SHRI DUSHYANT SATISH CHATURVEDI, Nagpur V. ACIT, CIRCLE-2, Nagpur

ITA 201/NAG/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 93390 (ITAT-NAGPUR)
• Duration Of Justice: 2 year(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-05-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 13-05-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: D P TIVARI
• Keywords: Business expenditure; Source of fund; Tax effect; Revised return; Capital expenditure

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR. BEFORE SHRI MUKUL K. SHRAWAT, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER. I.T.A. NOS. 201 & 202/NAG/2013 AS SESSMENT YEARS : 2008-09 & 2009-10. SHRI DUSHYANT SATISH CHATURVEDI, ASSTT. COMMISSIONER OF INCOME-TAX, 27-A, KOTWAL NAGAR, NAGPUR. V/S. CIRCLE-2, NAGPUR. PAN ADAPC 9620C APPELLANT. RESPONDENT. I.T.A. NO.203/NAG/2013 ASSESSMENT YEAR : 2008-09. SMT. SHEETAL DUSHYANT CHATURVEDI, ASSTT. COMMISSIONER OF INCOME-TAX, 27A, KOTWAL NAGAR, NAGPUR. V/S. CI RCLE-2, NAGPUR. PAN AFRPC 8047H APPELLANT. RESPONDENT. I.T.A. NO. 205/NAG/-2013 ASSESSMENT YEAR : 2008-09. SHRI SATISH JHAULAL CHATURVEDI, ASSTT. COMMISSIONER OF INCOME-TAX, 27A, KOTWAL NAGAR, NAGPUR. V/S. CIRCLE-2, NAGPUR. PAN AASPC 0183A APPELLANT. RESPONDENT. I.T.A. NOS. 207 & 208/NAG/2013 ASS ESSMENT YEARS : 2008-09 & 2009-10. SMT.ABHA SATISH CHATURVEDI, ASSTT. COMMISSIONER OF INCOME-TAX, 27A, KOTWAL NAGAR, NAGPUR. V/S. CIRCLE-2, NAGPUR. PAN ADAPC 9673Q. APPELLANT. RESPONDENT. 2 APPELLANT BY SHRI K.P. DEWANI. RESPONDENT BY : SH RI D.P. TIVARI. I.T.A.NOS.236 & 237/NAG/2013 ASSESSME NT YEARS : 2007-08&2009-10. DY. COMMISSIONER OF INCOME-TAX, SHRI DUSHYANT SATISH CHATURVEDI, CIRCLE-2, NAGPUR. V/S. NAGPUR. APPELLA NT BY : SHRI D.P.TIWARI. RESPONDE NT BY : SHRI L.S.DEWANI. DATE OF HEARING 06-05-2015 07-0502015 DATE OF ORDER 20 TH MAY,2015 O R D E R PER SHRI SHAMIM YAHYA, A.M. THESE APPEALS BY THE SEPARATE ASSESSEES AND REVENU E ARE DIRECTED AGAINST THE RESPECTIVE ORDERS OF LEARNED CIT(APPEALS). SINC E THE ISSUES ARE CONNECTED, THESE APPEALS ARE CONSOLIDATED FOR THE SAKE OF CONV ENIENCE. ASSESSEES APPEALS 2. FIRST COMMON ISSUE RAISED IS THAT LEARNED CIT(AP PEALS) HAS ERRED IN SUMMARILY RESTRICTING THE EXEMPTION OF AGRICULTURAL INCOME TO ` .25,000/- PER ACRE. 3. SINCE THE FACTS ARE IDENTICAL, WE ARE ADJUDICATI NG THIS ISSUE WITH REFERENCE TO ITA NO. 201/NAG/2013. IN THIS CASE THE ASSESSEE IS AN INDIVIDUAL. DURING THE YEAR THE ASSESSEE HAS EARNED INCOME FROM VARIOUS SOURCES INCLUDING BUSINESS OF SHARE TRADING, INCOME FROM OTHER SOURCES AND AGRICULTURAL INCOME. ASSESSEE HAD SHOWN 3 AGRICULTURAL INCOME OF ` .12,50,000/-. WHEN THE ASSESSING OFFICER ASKED FOR DETAILS OF PURCHASES AND SALES ETC. THE ASSESSEE SUBMITTED THAT ASSESSEE HAS SHOWN ESTIMATED AGRICULTURAL INCOME OF ` .12,50,000/- DURING THE YEAR. IT WAS SUBMITTED THAT ASSESSEE HAS NOT MAINTAINED ANY DETAILS IN THI S REGARD, THOUGH AS REQUIRED, COPY OF 7/12 EXTRACT WAS ENCLOSED. ASSESSING OFFICE R WAS NOT SATISFIED. HE MADE AN ESTIMATE OF AGRICULTURAL INCOME AT ` .4,58,423/-. 4. UPON ASSESSEES APPEAL, LEARNED CIT(APPEALS) NOT ED THAT SINCE THE ASSESSEE HAS NOT MAINTAINED ANY RECORD THE A.O. HAS RIGHTLY RESORTED TO ESTIMATION OF INCOME. HOWEVER, LEARNED CIT(APPEALS) OPINED THAT A SSESSEE DESERVES A LARGER AMOUNT AS AGRICULTURAL INCOME. FOR THIS PROPOSITION , LEARNED CIT(APPEALS) HELD AS UNDER : THE APPELLANT HAS SUBMITTED DETAILED SUBMISSIONS INCORPORATING THE CROPS GROWN IN DIFFERENT SEASONS IN THE LANDS OF A PPELLANT, THEIR AVERAGE YIELD, REALIZATION OF SALE OF CROP AS PER THE WHOL E SALE RATES AND EXPENSES INCURRED. THE APPELLANT RELIED ON THE TEXT BOOK K RUSHISANVADINT 2008 EDITION ISSUED BY DR. PUNJABRAO DESHMUKH KRUSHI VID YAPEETH, AKOLA (AGRICULTURAL UNIVERSITY) THE AVERAGE YIELD PER AC RE OF THE VARIOUS CROPS GROWN IN THE VIDARBHA REGION DURING THE RELEVANT P ERIOD. BASED ON THE ABOVE THE APPELLANT WORKED OUT THE AVERAGE INCOME FROM AGRICULTURAL OPERATIONS FROM THE LANDS OWNED TO BE NOT LESS THA N ` .43,000/- PER ACRE. IN VIEW OF THE SCIENTIFIC NATURE OF ARGUMENT, IT CAN BE AGREED THAT THE YIELD OF THE CROPS MAY BE IN THE RANGE MENTIONED IN THE MAT ERIAL RELIED ON BY THE APPELLANT. HOWEVER, DUE TO VAGARIES OF NATUR4E THE YIELD LEVELS WILL VARY FROM FARM TO FARM AND ALSO THE WHOLESALE RATES AS ADOPTED BY THE APPELLANT MAY NOT BE AVAILABLE TO THE FARMER IN THE FIELD DU E TO THE FACT THAT THE AGRICULTURAL COMMODITIES MARKET IS INFESTED WITH THE MIDDLEMEN. FURTHER THERE IS NO PROPER SUBMISSION FOR THE EXPENSES INC URRED FOR THE AGRICULTURAL ACTIVITY. THEREFORE, I AM OF THE CONSIDERED OPINIO N THAT THE WORKING OF INCOME SUBMITTED BY THE APPELLANT IS ON HIGHER SID E AND THE ESTIMATION MADE BY THE ASSESSING OFFICER CAN BE TERMED AS ARB ITRARY. 4 IT IS ALWAYS BETTER PROPOSITION TO RELY ON THE MA RKET TO ARRIVE AT THE FAIR PRICES FOR ANY OF THE INCOME EARNING ACTIVITY . I HAVE GONE THROUGH THE LEASE AGREEMENT IN RESPECT OF ONE FARMLAND SUBMITT ED BY THE APPELLANT WHO IS FOR ` .19,000/- PER YEAR. THE APPELLANT CONTENDED THAT T HE ANNUAL LEASE RENTAL IS ` .40,000/- FOR ORANGE ORCHARD AND AROUND ` .18,000/- TO ` .20,000/- PER ACRE FOR PLAIN AGRICULTURAL LAND IN A REAS NEAR TO THE AGRICULTURAL LAND OWNED BY THE APPELLANT. IN VIEW OF THE OVERALL FACTS AND CIRCUMSTANCES, THE FARMER WHO IS DOING AGRICULTURE BY HIMSELF MAY DERIVE MORE INCOME COMPARED TO GIVING ON LEASE TO SOMEONE ELSE. THE LEASE HAS TO EARN MINIMUM AMOUNT OF LEASE RENT AND SOME INCO ME FOR HIMSELF FOR H IS LIVING. HENCE I CONCLUDE THAT THE FARMET IF HE DOE S INTENSIVE CULTIVATION BY HIMSELF, NORMALLY HE MAY GET MORE INCOME THAN THE PREVALENT VALUE OF LEASE RENTALS. IN VIEW OF THE ABOVE, IN MY CONSIDERED OPINION TH E ESTIMATION OF INCOME FROM THE AGRICULTURAL ACTIVITIES BY THE APP ELLANT AT ` .25,000/- PER ACRE MEETS JUSTICE. ACCORDINGLY THESE GROUNDS ARE P ARTLY ALLOWED. AGAINST THE ABOVE ORDER, ASSESSEE IS IN APPEAL BEFO RE US. 5. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE R ECORDS. LEARNED COUNSEL OF THE ASSESSEE SUBMITTED THAT IN THE CASE OF THE A SSESSEE SHRI DUSHYANT CHATURVEDI, REVENUE HAD ACCEPTED THE AGRICULTURAL I NCOME AT ` .15,40,000/- FOR ASSESSMENT YEAR 2006-07 UNDER SECTION 143(3). HE SU BMITTED THAT EXTRACT IN FORM NO. 7/12 INDICATED THAT ASSESSEE WAS HOLDING SUBSTA NTIAL AGRICULTURAL LAND AND THERE WAS AGRICULTURAL ACTIVITY UPON IT. LEARNED C OUNSEL FURTHER SUBMITTED THAT ITAT, BENGALORE IN ITA NO. 946 AND 947/BANG/2011 V IDE ORDER DATED 26-07-2013 HAD MADE AN ESTIMATE OF AGRICULTURAL INCOME OF ` .75,000/- PER ACRE IN ASSESSMENT YEAR 2004-05. HENCE LEARNED COUNSEL SUBMITTED THAT THE ENTIRE AGRICULTURAL INCOME CLAIMED BY THE ASSESSEE DESERVES TO BE ACCEP TED. 5 6. PER CONTRA. LEARNED D.R. SUBMITTED THAT LEARNED CIT(APPEALS) HAS PASSED A FAIR AND REASONABLE ORDER. IN ABSENCE OF ANY DETAIL S PROVIDED BY THE ASSESSEE, LEARNED CIT(APPEALS) HAS PASSED A REASONABLE ORDER. HENCE HE CONTENDED THAT THE LEARNED CIT(APPEALS) ORDER SHOULD BE AFFIRMED. 7. UPON CAREFUL CONSIDERATION WE NOTE THAT ASSESSEE HAD MADE A CLAIM OF ESTIMATED AMOUNT OF AGRICULTURAL INCOME. NO DETAILS REGARDING THE SALE OR THE EXPENDITURE INCURRED WERE MAINTAINED AND PROVIDED T O THE ASSESSING OFFICER. ASSESSEES COUNSEL CLAIMED THAT SINCE IN ASSESSMENT YEAR 2006-07 A LARGER AMOUNT WAS ACCEPTED AS AGRICULTURAL INCOME, THIS YEAR ALSO AGRICULTURAL INCOME AS CLAIMED BY THE ASSESSEE SHOULD BE ACCEPTED. WE FIND THAT TH IS PROPOSITION HAS NO COGENCY. THE SAID ASSESSMENT ORDER DOES NOT SHOW THAT THE IS SUE OF AGRICULTURAL INCOME WAS EXAMINED BY THE ASSESSING OFFICER. NO DETAILS A S TO THE QUERY POSED, IF ANY, BY THE ASSESSING OFFICER IN THIS REGARD WAS SUBMITTED. HENCE JUST BECAUSE IN EARLIER YEAR AN ESTIMATED INCOME WAS ACCEPTED WITHOUT ANY E NQUIRY, SAME CANNOT BECOME A YARDSTICK. AS REGARDS THE CLAIM OF ESTIMAT E OF ` .75,000/- PER ACRE BY THE ITAT, BENGALORE, WE FIND THAT THE SAME PERTAINS TO A DIFFERENT REGION AND ON THE DIFFERENT FACTS OF CASE. THE SAME CANNOT BECOME A U NIVERSAL GUIDING FACTOR FOR ESTIMATION OF AGRICULTURAL INCOME. WE FIND THAT AS SESSING OFFICER HAS NOT DENIED THAT THE ASSESSEE WAS NOT ENGAGED INTO AGRICULTURAL ACTIVITY. THERE IS NO ENQUIRY BY THE ASSESSING OFFICER WHICH SUGGEST THAT ASSESS EE WAS NOT CARRYING ON ANY AGRICULTURAL ACTIVITY. ASSESSING OFFICER HAS ONLY M ADE AN ESTIMATE OF AGRICULTURAL INCOME WITHOUT ASSIGNING COGENT BASIS. 8. ON THE CONTRARY, UPON GOING THROUGH THE ORDER O F LEARNED CIT(APPEALS), WE ARE OF THE OPINION THAT LEARNED CIT(APPEALS) HAS M ADE A FAIR ESTIMATE OF INCOME 6 BASED UPON VARIOUS FACTORS FOR ESTIMATION TAKEN INT O ACCOUNT BY HIM. IN THESE CIRCUMSTANCES, IN OUR CONSIDERED OPINION, LEARNED C IT(APPEALS) ORDER IS FAIR AND REASONABLE AND THE SAME DOES NOT NEED ANY INTERFERE NCE ON OUR PART. 9. IN THE RESULT, THIS ISSUE RAISED BY THE ASSESSEE STANDS DISMISSED. 10. ANOTHER ISSUE RAISED IN ITA NO. 201 & 203/NAG/2 013 IS THAT THE LEARNED CIT(APPEALS) ERRED IN CONFIRMING THE ADDITION MADE BY THE ASSESSING OFFICER IN RESPECT OF DISALLOWANCE OF INTEREST PAID ON LOAN OB TAINED AGAINST KVP AMOUNTING TO ` .9,38,41/- (IN CASE OF SHRI DUSHYANT SATISH CHATURV EDI ITA NO. 201/NAG/2013) AND ` .22,81,886/- (IN THE CASE OF SMT. SHEETAL DUSHYANT CHATURVEDI ITA NO. 203/NAG/2013.). SINCE THE FACTS ARE IDENTICAL IN BO TH THE CASES REFERRED ABOVE, WE ARE CONSIDERING THIS ISSUE WITH REFERENCE TO ITA NO . 203/NAG/2013. 11. THE ASSESSEE IN THIS CASE WAS IN RECEIPT OF INT EREST OF ` .52,00,000/- FROM INVESTMENT IN KISAN VIKAS PATRA (KVP). DURING THE YEAR ASSESSEE ALSO OBTAINED LOAN OF ` .4.96 CRORES AGAINST KVPS. ON THIS LOAN THE ASSESSE E PAID INTEREST OF ` .22,81,886/-. THE ASSESSEE REDUCED THIS INTEREST F ROM THE TOTAL RECEIPT OF ` .52,00,000/- AND OFFERED THE BALANCE AMOUNT OF ` .29,18,114/- AS INCOME FROM OTHER SOURCES. THE ASSESSING OFFICER DID NOT ACCEPT THIS PROPOSITION. HE REFERRED TO THE PROVISIONS OF SECTION 57(III). HE HELD THAT THIS CLAIM OF INTEREST CANNOT BE ALLOWED AS DEDUCTION UNDER SECTION 57(III). IN THIS REGARD THE ASSESSING OFFICER ALSO DREW SUPPORT FROM HONBLE APEX COURT DECISION IN TH E CASE OF CIT V/S. DR. V.P. GOPINATHAN 248 ITR 449. LEARNED CIT(APPEALS) ALSO C ONFIRMED THE ABOVE ACTION OF THE ASSESSING OFFICER. AGAINST THIS ORDER, THE ASSE SSEE IS IN APPEAL BEFORE US. 12. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. LEARNED COUNSEL OF THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS BO RROWED AMOUNT AGAINST KVP TO 7 PROTECT THE INTEREST EARNING ON KVP AND PRESERVE TH E SOURCE OF EARNING. THUS INTEREST PAID ON LOAN OBTAINED IS EXPENDITURE INCUR RED WHOLLY AND EXCLUSIVELY FOR EARNING INTEREST ON KVP AND SAME IS ALLOWABLE AS DE DUCTION. THE LEARNED COUNSEL PLACED RELIANCE ON THE ORDER OF ITAT, AGRA BENCH I N THE CASE OF RAJ KUMARI AGARWAL IN ITA NO. 176/AGRA/2013 ORDER DATED 18-07- 2014. IN THE ALTERNATIVE THE LEARNED COUNSEL FURTHER SUBMITTED THAT INCOME FROM SHARE ARBITRAGE BUSINESS IS SHOWN AT ` .1,82,53,030/- IN COMPUTATION OF INCOME. THE CAPITA L INVESTMENT IN SHARE ARBITRAGE BUSINESS AS REFLECTED IN BALANCE SH EET AS ON 31-03-2008 IS AT ` .4,20,70,253/-. THE OWN FUNDS OF ASSESSEE AND INTER EST FREE FUNDS AVAILABLE AS ON 31-03-2008 IS AT ` .1,96,00,000/-. IN ABSENCE OF ANY EVIDENCE THAT BOR ROWED FUNDS HAVE BEEN UTILIZED FOR NON BUSINESS PURPOSES, IT IS PRESUMED THAT FUNDS ARE INVESTED FOR NON BUSINESS PURPOSES OUT OF OWN FUNDS . HENCE HE SUBMITTED THAT NO DISALLOWANCE OF INTEREST EXPENDITURE SHOULD BE DON E ON THIS PLANK ALSO. 13. PER CONTRA, LEARNED D.R. RELIED ON THE ORDERS O F THE AUTHORITIES BELOW. 14. WE FIND THAT UNDISPUTED FACT OF THE CASE IS THA T THE ASSESSEE HAS EARNED INTEREST INCOME ON KVP. ON THE SECURITY OF THIS KVP , ASSESSEE HAS ALSO OBTAINED LOAN. ASSESSEE HAS NETTED THE INTEREST INCOME ON KV P FROM THE INTEREST PAID ON THE LOAN TAKEN AND OFFERED THE SAME FOR TAXATION AS INCOME FROM OTHER SOURCES. WE MAY HERE GAINFULLY REFER TO PROVISIONS OF SECTIO N 57(III). THE SAID SECTION PROVIDES FOR ADJUSTMENT FROM THE INCOME FROM OTHER S OURCES OF EXPENDITURE NOT BEING IN THE NATURE OF CAPITAL EXPENDITURE LAID OUT OR EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF MAKING OR EARNING SU CH INCOME. NOW THE HONBLE APEX COURT IN THE CASE OF CIT V/S.DR. V.P. GOPINATH AN 248 ITR 449 HAD THE 8 OCCASION TO EXAMINE AN ANALOGICAL ISSUE. WE MAY GAI NFULLY REPRODUCE THE HONBLE APEX COURT DECISION IN THIS REGARD : THE HIGH COURT OF KERALA WAS CALLED UPON TO CON SIDER AT THE BEHEST OF THE REVENUE THE FOLLOWING TWO QUESTIONS : 1. WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE ASSESSEE IS TO BE ASSESSED ON THE GROSS AMOUNT OF INTEREST RECEIVED BY HIM ON HIS FIXED DEPOSIT OR ON THE INTEREST RECEIVED A S REDUCED BY THE AMOUNT OF INTEREST PAID ON THE LOAN TAKEN ON THE SECURITY OF SUCH DEPOSIT? 2. WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE TRIBUNAL IS RIGHT IN LAW AND FACT IN HOLDING; (I) THE ACT OF MAKING DEPOSIT AND THE ACT OF BORRO WING ON SUCH DEPOSIT CANNOT BE VIEWED AS REPRESENTING TWO DIFFERENT TRA NSACTIONS, (II) THERE IS THUS A NEXUS BETWEEN THE DEPOSIT AND THE BORROWING; (III) THE PRINCIPLE OF MUTUAL DEALINGS COULD BE IN FERRED. IT ANSWERED THE QUESTIONS IN FAVOUR OF THE ASSESSE E. THE REVENUE IS IN APPEAL BY SPECIAL LEAVE. 2. TO TAKE THE FACTS OF ONE OF THE TWO APPEALS BE FORE US AS ILLUSTRATIVE, THE ASSESSEE HAD PUT MONEYS INTO FIXED DEPOSIT WITH A BANK AND HAD EARNED IN THE ASSESSMENT YEAR IN QUESTION INTEREST IN THE SU M OF ` .1,17,444 THEREON. ON THE SECURITY OF THE AMOUNT SO DEPOSITED, THE AS SESSEE TOOK A LOAN FROM THE BANK AND PAID IN RESPECT OF THE LOAN INTEREST TO THE BANK IN THE SUM OF ` .90,140. THE ASSESSEE CLAIMED THAT HE COULD BE TAXE D ONLY ON THE DIFFERENTIAL AMOUNT OF ` .27,034. HIS CONTENTION WAS REJECTED BY THE ITO AND IN FIRST APPEAL. THE TRIBUNAL TOOK THE CONTRARY VI EW, AND OUT OF ITS JUDGMENT THE QUESTIONS QUOTED ABOVE WERE REFERRED TO THE HI GH COURT. THE HIGH COURT ANSWERED THE QUESTIONS AS INDICATED ABOV E O N THE BASIS THAT THE SITUATION WAS ONE OF THE MUTUALITY. 3. LEARNED COUNSEL APPEARING FOR THE ASSESSEE BEF ORE THE TRIBUNAL HAD MADE IT CLEAR THAT THE ASSESSEES CASE DID NOT RES T UIPON THE PROVISIONS OF S. 57(III) OF THE ACT. IN OTHER WORDS, IT WAS NOT THE CONTENTION OF THE ASSESSEE, 9 VERY RIGHTLY, THAT HE WAS PAYING INTEREST TO THE B ANK TO FACILITATE THE EARNING OF INTEREST FROM THE BANK. 4. THE ARGUMENT BEFORE US ON BEHALF OF THE ASSESS EE WAS THAT THE REAL INCOME OF THE ASSESSEE IS ONLY ` .27,034. IT WAS NOT DISPUTED, AS IT COULD NOT BE, THAT IF T HE ASSESSEE HAD TAKEN A LOAN FROM ANOTHER BANK AND PAID INTEREST THEREON HIS RE AL INCOME WOULD NOT DIMINISH TO THE EXTENT THEREOF. THE ONLY QUESTION THEN IS : DOES IT MAKE ANY DIFFERENCE THAT HE TOOK THE LOAN FROM THE SAME BAN K IN WHICH HE HAD PLACED THE FIXED DEPOSIT. THERE IS NO DIFFERENCE I N THE EYE OF THE LAW. THE INTEREST THAT THE ASSESSEE RECEIVED FROM THE BANK WAS INCOME IN HIS HANDS. IT COULD STAND DIMINISHED ONLY IF THERE WAS A PROV ISION IN LAW WHICH PERMITS SUCH DIMINUTION. THERE IS NONE, AND, THEREFORE, TH E AMOUNT PAID BY THE ASSESSEE AS INTEREST ON THE LOAN THAT HE TOOK FROM THE BANK DID NOT REDUCE INCOME. 5. LEARNED COUNSEL FOR THE ASSESSEE DREW OUR ATTE NTION TO THE JUDGMENT OF THE GUJARAT HIGH COURT IN JASHVIDHYABEN C. MEHTA VS . CIT (1988) 67 CTR (GUJ.) 239 : (1988) 172 ITR 680 (GUJ) : TC709. THIS WAS IN RESPECT OF MONEYS DEPOSITED IN THREE DIFFERENT ACCOUNTS OF A FIRM AN D IT WAS FOUND, AS A FACT, THAT THE REAL INCOME THAT THE ASSESSEE DREW FROM T HE FIRM WAS REDUCED BY HER DUES TO THE FIRM. THE FACTS OF THE CASE ARE TO TALLY DIFFERENT FROM THOSE BEFORE US. 6. IN THE RESULT, THE APPEALS ARE ALLOWED. THE OR DERS UNDER APPEAL ARE SET ASIDE. THE QUESTIONS ARE ANSWERED IN FAVOUR OF THE REVENUE. NO ORDER AS TO COSTS. NOW EXAMINING THE PROVISIONS OF SECTION 57(III) WE FIND THAT IT CANNOT BE SAID THAT THE INTEREST PAID ON THE LOAN TAKEN AGAINST THE SEC URITY OF KVP HAD ANY NEXUS WITH EARNING OF INCOME AS INTEREST ON THE KVP. HONBLE A PEX COURT WAS CONSIDERING THE ANALOGICAL ISSUE. THE QUESTION NO. 1 CONSIDERED BY THE HONBLE APEX COURT READ AS UNDER : 10 WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE ASSESSEE IS TO BE ASSESSED ON THE GROSS AMOUNT OF INTEREST RE CEIVED BY HIM ON THE FIXED DEPOSIT OR ON THE INTEREST RECEIVED AS REDUC ED BY THE AMOUNT OF INTEREST PAID ON THE LOAN TAKEN ON THE SECURITY OF SUCH DEPOSIT? THE HONBLE APEX COURT HAS DECIDED ALL THE QUESTION S INCLUDING THIS ONE IN FAVOUR OF THE REVENUE. THIS DECISION WAS RENDERED BY A LAR GER BENCH OF HONBLE APEX COURT CONSISTING OF THREE OF THEIR LORDSHIPS. LEARN ED COUNSEL OF THE ASSESSEE IN THIS REGARD SOUGHT TO DRAW OUR ATTENTION ON PARAGRAPH 3 OF HONBLE APEX COURT ORDER AND SUBMITTED THAT IN THIS CASE THE ASSESSEE HAD NO T CLAIMED INTEREST EXPENDITURE AS PER PROVISIONS OF SECTION 57(III). WE FIND THAT HONBLE APEX COURT DECISION HAS TO BE READ AS A WHOLE, PARTS AND SENTENCES THEREFRO M CANNOT BE PICKED UP AS THE RATIO. THIS WAS EXPOUNDED BY THE HONBLE APEX COURT IN THE CASE OF SUN ENGINEERING 198 ITR 297.. IN THE SAME PARAGRAPH RE FERRED BY THE LEARNED COUNSEL, HONBLE APEX COURT HAD CONTINUED AS UNDER : IN OTHER WORDS, IT WAS NOT THE CONTENTION OF THE ASSESSEE, VERY RIGHTLY, THAT HE WAS PAYING INTEREST TO THE BANK TO FACILI TATE THE EARNING OF INTEREST FROM BANK. THUS IT IS CLEAR THAT THE SAID INTEREST WAS NOT AL LOWABLE UNDER SECTION 57(III). EVEN IF THE ABOVE IS CONSIDERED AS OBITER DICTA (WHICH IT IS NOT) THE SAME FROM HONBLE APEX COURT IS BINDING UPON THE INFERIOR COURTS AND TRIBUNALS. CONSIDERED THIS POINT OF VIEW, WE FIND THAT THE DECISION OF ITAT, A GRA BENCH IN THE CASE OF RAJKUMARI AGRAWAL IN ITA NO. 176A/13 VIDE ORDER DATE D 18-7-2014, CANNOT BE CONSIDERED, AS THE SAME DID NOT HAVE BENEFIT OF REF ERENCE FROM AFORESAID HONBLE APEX COURT DECISION IN THE CASE OF CIT V/S. DR. V.P . GOPINATHAN 248 ITR 449. HENCE THE PLEA OF THE ASSESSEE THAT INTEREST EXPENDITURE SHOULD BE NETED OF AGAINST THE INTEREST INCOME UNDER SECTION 57(III) IS NOT SUSTAI NABLE. 11 15. NOW WE FIND THAT ASSESSEES COUNSEL HAS MADE AN ALTERNATIVE ARGUMENT THAT THE SAID EXPENDITURE SHOULD BE ALLOWED ON THE PREMISE THAT THE ASSESSEE HAD A MIXED SOURCES OF FUND AND ASSESSEE HAS SHOWN SHAR E OF ARBITRAGE TRADING BUSINESS ALSO AND SHOWN CONSIDERABLE INCOME THEREFR OM. HENCE IT HAS BEEN PLEADED THAT THE CURRENT EXPENDITURE SHOULD BE ALLO WED AS BUSINESS EXPENDITURE AS THERE IS NO MATERIAL THAT BORROWED FUNDS HAVE BE EN UTILIZED FOR NON BUSINESS PURPOSE. IN THIS REGARD, ASSESSEE HAS PLACED RELIAN CE UPON HONBLE MADRAS HIGH COURT DECISION IN THE CASE OF CIT V/S. HOTEL SAVERA 239 ITR 0795. THE LEARNED D.R. HAS OBJECTED TO THIS ALTERNATIVE ARGUMENT. WE FIND THAT THIS ALTERNATIVE ARGUMENT WAS NOT RAISED BEFORE THE AUTHORITIES BELOW. NEITHE R THE ASSESSEE HAS FILED ANY REVISED RETURN IN THIS REGARD. 16. IN OUR CONSIDERED OPINION THE ABOVE FAILURE BY THE ASSESSEE CANNOT BE SAID TO BE A FATAL ONE. HONBLE APEX COURT IN CIT V/S. M AHALAXMI TEXTILE MILLS LTD. 66 ITR 710 HAS HELD THAT IF THE ASSESSEE IS ENTITLED TO RELIEF ON THE CONTENTIONS RAISED BY HIM ON ANOTHER GROUND WHICH IS JUSTIFIED, THEN I T WOULD BE OPEN TO THE DEPARTMENTAL AUTHORITIES AND THE TRIBUNAL, AND INDE ED THEY WOULD BE UNDER A DUTY, TO GRANT THAT RELIEF. THE RIGHT OF THE ASSESS EE TO RELIEF IS NOT RESTRICTED TO THE PLEA RAISED BY HIM. HENCE ON THE ANVIL OF THIS EXP OSITION WE FIND THAT THIS ALTERNATIVE ARGUMENT OF THE ASSESSEE DESERVES TO BE CONSIDERED, AS IT AIMS TO SEEK RELIEF TO THE ASSESSEE. 17. THE HONBLE MADRAS HIGH COURT IN THE CASE OF H OTEL SAVERA 239 ITR 795 AS REFERRED BY THE LEARNED COUNSEL OF THE ASSESSEE, HA S OPINED THAT WHEN THE POSITION THAT REMAINED WAS THAT THE FIRM HAD ITS OWN FUNDS AS WELL AS BORROWED FUNDS, IT WAS NOT CLEAR THAT THE FIRM HAD NOT ADVAN CED MONEY OUT OF ITS OWN FUNDS 12 AND IN THE ABSENCE OF ANY MATERIALS TO INDICATE THA T THE FIRM HAD ADVANCED MONEYS TO THE PRIVATE LIMITED COMPANY OUT OF FUNDS BORROWED FOR BUSINESS PURPOSES, THE PRESUMPTION WOULD ARISE, WHEREFROM TH E COMMON FUNDS THAT THE MONEY ADVANCED CAME ONLY OUT OF ITS OWN FUNDS. THE TRIBUNAL WAS RIGHT IN HOLDING THAT NO PART OF THE INTEREST SHOULD BE DISALLOWED S PECIALLY IN THE ABSENCE OF ANY FINDING THAT THE MONEY BORROWED WAS ADVANCED TO THE PRIVATE LIMITED COMPANY FREE OF INTEREST. 18. NOW THE LEARNED COUNSEL OF THE ASSESSEE HAS CLA IMED THAT THE INTEREST BORROWED FROM BANK WAS UTILIZED FOR BUSINESS PURPOS ES. HE CLAIMED THAT THE ASSESSEE HAS A MIXED SOURCE OF FUNDS AND IN VIEW OF THE AFORESAID MADRAS HIGH COURT DECISION IN THE CASE OF HOTEL SAVERA (SUPRA) HE CLAIMED THAT THE ASSESSEE DESERVES RELIEF AND THE INTEREST EXPENDITURE ON LO AN BORROWED FROM BANK SHOULD BE ALLOWED. 19. WE FIND THAT THIS ISSUE NEEDS EXAMINATION OF TH E ACCOUNTS AND OTHER DETAILS PERTAINING TO SOURCES OF FUNDS AND THE UTILIZATION THEREOF. SINCE THE COMPLETE DETAILS IN THIS REGARD ARE NOT AVAILABLE ON RECORD, WE DEEM IT APPROPRIATE TO REMIT THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER. TH E ASSESSING OFFICER SHALL EXAMINE THE FACTS OF THE CASE IN THIS REGARD AND DECIDE AS PER LAW. REVENUES APPEALS: 20. ITA NOS. 236 AND 237/NAG/2013 THESE ARE CROSS APPEALS FILED BY THE REVENUE. IN T HESE APPEALS COMMON ISSUE RAISED IS THAT CIT(APPEALS) ERRED IN ACCEPTIN G THE AGRICULTURAL INCOME CLAIMED BY THE ASSESSEE IN THE ABSENCE OF RELEVANT DETAILS. WE FIND THAT THE ISSUE 13 OF AGRICULTURAL INCOME AND THE ESTIMATE THEREOF HAS ALREADY BEEN DEALT WITH BY US IN ASSESSEES APPEALS IN GROUND NO.1. WE FIND THAT AFTER ELABORATELY CONSIDERING THE ISSUE AND HEARING THE ARGUMENTS OF THE LEARNED D.R. WE HAVE ALREADY HELD THAT THE DECISION MADE BY THE LEARNED CIT(APPEALS) IS A REASONABLE ONE AND HENCE WE HAVE UPHELD THE SAME. WE ALSO FIND THAT THE REVE NUES GROUND HAS NOT BEEN PROPERLY DRAFTED, INASMUCH THE LEARNED CIT(APPEALS ) HAS NOT ACCEPTED THE ENTIRE AGRICULTURAL INCOME CLAIMED BY THE ASSESSEE. HENCE THE GROUND RAISED IS ALSO MISDIRECTED SINCE WE HAVE ALREADY UPHELD THE ORDER OF LEARNED CIT(APPEALS), WE DO NOT FIND ANY MERIT IN THESE APPEALS OF THE REVEN UE AND ACCORDINGLY THEY ARE DISMISSED. 21. WE MAY ALSO POINT OUT HERE THAT ASSESSEES COUN SEL HAS REQUESTED THAT THESE APPEALS BE DISMISSED FOR TAX EFFECT AS THEY A RE BELOW THE PRESCRIBED MONETARY LIMIT FOR FILING APPEAL BEFORE THE TRIBUNA L. HOWEVER, WE NOTE THAT SINCE THESE ARE CROSS APPEALS AND THE ISSUE INVOLVED ALSO RELATES TO GROUND RAISED BY THE ASSESSEE, THESE APPEALS ARE NOT LIABLE TO BE DISMIS SED FOR LOW TAX EFFECT. 22. IN THE RESULT, APPEALS FILED BY THE ASSESSEE IN ITA NOS. 202,205,207 AND 208 ARE DISMISSED.ASSESSEES APPEALS IN ITA NO. 201 AND 203 ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. REVENUES APPEALS ARE DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON 20 TH MAY, 2015. SD/- SD/- (MUKUL K. SHRAWAT) (SHAMIM YAHYA) JUDICIAL MEMBER. ACCOUNTANT MEMBER NAGPUR, DATED: 20 TH MAY, 2015. 14 COPY OF ORDER FORWARDED TO : 1. THE ASSESSEE. 2. REVENUE. 3. THE CIT(A) 4. THE CIT, NAGPUR. 5. THE D.R., ITAT, NAGPUR. 6. GUARD FILE. T RUE COPY. BY ORDER ASSISTANT REGISTRAR, ITAT, NAGPUR WAKODE