Shri Dipesh P. Sukhadia, Ahmedabad V. The ACIT, Circle 12, Ahmedabad

ITA 2092/AHD/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 0454 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 1 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-09-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 08-08-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: J C SHAH
• Keywords: Proportionate interest

Judgement Text

I.T.A. NO . 2092 /AHD/201 3 A SSESSMENT Y EAR: 200 9 - 10 PAGE 1 OF 3 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH, SMC , AHMEDABAD [CORAM: PRAMOD KUMAR AM] I.T.A. NO. 2092 /AHD/ 20 1 3 ASSESSMENT Y EAR : 200 9 - 10 DIPESH P SUKHADIA , ................... . APPELLANT PROP. O F M/S. BHAVYA CORPORATION , B - 64 TO 80, PUSHPRAJ ESTATE, NUTAN MILL COMPOUND, SARA S PUR, AHMEDABAD 380 018. [ PAN: A CU PS 2394 B ] VS. ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE 12, AHMEDABAD. . ...... . ... . RESPONDENT APPEARANCES BY: J.C. SHAH , FOR THE APPELLANT K EYUR PATEL , FOR THE RESPONDENT D ATE OF CONCLUDING THE HEARING : 30 .06.2016 DATE OF PRONOUNCING THE ORDER : 29 . 0 9 .2016 O R D E R 1. THIS APPEAL CALLS INTO QUESTION CORRECTNESS OF THE ORDER DATED 3 RD JUNE, 201 3 , PASSED BY THE LEARNED CIT(A) FOR THE ASSESSMENT YEAR 200 9 - 10 . 2. GRIEVANCE OF THE ASSESSEE , IN SUBSTANCE , IS THAT LEARNED CIT ( A ) ERRED IN UPHOLDING THE DISALLOWANCE OF INTEREST DEDUCTION, UNDER SECTION 36 (1)(III), TO THE EXTENT OF RS.3,29,753/ - . 3. DURING THE COURSE OF SCRUT INY ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAD OBTAINED UNSECURE LOANS DURING THE YEAR. AS AGAINST I.T.A. NO . 2092 /AHD/201 3 A SSESSMENT Y EAR: 200 9 - 10 PAGE 2 OF 3 UNSECURED LOANS OF RS.53,93,253/ - AS AT THE BEGINNING OF THE YEAR, THE ASSESSEE HAD UNSECURED LOANS OF RS.1,13,94,502/ - AT TH E END OF THE YEAR. THE A SSESSING OFFICER FURTHER NOTED THAT WHILE THERE WAS A CREDIT BALANCE IN ASSESSEE S PERSONAL ACCOUNT IN THE FIRST FEW MONTHS, THE BALANCE, AS AT THE YEAR END, WAS A DEBIT BALANCE TO THE TUNE OF RS.78,52,213/ - . ON THESE FACTS , THE A SSESSING OFFICER DISALLOWED PROPORTIONATE INTEREST PAYMENT @ 18% ON THE AMOUNT USED FOR PERSONAL PURPOSES. AGGRIEVED, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LEARNED CIT ( A ) BUT WITHOUT MUCH SUCCESS. LEARNED CIT (A) RESTRICTED THE DISALLOWANCE O N THE BASIS OF INTEREST @ 12% , AS AGAINST @ 18% ADOPTED BY THE AS SESSING OFFICER BUT CONFIRMED TH E DISALLOWANCE IN PRINCIPLE. THE ASSESSEE IS NOT SATISFIED A ND IS IN FURTHER A PPEAL BEFORE ME. 4. I HAVE HE A RD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RE CORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF APPLICABLE LEGAL POSITION. 5. IN MY VIEW, THE FACT THAT THE ASSESSEE H AS USED S OME FUNDS FOR PERSONAL PURPOSES , EVEN IF THAT BE SO, CANNOT BE REASON ENOUGH TO INVOKE DISALLOWANCE UNDER SECTION 37( 1)(III) A S LONG AS ASSESSEE HAS SUFFICIENT INTEREST FREE FUNDS TO MEET SUCH A USAGE OF FUNDS. THE PRESUMPTION, IN SUCH A SITUATION, IS THAT INTEREST BEARING FUNDS ARE USED FOR BUSINESS PURPOSES. THAT APART, DEBIT BALANCE OF RS.78,52,213/ - CANNOT BE CONSI DERED IN ISOLATION WITH ASSESSEE S CAPITAL ACCOUNT. WHEN ALL THINGS ARE TAKEN TOGETHER, AS LEA R NED COUNSEL SUBMITS IN HIS WRITTEN NOT E , THE DISALLOWANCE WILL BE AT LEAST RESTRICTED TO RS.1,51,104/ - . LEARNED C OUNSEL IS CONTENT WITH THIS. LEARNED D EPARTME NTAL REPRESENTATIVE COULD NOT POINT OUT A NY ERROR IN THIS COMPUTATION. IN THIS VIEW OF THE MATTER , AND PARTICULARLY HAVING REGARD TO S MALLNESS OF AMOUNTS INVOLVED, I A M INCLINED TO RESTRICT THE DISALLOWANCE TO RS.1,51,104/ - RATHER THAN REMITTING TH E MATTE R TO THE FILE OF THE I.T.A. NO . 2092 /AHD/201 3 A SSESSMENT Y EAR: 200 9 - 10 PAGE 3 OF 3 ASSESSING OFFICER FOR FURTHER EXAMINATION. THE DISALLOWANCE THUS STANDS RESTRICTED TO RS.1,51,104/ - . 6 . IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON THIS 29 TH DAY OF SEPTEMBER, 2016. SD/ - PRAMOD KUMAR (ACCOUNTANT MEMBER) DATED: THE 29 TH DAY OF SEPTEMBER , 2016. PBN/* COPIES TO: (1) THE APPELLANT (2) THE RESPONDENT (3) CIT (4) CIT(A) (5 ) DR (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD