERAGE EXPENSES TREATING THE SAME AS NOT PERTAIN ING TO TAXABLE INCOME. THE LD.AR HAS THEN REFERRED TO ASSESSEE'S OWN FUNDS AND SUBMITTED THAT FOR THE ASSESSMENT YEAR 2011-12, THE ASSESSEE WAS H AVING ITS OWN FUND OF RS. 33.95 CRORES. SIMILARLY FOR SUBSEQUENT ASSES SMENT YEAR, THE ASSESSEE WAS HAVING SUFFICIENT FUNDS WHICH WERE MOR E THAN THE INVESTMENTS MADE IN THE SHARES OF COMPANY AND MUTUA L FUNDS. HE HAS ALSO POINTED OUT THAT THERE WAS NO FURTHER INVESTME NT IN THE SHARES IN THE YEAR UNDER CONSIDERATION AND IN ALL SUBSEQUENT YEAR S INITIAL INVESTMENT WAS MADE IN THE SHARES OF THE COMPANY IN THE ASSESS MENT YEAR 2006-07 AND AFTER 2007-08, THERE WAS NO FRESH INVESTMENT. A S REGARDS THE INVESTMENT IN PARTNERSHIP FIRM, THE LD.AR HAS SUBMI TTED FOR THE ASSESSMENT YEAR 2011-12, THE ASSESSEE HAS MADE INV ESTMENT OF RS. 1.44 CRORES AND IN ALL SUBSEQUENT YEARS THE SAID INVESTM ENT WAS GRADUALLY REDUCED TO RS. 41.56 LACS IN ASSESSMENT YEAR 2014-1 5. HENCE, THE LD.AR HAS SUBMITTED THAT WHEN THE ASSESSEE IS HAVING MORE THAN ABOUT RS. 35.00 CREORES IN THE YEAR UNDER CONSIDERATION AND INVESTM ENT MADE IN THE PARTNERSHIP FIRM IS ONLY RS. 1.44 CRORE THE NO DISA LLOWANCE IS CALLED FOR ON ACCOUNT OF INTEREST INCOME . HE HAS ALSO REFERRED T O THE DETAILS OF ITA NO. 194/JP/2019 SHRI SUMIT GUPTA VS ACIT, CIRCLE-6, JAI PUR 7 ASSESSEE'S CAPITAL ACCOUNT AND INCOME STATEMENT AND SUBMITTED THAT APART FROM INTEREST AND BROKERAGE EXPENSES WHICH IS ALSO IN RESPECT OF TAKING THE LOAN. THE ASSESSEE HAS NOT CLAIMED ANY OTHER IN DIRECT EXPENDITURE WHICH CAN BE APPORTIONED TO THE INCOME. THUS THE DI SALLOWANCE RESTRICTED BY THE LD. CIT(A) TO THE EXTENT OF EXEMPT INCOME IS ALSO NOT JUSTIFIED. 2.4 ON THE OTHER HAND, THE LD. DR SUBMITTED THAT T HE ASSESSEE HAS TAKEN LOAN AND PAID INTEREST AT THE AVERAGE RATE OF 14.4% . FURTHER THE ASSESSEE HAS ALSO INCURRED IN RESPECT OF BROKERAGE EXPENSES TO THE TUNE OF RS. 16,11,929/- FOR TAKING THE LOAN. HENCE, THE ASSESSE E HAS INCURRED THE INTEREST AND BROKERAGE EXPENSES FOR TAKING THE LOAN AND AT THE SAME TIME THE ASSESSEE HAS MADE INVESTMENT IN THE PARTNERSHIP FIRM AS WELL AS INVESTMENT IN THE MUTUAL FUNDS APART FROM IN THE S HARES OF THE COMPANY IN WHICH THE ASSESSEE IS A DIRECTOR. THE ASSESSEE H AS EARNED TAX FREE INCOME DURING THE YEAR UNDER CONSIDERATION ON ACCO UNT OF DIVIDEND FROM MUTUAL FUND AND SHARES OF THE PARTNERSHIP FIRM. TH EREFORE, THE PROVISIONS OF SECTION 14A READ WITH RULE 8D OF INCO ME TAX RULES ARE APPLICABLE IN THE CASE OF THE ASSESSEE. THE LD. DR HAS RELIED UPON THE ORDER OF THE AO AND SUBMITTED THAT THE AO HAS COMPU TED THE ITA NO. 194/JP/2019 SHRI SUMIT GUPTA VS ACIT, CIRCLE-6, JAI PUR 8 DISALLOWANCE STRICTLY AS PER FORMULA PROVIDED UNDER RULE 8D OF INCOME TAX RULES. 2.5 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WEL L AS THE RELEVANT MATERIAL ON RECORD. THE AO HAS TAKEN THE INTEREST E XPENDITURE OF RS. 96,30,358/- FOR APPORTIONMENT OF THE SAME IN RESPEC T OF EXEMPT INCOME. THE AO THEREAFTER TOOK THE AVERAGE VALUE OF THE INV ESTMENT MADE IN THE SHARES, MUTUAL FUNDS AND PARTNERSHIP FIRM AT RS. 28 ,46,90,237/-. ACCORDINGLY, THE AO COMPUTED THE ALLOCABLE INTEREST EXPENDITURE BY TAKING THE AVERAGE INVESTMENT AND TOTAL ASSETS OF T HE ASSESSEE. WE FIND THAT THE AMOUNT OF INTEREST TAKEN BY THE ASSESSEE F OR THE PURPOSE OF COMPUTING THE DISALLOWANCE U/S 14A IS NOT BASED ON THE CORRECT FACTS AS THE TOTAL INTEREST EXPENSES AND BROKERAGE EXPENSES FOR THE YEAR UNDER CONSIDERATION IS RS. 1,49,10,361/- WHEREAS THE ASSE SSEE HAS CLAIMED THE INTEREST EXPENDITURE OF RS. 1,09,97,000/-. THEREFOR E, THE ASSESSEE MADE SUO MOTU DISALLOWANCE OF RS. 39.04 LACS ON ACCOUNT OF INTEREST AND BROKERAGE EXPENSES. THIS SUO MOTU DISALLOWANCE MADE BY THE ASSESSEE WAS NOT CONSIDERED BY THE AO WHILE TAKING THE FIGUR E OF ALLOCABLE INTEREST EXPENDITURE. FURTHER, WE NOTE THAT DURING THE YEAR UNDER CONSIDERATION ITA NO. 194/JP/2019 SHRI SUMIT GUPTA VS ACIT, CIRCLE-6, JAI PUR 9 THERE IS NO FRESH INVESTMENT IN THE SHARES OF THE C OMPANY I.E. M/S. TAB INDIA GRANITE PVT. LTD. THEREFORE, THERE IS NO QUES TION OF UTILIZING ANY BORROWED FUNDS IN THE YEAR UNDER CONSIDERATION SO FAR AS INVESTMENT IN THE SHARES OF THE COMPANY. THIS FACT IS FURTHER SU PPORTED BY INTEREST INCOME RECEIVED BY THE ASSESSEE OF RS. 1,12,98,637/ - AS AGAINST INTEREST EXPENDITURE CLAIMED AT RS. 1,09,97,000/-. THUS THE INTEREST INCOME OF THE ASSESSEE IS MORE THAN THE INTEREST EXPENDITURE CLAI MED. THE ASSESSEES OWN FUND IS ALSO AROUND 35 CRORES WHICH IS MUCH MOR E THAN THE INVESTMENT MADE BY THE ASSESSEE IN THE SHARES, MUTU AL FUNDS AND CAPITAL IN THE PARTNERSHIP FIRM. ACCORDINGLY, HAVING REGARD TO THE FACTS THAT ASSESSEE'S OWNS FUND IS MORE THAN THE INVESTMENT IN QUESTION AND SUO MOTU DISALLOWANCE OF RS. 39.04 LACS IS MADE BY THE ASSESSEE ON ACCOUNT OF INTEREST AND BROKERAGE, NO FURTHER DISALLOWANCE IS CALLED FOR U/S 14A OF THE ACT. 2.5.1 AS REGARDS INDIRECT AND ADMINISTRATIVE EXPEND ITURE DISALLOWED BY THE AO UNDER RULE 8D(2)(III) OF INCOME TAX RULES, W E FIND THAT THE ASSESSEE HAS CLAIMED THE EXPENDITURE ON ACCOUNT OF INTEREST AND BROKERAGE AND NO OTHER EXPENDITURE HAS BEEN CLAIMED WHICH CAN BE ATTRIBUTED IN ITA NO. 194/JP/2019 SHRI SUMIT GUPTA VS ACIT, CIRCLE-6, JAI PUR 10 RESPECT OF EARNING OF EXEMPT INCOME. THIS FACT IS C LEAR FROM THE ANNEXURE 1 BEING CAPITAL ACCOUNT OF THE ASSESSEE AS WELL AS DETAILS OF THE EXPENDITURE. THUS WHEN THE ASSESSEE HAS NOT CLAIMED ANY EXPENDITURE ON ACCOUNT OF INDIRECT ADMINISTRATIVE EXPENDITURE THEN THE DISALLOWANCE UNDER RULE 8D (2)(III) OF INCOME TAX RULES IS NOT C ALLED FOR. THE PROVISIONS OF SECTION 14A AND RULE 8D CAN BE INVOKE D ONLY WHEN THE ASSESSEE HAS CLAIMED SOME EXPENDITURE WHICH CAN BE ATTRIBUTED FOR EARNING EXEMPT INCOME. WHERE ASSESSEE HAS NOT CLAIM ED ANY EXPENDITURE ON ACCOUNT OF ADMINISTRATIVE EXPENDITURE THEN NO DI SALLOWANCE CAN BE MADE U/S 14A READ WITH RULE 8D(2)(III) OF THE RULES . THEREFORE, THE DISALLOWANCE SUSTAINED BY THE LD. CIT(A) TO THE EXT ENT OF EXEMPT INCOME IS NOT JUSTIFIED AND THE SAME IS DELETED. THUS GROU ND NO. 1 OF THE ASSESSEE IS ALLOWED AND GROUND NO. 2 OF THE REVENUE IS DISMI SSED. 3.1 THE GROUND NO.2 OF THE ASSESSEES APPEAL IS REG ARDING DISALLOWANCE OF INTEREST EXPENSES AND BROKERAGE EXP ENSES ON THE GROUND THAT THE ASSESSEE HAS PAID INTEREST @ 14.4% WHEREAS THE ASSESSEE HAS RECEIVED INTEREST @ 12% FROM THE PARTNERSHIP FIRM. ITA NO. 194/JP/2019 SHRI SUMIT GUPTA VS ACIT, CIRCLE-6, JAI PUR 11 3.2 WE HAVE HEARD THE LD.AR AND LD. DR AND CONSIDER ED THE RELEVANT MATERIAL ON RECORD. AS FAR AS THE INTEREST PAID BY THE ASSESSEE @ 14.4% AND RECEIVED INTEREST FROM THE PARTNERSHIP FIRM @ 1 2% IS NOT IN DISPUTE. HOWEVER, THE OVERALL INTEREST INCOME OF THE ASSESSE E IS MORE THAN THE INTEREST EXPENDITURE CLAIMED. THE SOLE BASIS OF THE DISALLOWANCE MADE BY THE AO IS ALSO THAT THE ASSESSEE HAS WRONGLY ALLOCA TED THE INTEREST EXPENDITURE AGAINST BUSINESS INCOME. HOWEVER, ONCE THE INTEREST RECEIVED FROM THE PARTNERSHIP FIRM IS TREATED AS BUSINESS IN COME OF THE ASSESSEE THEN INTEREST EXPENDITURE IN RESPECT OF EARNING BUS INESS INCOME CANNOT BE DISALLOWED ON THE BASIS OF LESS INCOME EARNED BY TH E ASSESSEE. THE AO HAS NOT DOUBTED THE INTEREST PAYMENT AND INTEREST R ECEIPT OF THE ASSESSEE. HOWEVER, IT WAS OBSERVED THAT THE INVESTMENT MADE B Y THE ASSESSEE IN THE FIRM DURING THE YEAR UNDER CONSIDERATION IS OVER AN D ABOVE THE FIXED CAPITAL INTRODUCED BY THE ASSESSEE IN THE PARTNERSH IP FIRM AND THEREFORE, RECEIVING THE INTEREST AT THE RATE LESS THAN THE IN TEREST PAYMENT BY THE ASSESSEE HAS LED THE AO TO MAKE THE DISALLOWANCE. THE LD.AR OF THE ASSESSEE RELIED ON THE DECISION OF MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF DELITE ENTERPRISES (P) LTD. VS ITO, WARD- 3 (1)(2) [2008] 22 SOT ITA NO. 194/JP/2019 SHRI SUMIT GUPTA VS ACIT, CIRCLE-6, JAI PUR 12 245 (MUMBAI) AND SUBMITTED THAT THE TRIBUNAL HAS CO NSIDERED THE IDENTICAL ISSUE AND HELD THAT NO DISALLOWANCE CAN B E MADE U/S 36(1)(III) OF THE ACT ON THE GROUND THAT INVESTMENT MADE BY THE ASSESSEE IN THE PARTNERSHIP FIRM HAS EARNED LESS INCOME THAN THE IN TEREST EXPENDITURE. AS WE HAVE ALREADY DISCUSSED IN THE FOREGOING PART OF THIS ORDER THAT ONCE INTEREST INCOME IS TREATED AS BUSINESS INCOME OF TH E ASSESSEE THEN THE CORRESPONDING EXPENDITURE CANNOT BE DISALLOWED ON T HE GROUND OF LESS INCOME EARNED BY THE ASSESSEE. THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF DELITE ENTERPRISES (P) LTD. VS ITO (SUPRA) HAS DEALT WITH THIS ISSUE IN PARA 7.1. AND 7.2 AS UNDER:- 7.1 THE ASSESSEE IN THIS CASE, IN PURSUANCE OF THE OBJE CTS OF CARRYING ON OF BUSINESS OF DEALING IN COMMODITIES AND BUSINE SS OF DEALING IN SHARES AND SECURITIES, ETC. HAS INVESTMENT IN THE PARTNERSHIP FIRM. CLAUSE 8 OF THE PARTNERSHIP FIRM CLEARLY STATES THAT THE ASSESSEE S HALL BE ENTITLED TO INTEREST AT THE RATE OF 12 PER CENT ON THE CAPITAL INTRODUCED. THE EARNING OF INTEREST IS CAPPED AT THE MAXIMUM AMOUNT OF PROFIT EARNED. IN O THER WORDS, THE INTEREST ON CAPITAL/LOANS, SHOULD NOT EXCEED THE AGGREGATE A MOUNT OF PROFIT EARNED BY THE FIRM IN THE YEAR. SEC. 28(V) OF THE ACT MERELY STATES THAT THE INTEREST EARNED ON A PARTNERSHIP FIRM IS TAXABLE. FOR THE ASST. YR. 2001-02 THE ASSESSEE HAD IN FACT EARNED INTEREST OF RS. 99,01,000 AND THE AO HA S BROUGHT IT TO TAX. THE FIRST APPELLATE AUTHORITY HAS RIGHTLY HELD THAT THIS RECE IPT IS TAXABLE UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION' UNDER S. 28(V) OF THE ACT. THERE IS NO EXEMPTION CLAIMED UNDER S. 10(2A) OF THE ACT BY THE ASSESSEE. SEC. 10(14) CLEARLY STATES THAT EXPENDITURE INCURRED BY THE ASS ESSEE IN RELATION TO INCOME WHICH DOES NOT FORM PART OF TOTAL INCOME UNDER THE ACT WILL NOT BE ALLOWED. IN THIS CASE, FOR BOTH THE ASSESSMENT YEARS, THERE IS NO INCOME EARNED BY THE ASSESSEE WHICH DOES NOT FORM PART OF THE TOTAL INCO ME UNDER THE ACT. UNDER THESE CIRCUMSTANCES WE DO NOT SEE ANY REASON WHY TH E CLAIM OF THE ASSESSEE IS ITA NO. 194/JP/2019 SHRI SUMIT GUPTA VS ACIT, CIRCLE-6, JAI PUR 13 NOT ALLOWABLE UNDER S. 36(1)(III). COMING TO THE AR GUMENT OF THE LEARNED DEPARTMENTAL REPRESENTATIVE THAT THE JUDGMENT OF TH E HONBLE APEX COURT IN THE CASE OF RAJENDRA PRASAD MOODY (SUPRA) IS NOT AP PLICABLE TO THIS CASE, WE FIND THAT THE HONBLE MADRAS HIGH COURT IN THE CASE OF M. ETHURAJAN (SUPRA) HAS HELD THAT THE PROPOSITIONS LAID DOWN IN RAJENDR A PRASAD MOODYS CASE (SUPRA) FOR ALLOWABILITY UNDER S. 57(III), ARE EQUA LLY APPLICABLE FOR DEDUCTIONS CLAIMED UNDER S. 36(1)(III) OR S. 37. THUS THIS ARG UMENT OF THE REVENUE IS WITHOUT ANY MERIT. 7.2 IN VIEW OF THE ABOVE DISCUSSION WE ARE OF THE CONSI DERED OPINION THAT THE FIRST APPELLATE AUTHORITY AT PARA 4.3 P. 1 5 OF THE ORDER FOR THE ASST. YR. 2001-02 HAS RIGHTLY COME TO A CONCLUSION THAT THE C LAIM OF THE ASSESSEE FOR THE DEDUCTION UNDER S. 36(1)(III) HAS TO BE ALLOWED. ACCORDINGLY, NO DISALLOWANCE IS CALLED FOR IN RESPE CT OF INTEREST EXPENDITURE ON THE GROUND THAT CORRESPONDING INCOME EARNED BY THE ASSESSEE FROM PARTNERSHIP FIRM IS LESS THAN THE INT EREST EXPENDITURE. THUS THE DISALLOWANCE MADE BY THE AO AND SUSTAINED BY TH E LD. CIT(A) IS DELETED. THUS GROUND NO. 2 OF THE ASSESSEE IS ALLOW ED. 4.1 THE GROUND NO. 3 OF THE ASSESSEE IS REGARDING T HE DISALLOWANCE MADE BY THE AO ON ACCOUNT OF BROKERAGE EXPENDITURE AGAINST THE INCOME FROM OTHER SOURCES. 4.2 WE HAVE HEARD THE LD.AR AS WELL AS LD. DR AND C ONSIDERED THE RELEVANT MATERIAL ON RECORD. THE AO HAS MADE DISALL OWANCE ON THE GROUND THAT THE ASSESSEE HAS TAKEN INCORRECT AND IM PROPER CRITERIA FOR ALLOCATING BROKERAGE EXPENSES TOWARDS THE INCOME EA RNED BY THE ASSESSEE ITA NO. 194/JP/2019 SHRI SUMIT GUPTA VS ACIT, CIRCLE-6, JAI PUR 14 FROM ADVANCE GIVEN TO THE COMPANY AND INTEREST INCO ME EARNED FROM PARTNERSHIP FIRM AS WELL AS OTHER INVESTMENT MADE B Y THE ASSESSEE. THOUGH THE ALLOCATION OF THE BROKERAGE EXPENSES AS WELL AS INTEREST EXPENSES OUGHT TO HAVE BEEN BASED ON THE QUANTUM O F THE BORROWED FUNDS USED FOR RESPECTIVE INVESTMENTS YIELDING INTE REST INCOME U/S 56 OF THE I.T. ACT, 1961 AS WELL AS INTEREST INCOME U/S 2 8 OF THE I.T. ACT, 1961. HOWEVER, WHEN THE OVERALL INTEREST INCOME EARNED BY THE ASSESSEE IS MORE THAN THE CORRESPONDING INTEREST EXPENDITURE THEN SU CH A TECHNICAL DISALLOWANCE OF RS. 2,87,233/- BY RECOMPUTING THE ALLOCATION OF BROKERAGE EXPENDITURE IS NOT JUSTIFIED. EVEN THE AO HAS ALSO NOT TAKEN THE CORRECT AMOUNT INTO CONSIDERATION WHILE COMPUTING T HE DISALLOWANCE. THE ALLOCATION OF BROKERAGE EXPENSES OUGHT TO HAVE BEEN BASED ON THE QUANTUM OF BORROWED FUNDS USED FOR VARIOUS INVESTME NTS. WE FIND THAT IF THE BROKERAGE EXPENSES IS ATTRIBUTED ON THE BASIS O F QUANTUM OF BORROWED FUNDS USED FOR THE ADVANCES MADE TO THE COMPANY TH EN NO DISALLOWANCE IS CALLED FOR. ACCORDINGLY, HAVING CONSIDERED THE F ACTS AND CIRCUMSTANCES OF THE CASE WHEN THE QUANTUM OF THE BORROWED FUNDS USED FOR MAKING THE ADVANCES TO THE COMPANY IS TAKEN INTO CONSIDERATION AND CORRESPONDING ITA NO. 194/JP/2019 SHRI SUMIT GUPTA VS ACIT, CIRCLE-6, JAI PUR 15 INTEREST INCOME EARNED BY THE ASSESSEE THEN THERE W ILL BE NO ADDITION IN THE TOTAL INCOME OF THE ASSESSEE EVEN BY REALLOCATI NG BROKERAGE EXPENSES AMOUNTS TO DIFFERENT CATEGORIES OF INVESTMENTS AND INCOME EARNED FROM THE SAME. ACCORDINGLY, SUCH DISALLOWANCE ON ACCOUNT OF BROKERAGE EXPENSES IS DELETED. THUS GROUND NO. 3 OF THE ASSES SEE IS ALLOWED. 5.1 THE GROUND NO. 1 OF THE REVENUES APPEAL REGARD ING THE ADDITION MADE BY THE AO BEING RENTAL INCOME OF THE FLAT USED BY THE FIRM, WAS DELETED BY THE LD. CIT(A) BY TREATING THE SAME AS P ROPERTY WAS USED FOR BUSINESS PURPOSES OF THE ASSESSEE. 5.2 THE LD. DR HAS SUBMITTED THAT THE ASSESSEE OWNS A FLAT BEARING NO 308, THIRD FLOOR, SCION ALOEVERA, KODHIHALLI MA IN ROAD, VARTHU HOBLI, BANGALORE. HOWEVER, THE ASSESSEE HAS NOT DEC LARED ANY INCOME FROM HOUSE PROPERTY. THE AO ASKED THE ASSESSEE AS TO WHY RENTAL INCOME OF THE SAID PROPERTY SHOULD NOT BE ASSESSED AS INCO ME FROM HOUSE PROPERTY. THE ASSESSEE IN ITS REPLY CLAIMED THAT TH E SAID PROPERTY IS BEING USED BY THE PARTNERSHIP FIRM M/S. UNIVERSAL GRANITE S AND THEREFORE, IT IS USED FOR BUSINESS OF THE ASSESSEE AND CONSEQUENTLY CANNOT BE ASSESSD U/S 22/23 OF THE I.T. ACT, 1961. THE LD. DR SUBMITTED T HAT ASSESSEE DID NOT ITA NO. 194/JP/2019 SHRI SUMIT GUPTA VS ACIT, CIRCLE-6, JAI PUR 16 PRODUCE ANY DOCUMENTARY EVIDENCE REGARDING THE SAID PROPERTY AND EVEN ANY PROOF TO SHOW THAT THE SAID PROPERTY WAS USED B Y THE PARTNERSHIP FIRM FOR CARRYING OUT ITS BUSINESS. THEREFORE, IN THE AB SENCE OF NECESSARY DETAILS, THE AO HAS DETERMINED THE FAIR RATEABLE VA LUE OF THE PROPERTY IN QUESTION BY TAKING REASONABLE RENT @ RS. 34,000/- P ER MONTH AND MADE ADDITION OF RS. 2,52,000/- ON ACCOUNT OF INCOME FRO M HOUSE PROPERTY. THE LD. CIT(A) DELETED SAID ADDITION BY CONSIDERING TH E SAID FLAT HAVING BEEN USED FOR THE BUSINESS OF THE FIRM IN WHICH ASSESSEE IS A PARTNER AND THEREFORE, THE SAME CANNOT BE ASSESSED TO TAX UNDER THE HEAD INCOME FROM HOUSE PROPERTY. THE LD. DR HAS POINTED OUT THAT THE ASSESSEE HAS FAILED TO PRODUCE THE RELEVANT RECORDS AND DOCUMENTARY EVIDEN CES TO PROVE THAT THE FLAT WAS BEING USED FOR CARRYING OUT BUSINESS BY TH E PARTNERSHIP FIRM. THUS THE ORDER OF THE LD. CIT(A) IS BASED ONLY ON P RESUMPTION AND SUBMISSIONS OF THE ASSESSEE WITHOUT VERIFYING THE F ACTS RELEVANT FOR THE PURPOSE OF ASSESSMENT OF INCOME FROM THE HOUSE PROP ERTY. 5.3 ON THE OTHER HAND, THE LD.AR SUBMITTED THAT THE AO HAS NOT DISPUTED THE FACT THAT FLAT OWNED BY THE ASSESSEE W AS USED BY THE PARTNERSHIP FIRM IN WHICH ASSESSEE IS A PARTNER AND THEREFORE, THE SAID FLAT ITA NO. 194/JP/2019 SHRI SUMIT GUPTA VS ACIT, CIRCLE-6, JAI PUR 17 IS BEING USED FOR CARRYING OUT ITS BUSINESS. HE HAS RELIED ON VARIOUS DECISIONS ON THE POINT WHEREIN FLAT OWNED BY THE PA RTNER BUT USED BY THE PARTNERSHIP FIRM WAS HELD AS USED FOR BUSINESS PURP OSES AND THEREBY NOT LIABLE TO ASSESS THE TAX UNDER THE HEAD INCOME FROM HOUSE PROPERTY. THE DECISIONS RELIED ON BY THE LD.AR ARE AS UNDER: (1) CIT VS MUSTAFA KHAN [2005] 276 ITR 601 (ALL.) (2) CIT VS H.S. SINGHAL & SONS [2002] 253 ITR 653 (DEL .) (3) CIT VS SYED ANWAR HUSSAIN [1990] 186 ITR 749 (PATN A) 5.4 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WEL L AS RELEVANT MATERIAL ON RECORD. THERE IS NO QUARREL ON THE POIN T THAT IF A PROPERTY IS USED BY THE PARTNERSHIP FIRM FOR THE PURPOSE OF CAR RYING OUT ITS BUSINESS THEN THE PROPERTY OWNED BY THE PARTNER OF THE SAID FIRM CANNOT BE ASSESSED TO TAX UNDER THE HEAD INCOME FROM HOUSE PROPERTY BE ING USED FOR BUSINESS PURPOSES. HOWEVER, IN THE CASE IN HAND, IT IS NOT T HE CASE THAT SUCH FLAT OWNED BY THE ASSESSEE WAS GIVEN TO THE PARTNERSHIP FIRM BY THE ASSESSEE FOR CARRYING OUT ITS BUSINESS FROM THE SAID PREMISE S BUT THE FLAT APPEARS TO HAVE BEEN PURCHASED BY THE ASSESSEE RECENTLY, THOUG H THE ASSESSEE HAS NOT FILED ANY TITLE DOCUMENT TO GIVE THE EXACT DATE OF ACQUISITION OF SAID FLAT. ITA NO. 194/JP/2019 SHRI SUMIT GUPTA VS ACIT, CIRCLE-6, JAI PUR 18 FURTHER THE ASSESSEE HAS ALSO NOT PRODUCED ANY DOCU MENTARY EVIDENCE TO SHOW THAT SAID FLAT WAS GIVEN TO THE PARTNERSHIP FI RM FOR THE PURPOSE OF CARRYING OUT THE BUSINESS. THEREFORE, IN THE ABSENC E OF ANY MATERIAL TO SUPPORT THE CLAIM THAT FLAT IS BEING USED BY THE PA RTNERSHIP FIRM FOR THE PURPOSE OF ITS BUSINESS, THE CLAIM OF THE ASSESSEE CANNOT BE ACCEPTED ON MERE SUBMISSIONS . THE DECISIONS RELIED ON BY THE L D.AR OF THE ASSESSEE ARE ON THE POINT WHEN THE FACT OF GIVING THE FLAT T O THE PARTNERSHIP FIRM AND USED FOR BUSINESS PURPOSES OF THE PARTNERSHIP F IRM WAS NOT IN DISPUTE. THE EXACT NATURE OF USE OF THE FLAT IN QUESTION IS NOT ASCERTAINABLE IN THE ABSENCE OF THE RELEVANT MATERIAL AND RECORD. EVEN T HE ASSESSEE HAS NOT ESTABLISHED THIS FACT FROM THE ACCOUNTS OF THE PART NERSHIP FIRM. ACCORDINGLY, WE DO NOT FIND ANY SUBSTANCE IN THE CL AIM OF THE ASSESSEE AS THE ASSESSEE HAS FAILED TO ESTABLISH THAT SAID FLA T WAS BEING USED BY THE PARTNERSHIP FIRM FOR THE PURPOSE OF ITS BUSINESS. 5.4.1 AS REGARDS THE DETERMINATION OF ANNUAL LETTIN G VALUE (FOR SHORT ALV) OF THE FLAT IN QUESTION, THE AO HAS NOT FOLLOW ED THE PROCEDURE AS PRESCRIBED U/S 23(1)(A) OF THE ACT. THE ASSESSEE HA S FURNISHED THE FAIR MARKET RENT OF RS. 20,000/- PER MONTH WHICH WAS ENH ANCED BY THE AO TO ITA NO. 194/JP/2019 SHRI SUMIT GUPTA VS ACIT, CIRCLE-6, JAI PUR 19 RS. 30,000/- PER MONTH ON THE GROUND THAT FLAT WAS USED FOR COMMERCIAL PURPOSES. HOWEVER, IN ABSENCE OF ANY RECORD, THE SA ID ENHANCEMENT MADE BY THE AO FROM RS. 20,000/- PER MONTH TO RS. 30,000 /- PER MONTH IS WITHOUT ANY BASIS. EVEN THE AO HAS NOT CONDUCTED AN Y ENQUIRY TO ASCERTAIN THE FAIR MARKET ALV OF THE FLAT IN QUESTI ON IN TERMS OF SECTION 23(1) OF I.T. ACT, 1961. ACCORDINGLY, IN THE FACTS AND CIRCUMSTANCES OF THE CASE, WE RESTRICT THE ADDITION ON ACCOUNT OF INCOME FROM HOUSE PROPERTY TO THE EXTENT OF FAIR MARKET ANNUAL LETTING VALUE AT RS. 2.40 LACS. THE AO IS DIRECTED TO RECOMPUTE THE INCOME FROM HOUSE PROP ERTY. ACCORDINGLY, GROUND NO. 1 OF THE REVENUE IS PARTLY ALLOWED. 6.1 THE ASSESSEE IN ITA NO. 195/JP/2019 FOR THE ASS ESSMENT YEAR 2012-13 HAS RAISED THE FOLLOWING GROUNDS:- 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF TH E AO IN MAKING DISALLOWANCE OF RS. 20,39,894/- OUT OF INTEREST AND BROKERAGE EXPENSES CLAIMED UNDER THE HEAD OF BUSINESS AND PROFESSION. THE ACTION OF THE LD. CIT(A) IS ILLEGAL, UNJUSTIFIED, ARBITRARY AND A GAINST THE FACTS OF THE CASE. RELIEF MAY PLEASE BE GRANTED BY DELETING THE SAID DISALLOWANCE MADE BY THE AO AND CONFIRMED BY THE LD. CIT(A). 2. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF TH E AO IN MAKING DISALLOWANCE OF RS. 1,03,892/- U/S 14A OF THE I.T. ACT, 1961. THE ACTION OF THE LD. CIT(A) IS ILLEGAL, UNJUSTIFIED, A RBITRARY AND AGAINST THE FACTS OF THE CASE. RELIEF MAY PLEASE BE GRANTED BY DELETING THE SAID DISALLOWANCE MADE BY THE AO AND CONFIRMED BY THE LD . CIT(A). ITA NO. 194/JP/2019 SHRI SUMIT GUPTA VS ACIT, CIRCLE-6, JAI PUR 20 7.1 THE GROUND NO. 1 OF THE ASSESSEE IS REGARDING D ISALLOWANCE OF INTEREST AND BROKERAGE EXPENSES ON THE GROUND THAT THE ASSESSEE HAS INCURRED INTEREST EXPENDITURE ON THE BORROWED FUNDS WHEREAS NO INCOME WAS EARNED BY THE ASSESSEE FROM THE PARTNERSHIP FIR M. 7.2 WE HAVE HEARD THE LD.AR AS WELL AS LD. DR . THI S GROUND IS COMMON TO THE GROUND NO. 1 OF THE ASSESSEE'S APPEAL FOR THE ASSESSMENT YEAR 2011-12. HOWEVER, ONLY DIFFERENCE IS REGARDING THE FACT THAT FOR THE YEAR UNDER CONSIDERATION THE ASSESSEE HAS NOT RECEI VED ANY INTEREST FROM PARTNERSHIP FIRM WHEREAS IN THE ASSESSMENT YEAR 20 11-12 THE ASSESSEE RECEIVED INTEREST @ 12% FROM THE PARTNERSHIP FIRM. IN PRINCIPLE, WE HOLD THAT ONCE THE INTEREST INCOME FROM PARTNERSHIP FIRM IS TREATED AS BUSINESS INCOME THEN EVEN IF THE BUSINESS INCOME IS NOT EARN ED BY THE ASSESSEE THE CORRESPONDING EXPENDITURE CANNOT BE DISALLOWED. WHA T IS TO BE CONSIDERED FOR THE PURPOSE OF ALLOWING INTEREST EXP ENDITURE IS WHETHER THE SAID EXPENDITURE IS LAID OUT FOR THE PURPOSE OF THE BUSINESS OF THE ASSESSEE. WHEN THE CORRESPONDING INCOME IS TREATED AS BUSINES S INCOME THEN DUE TO THE REASONS THAT THE PARTNERSHIP FIRM HAS INCURR ED LOSSES. CONSEQUENTLY, NO INTEREST IS PAID TO THE PARTNER THE CORRESPONDIN G INTEREST EXPENDITURE OF ITA NO. 194/JP/2019 SHRI SUMIT GUPTA VS ACIT, CIRCLE-6, JAI PUR 21 THE ASSESSEE CANNOT BE DISALLOWED. HENCE, IN VIEW O F OUR FINDINGS GIVEN FOR THE ASSESSMENT YEAR 2011-12 (SUPRA), THE DISALL OWANCE MADE BY THE AO IS DELETED. THUS GROUND NO. 1 OF THE ASSESSEE IS ALLOWED. 8.1 GROUND NO. 2 OF THE ASSESSEE IS REGARDING DISAL LOWANCE OF RS. 1,03,892/- MADE BY THE AO U/S 14A OF THE I.T. ACT, 1961. 8.2 AT THE TIME OF HEARING, THE LD.AR OF THE ASSESS EE HAS STATED AT BAR THAT THE ASSESSEE DOES NOT WANT TO PRESS THIS GROUN D DUE TO SMALLNESS OF THE ADDITION. 8.3 ON THE OTHER HAND, LD. DR HAS NOT RAISED ANY O BJECTION IF THE GROUND NO. 2 OF THE ASSESSEE IS DISMISSED. 8.4 ACCORDINGLY, THE GROUND NO. 2 OF THE ASSESSEE I S DISMISSED BEING NOT PRESSED. 9.1 THE ASSESSEE IN ITA NO. 196/JP/2019 FOR THE ASS ESSMENT YEAR 2013-14 HAS RAISED THE FOLLOWING GROUNDS:- 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF TH E AO IN MAKING DISALLOWANCE OF RS.18,20,426/- OUT OF INTEREST AND BROKERAGE EXPENSES CLAIMED UNDER THE HEAD OF BUSINESS AND PROFESSION. THE ACTION OF THE LD. CIT(A) IS ILLEGAL, UNJUSTIFIED, ARBITRARY AND A GAINST THE FACTS OF THE CASE. RELIEF MAY PLEASE BE GRANTED BY DELETING THE SAID DISALLOWANCE MADE BY THE AO AND CONFIRMED BY THE LD. CIT(A). ITA NO. 194/JP/2019 SHRI SUMIT GUPTA VS ACIT, CIRCLE-6, JAI PUR 22 2. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF TH E AO IN MAKING DISALLOWANCE OF RS. 96,275/- U/S 14A OF THE I.T. AC T, 1961. THE ACTION OF THE LD. CIT(A) IS ILLEGAL, UNJUSTIFIED, ARBITRAR Y AND AGAINST THE FACTS OF THE CASE. RELIEF MAY PLEASE BE GRANTED BY DELETI NG THE SAID DISALLOWANCE MADE BY THE AO AND CONFIRMED BY THE LD . CIT(A). 10.1 THE GROUND NO. 1 OF THE ASSESSEE IS REGARDING DISALLOWANCE OF INTEREST AND BROKERAGE EXPENSES FOR WANT OF INTERES T INCOME RECEIVED FROM THE PARTNERSHIP FIRM. 10.2 WE HAVE HEARD THE LD.AR AS WELL AS LD. DR AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. THIS GROUND IS IDENTIC AL AND COMMON TO THE GROUND NO. 1 OF THE ASSESSEE FOR THE ASSESSMENT YE AR 2012-13. IN VIEW OF OUR FINDINGS GIVEN FOR THE ASSESSMENT YEAR 2012- 13 (SUPRA), THIS GROUND OF APPEAL OF THE ASSESSEE STANDS ALLOWED AND DISALLOWANCE MADE BY THE AO IS DELETED. THUS GROUND NO. 1 OF THE ASSE SSEE IS ALLOWED. 11.1 THE GROUND NO. 2 OF THE ASSESSEE IS REGARDING DISALLOWANCE OF RS. 96,275/- MADE BY THE AO U/S 14A OF THE I.T. ACT , 1961. 11.2 DURING THE COURSE OF HEARING, THE LD.AR OF THE ASSESSEE HAS NOT PRESSED THE GROUND NO. 2 FOR WHICH THE LD.DR HAS NO OBJECTION. HENCE, THE GROUND NO. 2 OF THE ASSESSEE IS DISMISSED BEING NOT PRESSED. ITA NO. 194/JP/2019 SHRI SUMIT GUPTA VS ACIT, CIRCLE-6, JAI PUR 23 12.1 THE ASSESSEE IN ITA NO. 197/JP/2019 FOR THE AS SESSMENT YEAR 2014-15 HAS RAISED THE FOLLOWING GROUNDS:- 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF TH E AO IN MAKING DISALLOWANCE OF RS. 80,057/- U/S 14A OF THE I.T. AC T, 1961. THE ACTION OF THE LD. CIT(A) IS ILLEGAL, UNJUSTIFIED, ARBITRAR Y AND AGAINST THE FACTS OF THE CASE. RELIEF MAY PLEASE BE GRANTED BY DELETI NG THE SAID DISALLOWANCE MADE BY THE AO AND CONFIRMED BY THE LD . CIT(A). 2. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE LD. CIT(A) HAS ERRED IN DISALLOWING A SUM OF RS. 22 ,56,379/- OUT OF INTEREST EXPENSES CLAIMED UNDER THE HEAD OF BUSINES S AND PROFESSION. THE ACTION OF THE AO IS ILLEGAL, UNJUSTIFIED, ARBIT RARY AND AGAINST THE FACTS OF THE CASE. RELIEF MAY PLEASE BE GRANTED BY DELETING THE SAID DISALLOWANCE MADE BY THE AO AND CONFIRMED BY THE LD . CIT(A). 13.1 THE GROUND NO. 1 OF THE ASSESSEE IS REGARDING DISALLOWANCE OF RS. 80,057/- MADE BY THE AO U/S 14A OF THE I.T. ACT , 1961. 13.2 DURING THE COURSE OF HEARING, THE LD.AR OF THE ASSESSEE HAS NOT PRESSED THE GROUND NO. 1 FOR WHICH THE LD.DR HAS NO OBJECTION. HENCE, THE GROUND NO. 1 OF THE ASSESSEE IS DISMISSED BEING NOT PRESSED. 14.1 THE GROUND NO. 2 OF THE ASSESSEE IS REGARDING DISALLOWANCE OF INTEREST EXPENSES ON THE GROUND THAT THE ASSESSEE H AS NOT EARNED ANY INTEREST INCOME FROM PARTNERSHIP FIRM. 14.2 WE HAVE HEARD THE LD.AR AS WELL AS THE LD. DR AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. THE AO HAS MADE DISALL OWANCE OF INTEREST ITA NO. 194/JP/2019 SHRI SUMIT GUPTA VS ACIT, CIRCLE-6, JAI PUR 24 EXPENSES ON THE GROUND THAT THE ASSESSEE HAS NOT RE CEIVED ANY INTEREST INCOME FROM PARTNERSHIP FIRM WHEREAS THE ASSESSEE H AS INCURRED INTEREST EXPENSES ON THE LOAN USED FOR MAKING INVESTMENT IN THE PARTNERSHIP FIRM. THE LD.AR HAS POINTED OUT THAT TOTAL INTEREST EXPEN SES INCURRED BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION IS RS. 85,75,566/- WHEREAS THE ASSESSEE HAS CLAIMED INTEREST EXPENSES TO THE T UNE OF RS. 22,56,379/- ONLY. THUS THE ASSESSEE HAS SUO MOTU DISALLOWED A S UM OF RS. 63,19,187/- .THE LD.AR THEN CONTENDED THAT DISALLOWANCE MADE BY THE ASSESSEE IS MORE THAN THE DISALLOWANCE MADE BY THE AO WHICH IS RS. 29,30,373/-. BASED ON THESE FACTS, THE LD.AR HAS SUBMITTED THAT THE AO AS WELL AS THE LD. CIT(A) HAS NOT CONSIDERED THE CORRECT FACTS ON THIS ISSUE, PARTICULARLY SUO MOTU DISALLOWANCE OF INTEREST EXPENSES TO THE T UNE OF RS. 63,19,187/- BY THE ASSESSEE . 14.3 ON THE OTHER HAND, THE LD. DR RELIED ON THE OR DERS OF THE AUTHORITIES BELOW. 14.4 HAVING CONSIDERED THE RIVAL SUBMISSIONS AS WEL L AS RELEVANT MATERIAL ON RECORD, WE NOTE THAT THE AO HAS MADE DI SALLOWANCE ON PROPORTIONATE INTEREST EXPENDITURE BY CONSIDERING T HE AVERAGE INVESTMENT ITA NO. 194/JP/2019 SHRI SUMIT GUPTA VS ACIT, CIRCLE-6, JAI PUR 25 MADE IN THE PARTNERSHIP FIRM OUT OF BORROWED FUNDS . HOWEVER, WE FIND THAT OUT OF TOTAL EXPENDITURE OF RS. 85,75,566/-, T HE ASSESSEE HAS CLAIMED INTEREST EXPENSES OF RS. 22,56,379/- AGAINST INTERE ST EARNED FROM THE COMPANY. WE FURTHER NOTE THAT INTEREST EXPENDITURE ALLOCABLE TO THE ADVANCE GIVEN TO THE COMPANY COMES TO RS. 29,30,373 /-. HOWEVER, THE ASSESSEE HAS CLAIMED INTEREST EXPENDITURE ONLY RS. 22,56,379/- TO THE EXTENT OF INTEREST INCOME EARNED FROM THE COMPANY I RRESPECTIVE OF THE ACTUAL INTEREST EXPENSES PERTAINING TO THE LOAN GIV EN TO TAB INDIA GRANITE PVT. LTD. (FOR SHORT TIGPL) THEREFORE, PRIMA FA CIE, IT APPEARS THAT ONCE ASSESSEE HIMSELF HAS NOT CLAIMED INTEREST EXPENDITU RE OF RS. 63,19,187/- THEN INTEREST EXPENDITURE TO THE EXTENT OF INTEREST INCOME IS JUSTIFIED. HOWEVER, FOR THE SAKE OF COMPLETING THE EXERCISE OF VERIFICATION OF FACTS, WE DIRECT THE AO TO VERIFY ALL THESE FACTS REGARDIN G SUO MOTU DISALLOWANCE MADE BY THE ASSESSEE AS TO CLAIM OF INTEREST ONLY TO THE EXTENT OF INTEREST INCOME AND THUS ALLOW THE CLAIM OF THE ASSESSEE IF THE FACTS AS CLAIMED BY THE ASSESSEE ARE FOUND CORRECT . THUS GROUND NO. 2 OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURP OSES. ITA NO. 194/JP/2019 SHRI SUMIT GUPTA VS ACIT, CIRCLE-6, JAI PUR 26 15.0 IN THE RESULT, THE APPEALS OF THE ASSESSEE IN ITA NO 194/JP/2019 IS ALLOWED, ITA NO. 195/JP/2019 IS PARTLY ALLOWED ITA NO. 196/JP/2019 IS PARTLY ALLOWED ITA NO. 197/JP/2019 IS PARTLY ALLOWED FOR STATISTIC AL PURPOSES AND REVENUES APPEAL IN ITA NO.293/JP/2019 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 29 /07/2019. SD/- SD/- FOE FLAG ;KNO FOT; IKY JKO (VIKRAM SINGH YADAV) (VIJAY PAL RAO) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 29 /07/ 2019 *MISHRA VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- SHRI SUMIT GUPTA, JAIPUR 2. IZR;FKHZ@ THE RESPONDENT- THE ACIT /DCIT, CIRCLE-6, JAIPUR 3. VK;DJ VK;QDRVIHY ) @ CIT(A), 4. VK;DJ VK;QDR@ CIT, 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO.194 TO 197 & 293/JP/2019) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR