Sh. Ravinandan Kumar, Ludhiana V. ACIT, C-7, Ludhiana

ITA 21/CHANDI/2019

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 3240 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 year(s) 5 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-06-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 07-06-2021
• Assessment Year: 2014-2015
• Appeal Filed On: 08-01-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASHOK KHANNA
• Keywords: Onus to prove
• Section: 271(1)(c); 143(3); 201; 191; 113; 13; 2

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH B, CHANDIGARH BEFORE: SMT.ANNAPURNA GUPTA, ACCOUNTANT MEMBER AND SHRI R.L. NEGI, JUDICIAL MEMBER . / ITA NO.21/CHD/2019 / ASSESSMENT YEAR : 2014-15 SH.RAVINANDAN KUMAR, #606/2916, C/O M/S RAHUL SALES, KRISHNA NAGAR, FEROZPUR ROAD, LUDHIANA. THE D.C.I.T. , CIRCLE 7, LUDHIANA. ./ PAN NO: AGQPK5052L /APPELLANT /RESPONDENT /ASSESSEE BY : SHRI PARIKSHIT AGGARWAL, CA ! / REVENUE BY : SHRI ASHOK KHANNA, ADDL.CIT $ /DATE OF HEARING : 07.06.2021 $ /DATE OF PRONOUNCEMENT: 07 .06. 2021 (HEARING THROUGH WEBEX) /ORDER PER ANNAPURNA GUPTA, ACCOUNTANT MEMBER : THE ABOVE APPEAL HAS BEEN PREFERRED BY THE ASSESSEE AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF IN COME TAX (APPEALS )-3 [IN SHORT THE LD.CIT(A)] , LUDHIANA DATED 14.11.2018 RELATING TO ASSESSMENT YEAR 2014-15, PASSED ITA NO.21/CHD/2019 A.Y. 2014-15 PAGE 2 OF 13 U/S 250(6)) OF THE INCOME TAX ACT, 1961 (HEREINAFTE R REFERRED TO AS ACT. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: 1. THAT THE LEARNED COMMISSIONER OF INCOME TAX APPEALS)-3, LUDHIANA HAS ERRED THE CONFIRMING THE ADDITION OF RS.40,53,426/- MADE BY THE LEARNED ASSESSING OFFICER ON ACCOUNT OF DISALLOWING THE DEDUCTIONS CLAIMED BY THE ASSESSEE U/S 57(III) OF THE INCOME TAX ACT, 1961 AT RS.40,53,426/- WITHOUT CONSIDERING THE FACTS OF THE CASE, WITHOUT GIVING ANY OPPORTUNITY FOR HEARING TO THE APPELLANT AND WITHOUT CONSIDERING THE SUBMISSIONS FILED BY THE APPELLANT DURING THE COURSE OF APPELLATE PROCEEDINGS AS PER AS IN ASSESSMENT PROCEEDINGS. THEREFORE, ADDITION OF RS.40,53,426/- MADE BY THE LEARNED ASSESSING OFFICER AND CONFIRMED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-3, LUDHIANA IS ILLEGAL, UNCALLED FOR AND NEEDS TO BE DELETED. 3. THAT THE APPELLANT CRAVES TO LEAVE OR TO AMEND THE GROUND OF APPEALS BEFORE OR AT THE TIME OF HEARING. 3. AS IS EVIDENT FROM THE GROUNDS OF APPEAL RAISED BEFORE US, THE SOLITARY ISSUE IN THE PRESENT APPEAL RELATES TO DISALLOWANCE OF DEDUCTION CLAIMED BY THE ASSESSE E U/S 57(III) OF THE ACT AMOUNTING TO RS.40,53,426/-. THE IMPUGNED DISALLOWANCE, AS IS EMANATING FROM THE ORD ERS OF THE AUTHORITIES BELOW, RELATES TO INTEREST EXPENSES INCURRED WHICH WERE CLAIMED AGAINST INTEREST INCOME ITA NO.21/CHD/2019 A.Y. 2014-15 PAGE 3 OF 13 EARNED BY THE ASSESSEE AND RETURNED UNDER THE HEAD INCOME FROM OTHER SOURCES. TAKING US THROUGH THE FACTS OF THE CASE, THE LD.COUNSEL FOR THE ASSESSEE FIRST DREW OUR ATTENTION TO THE ASSESSMENT ORDER MADE ON THE ASSES SEE DATED 21.12.2016 AND POINTED OUT THAT THE CASE OF T HE ASSESSEE WAS SELECTED FOR LIMITED SCRUTINY UNDER CA SS FOR ONE OF THE REASON BEING LARGE DEDUCTION CLAIMED U/S 57 OF THE ACT. THEREAFTER HE DREW OUR ATTENTION TO PARA N O.2 OF THE ORDER POINTING OUT THAT THE AO HAD DISCUSSED TH E ISSUE OF THE AFORESAID CLAIM IN THIS PARA. REFERRING TO T HE SAME, HE POINTED OUT THAT THE AO HAD NOTED THAT THE ASSES SEE HAD CLAIMED DEDUCTION OF INTEREST EXPENSES U/S 57 AMOUNTING TO RS.40,53,426/- WHICH HE WAS ASKED TO EXPLAIN DURING PROCEEDINGS AS HOW THE ASSESSEE WAS ELIGIBLE TO CLAIM THE SAME. THE LD.COUNSEL FOR THE ASSESSEE DREW OUR ATTENTION THEREAFTER TO THE REPLY SUBMITTE D BY THE ASSESSEE TO THE AO ON 08.12.2016 AS UNDER: 'DECEMBER 8, 2016 THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE VII, LUDHIANA RE : MR RAVI NANDAN KUMAR PROP. M/S RAHUL SALES, 606/2916, KRISHNA NAGAR, LUDHIANA PAN: AGQPK5052L ASSESSMENT YEAR: 2014-15 ITA NO.21/CHD/2019 A.Y. 2014-15 PAGE 4 OF 13 SUB : ASSESSMENT PROCEEDINGS UNDER SECTION 143(3) O F THE INCOME TAX ACT, 1961 ('THE ACT') RESPECTED SIR, WITH REGARD TO THE CAPTIONED SUBJECT, IT IS HUMBLY SUBMITTED THAT THE CASE OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION HAS BEEN PICKED BY YOUR GOODSELF UNDER SECTION 143(3) O F THE ACT. WE HAVE ALREADY FURNISHED REPLIES TO YOUR GOODSELFS Q UESTIONNAIRE. FURTHER, IT IS SUBMITTED THAT YOUR GOODSELF HAS ASK ED TO EXPLAIN THAT HOW THE EXPENSES CLAIMED UNDER SECTION 57 OF THE AC T ARE ELIGIBLE FOR DEDUCTION AGAINST INCOME FROM OTHER SOURCES. REGARDING THE ABOVE, IT IS SUBMITTED THAT THE ASSES SEE HAS TAKEN LOANS FROM THE CHOLAMANDALAM INVESTMENT AND FINANCE COMPANY LIMITED AND TATA CAPITAL HOUSING FINANCE LIMITED AND INVESTED THE SAME AS LOAN IN THE FIRM NAMED M/S RAHUL SALES AND IN THE MUTUAL FUNDS. DUE TO THIS REASON, THE ASSESSEE HAS CLAIMED THE INTEREST PAID ON THE ABOVE SAID LOANS AS AN EXPENDI TURE UNDER SECTION 57 OF THE ACT. WE HOPE THAT YOUR GOODSELF WOULD FIND THE ABOVE DOC UMENTS IN ORDER AND OBLIGE. THANKING YOU, YOURS FAITHFULLY, SD/- (AUTHORISED SIGNATORY)' AND AGAIN TO ANOTHER REPLY DATED 14.12.2016 AS UNDE R: 'DECEMBER 14, 2016 THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE VII, LUDHIANA RE : MR RAVI NANDAN KUMAR PROP. M/S RAHUL SALES, 606/2916, KRISHNA NAGAR, LUDHIANA PAN: AGQPK5052L ASSESSMENT YEAR: 2014-15 SUB : ASSESSMENT PROCEEDINGS UNDER SECTION 143(3) O F THE INCOME TAX ACT, 1961 ('THE ACT') RESPECTED SIR, WITH REGARD TO THE CAPTIONED SUBJECT, IT IS HUMBLY SUBMITTED THAT THE CASE OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION HAS BEEN PICKED BY YOUR GOODSELF UNDER SECTION 143(3) O F THE ACT. WE ITA NO.21/CHD/2019 A.Y. 2014-15 PAGE 5 OF 13 HAVE ALREADY FURNISHED REPLIES TO YOUR GOODSELFS Q UESTIONNAIRE. FURTHER, IT IS SUBMITTED THAT YOUR GOODSELF HAS ASK ED TO EXPLAIN THAT HOW THE EXPENSES CLAIMED UNDER SECTION 57 OF THE AC T ARE ELIGIBLE FOR DEDUCTION AGAINST INCOME FROM OTHER SOURCES. REGARDING THE ABOVE, IT IS SUBMITTED THAT THE ASSES SEE HAS EARNED AN INTEREST FROM M/S RAHUL SALES AMOUNTING TO RS.30 ,82,235/- AND INCOME FROM MUTUAL FUNDS AMOUNTING TO RS.50,75 2/- AND TOTAL OF ABOVE STATED FIGURES COME TO RS.31,32,987/ -. IT IS SUBMITTED THAT THE ASSESSEE HAD TAKEN LOANS F ROM THE CHOLAMANDALAM INVESTMENT AND FINANCE COMPANY LIMITE D AND TATA CAPITAL HOUSING FINANCE LIMITED AND INVESTED THE SAME AS LOAN IN THE FIRM NAMED M/S RAHUL SALES AND IN THE MUTUAL FUNDS DUE TO THIS REASON, THE ASSESSES H AS CLAIMED THE INTEREST PAID ON THE ABOVE SAID LOANS A S AN EXPENDITURE UNDER SECTION 57 OF THE ACT THE COPY OF ACCOUNT OF THE ASSESSES IN THE BOOKS OF ACCOUNTS OF M/S RAHUL SALES FOR THE YEAR UNDER CONSIDERATION IS ENCLOSED HEREWITH AS ANNEXURE-I. I T CAN BE SEEN THAT THE OPENING BALANCE IN THE ABOVE SAID BAN K ACCOUNT IS RS. 2,36,18,987/ -. WE ARE ALSO ENCLOSING HEREWITH THE COPY OF ACCOUNT OF CHOLAMANDALAM INVESTMENT AND FINANCE COMPANY LIMITED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE AS ANNEXURE-LL. THE OPENING BALANCE IN THE ABOVE SAID ACCOUNT IS RS. 2,19,57,375/-. FURTHER, IT IS S UBMITTED THAT THE ASSESSES HAS RAISED THE LOAN FROM TATA CAP ITAL HOUSING FINANCE LIMITED IN THE PRECEDING YEARS. THE INVESTMENT OF THE ASSESSEE IN M/S RAHUL SALES I S HIS PERSONAL INVESTMENT AND THE LOANS RAISED BY THE ASS ESSEE FROM CHOLAMANDALAM INVESTMENT AND FINANCE COMPANY LIMITED AND TATA CAPITAL HOUSING FINANCE LIMITED AR E HIS PERSONAL LOANS. FURTHER, THE ASSESSEE HAS VARIOUS O THER PERSONAL ASSETS IN THE FORM OF IMMOVEABLE PROPERTIE S ARID VANCNA OTHER PERSONAL UNSECURED LOANS IT IS A LANDMARK PRINCIPLE THAT MONEY HAS NO COLOUR AND ENTIRE MONEY OF THE ASSESSEE, COMING FROM ANY SOURC E, COMES M A COMMON KITTY. IT SHOULD DE THE DISCRETION OF THE ASSESSEE THAT WHERE HE HAD APPLIED HIS SOURCES THE ABOVE INVESTMENT IN M/S RAHUL SALES IS HIS PERSONAL INVES TMENT, WHEREAS HE HAS RAISED LOANS FROM VARIOUS INSTITUTIO NS ON HIS PERSONAL ACCOUNT. IT IS NOT THE REVENUE WHO WILL SU GGEST THAT WHICH LOAN SHOULD BE TAKEN BY THE ASSESSES AND WHER E SHOULD IT BE INVESTED 01 WHETHER NO LOAN SHOULD BE TAKEN BY THE ASSESSEE THESE ARE NOT THE BUSINESS ASSETS AND ITA NO.21/CHD/2019 A.Y. 2014-15 PAGE 6 OF 13 BUSINESS LOANS WHERE THE DIRECT NEXUS OF FUNDS AND ITS APPLICATION SHOULD BE TAKEN INTO ACCOUNT, IN CASE O F PERSONAL ASSETS AND PERSONAL SOURCES, IT IS THE DISCRETION O F THE ASSESSEE TO APPLY ANY OF HIS SOURCES IN ANY OF HIS PERSONAL ASSETS. IN OUR CASE TOO, THE ASSESSEE HAS RAISED THE LOANS FROM CHOLAMANDALAM INVESTMENT AND FINANCE COMPANY LIMITE D AND TATA CAPITAL HOUSING FINANCE LIMITED IN THE PRE CEDING YEARS WHEREAS THE INVESTMENT HAS ALSO BEEN MADE BY HIM IN M/S RAHUL SALES IN THE PRECEDING YEARS. THE ASSESSE E HAS APPLIED THE ABOVE SAID LOANS IN M/S RAHUL SALES. TH EREFORE, IT IS SUBMITTED TO YOUR GOODSELF TO KINDLY ALLOW TH E EXPENDITURE INCURRED BY THE ASSESSEE IN THE ABOVE S AID LOANS AGAINST AN INVESTMENT IN M/S RAHUL SALES. WE HOPE THAT YOUR GOODSELF WOULD FIND THE ABOVE INF ORMATION AND DOCUMENTS IN ORDER AND OBLIGE. THANKING YOU, YOURS FAITHFULLY, SD/- (AUTHORISED SIGNATORY)' 4. BOTH THE ABOVE REPLIES STAND REPRODUCED IN THE O RDER OF THE AO. REFERRING TO THE SAME, HE STATED THAT HE HAD EXPLAINED TO THE AO THAT THE ASSESSEE HAD EARNED IN TEREST INCOME AMOUNTING TO RS.30,82,235/- FROM LOAN GIVEN TO A FIRM NAMED M/S RAHUL SALES AND HAD ALSO EARNED INCO ME FROM MUTUAL FUNDS AMOUNTING TO RS.50,752/- AND THE ENTIRE AFORESAID INCOME OF RS.31,32,987/- HAD BEEN RETURNED UNDER THE HEAD INCOME FROM OTHER SOURCES . THAT THE AFORESAID INVESTMENTS, IT HAD BEEN EXPLAIN ED, HAD BEEN MADE FROM LOANS TAKEN FROM M/S CHOLAMANDLAM INVESTMENT FINANCE COMPANY LIMITED AND M/S TATA ITA NO.21/CHD/2019 A.Y. 2014-15 PAGE 7 OF 13 CAPITAL HOUSING FINANCE LIMITED AND INTEREST PAID T HEREON HAD ACCORDINGLY BEEN CLAIMED AS DEDUCTION AS PER S ECTION 57 OF THE ACT AGAINST THE INCOME EARNED FROM INVEST MENTS SO MADE. THE LD.COUNSEL FOR THE ASSESSEE CONTENDED THAT EVEN COPIES OF ACCOUNT OF THE ASSESSEE IN THE BOOKS OF M/S RAHUL SALES FOR THE YEAR UNDER CONSIDERATION HAD BE EN FILED TO THE AO REFLECTING OPENING BALANCE OF RS.2,36,18,987/- AS ALSO COPY OF ACCOUNT OF M/S CHOLAMANDLAM INVESTMENT FINANCE COMPANY LIMITED IN THE BOOKS OF THE ASSESSEE REFLECTING OPENING BALANC E OF RS.2,19,56,375/- AND IT HAD ALSO SUBMITTED TO THE A O THAT THE LOAN FROM M/S TATA CAPITAL HOUSING FINANCE LIMI TED HAD BEEN RAISED IN THE EARLIER YEARS. THE LD.COUNSE L FOR THE ASSESSEE CONTENDED THAT DESPITE THE EXPLANATION AND SUBMISSIONS SO MADE BY THE ASSESSEE THE AO HELD THA T THE ASSESSEE HAD FAILED TO PROVE HOW THE EXPENDITURE CL AIMED U/S 57 OF THE ACT WAS FOR THE PURPOSE OF EARNING SU CH INCOME AND ACCORDINGLY HE DISALLOWED THE EXPENSES CLAIMED U/S 57 OF THE ACT AMOUNTING TO RS.40,53,426 /-. HE DREW OUR ATTENTION TO THE RELEVANT FINDINGS OF T HE AO AS UNDER: EVEN FROM THE ABOVE REPLY, THE ASSESSEE HAS FAILED TO PROVE HOW THE EXPENDITURE CLAIMED U/S 57 OF I.T. ACT, IS FOR THE PURPOSE OF MAKING OR EARNIN G SUCH INCOME. THUS, EXPENSES CLAIMED U/S 57 ITA NO.21/CHD/2019 A.Y. 2014-15 PAGE 8 OF 13 AMOUNTING TO RS.40,53,426/- ARE DISALLOWED AND ARE ADDED TO THE TOTAL INCOME OF THE ASSESSEE. PENALTY PROCEEDINGS U/S 271(1)(C) FOR FILING INACCURATE PARTICULARS OF INCOME ARE BEING INITIATED SEPARATELY. (ADDITION OF RS.40,53,426/-) 5. THE LD.COUNSEL FOR THE ASSESSEE DREW OUR ATTENTI ON TO THE ORDER OF THE LD.CIT(A) AND STATED THAT DESPI TE REITERATING HIS CONTENTION WHICH WERE MADE BEFORE T HE AO, BEFORE THE CIT(A) ALSO, AS REPRODUCED AT PARA 4.1 O F THE ORDER, THE LD.CIT(A) UPHELD THE DISALLOWANCE RE- EMPHASIZING THE FINDINGS OF THE AO THAT THE ASSESS EE HAD FAILED TO PROVE THE NEXUS BETWEEN THE LOAN DEDUCTIO N AND INTEREST PAID THEREON WITHOUT SPECIFICALLY DEALING WITH THE CONTENTIONS OF THE ASSESSEE. HE DREW OUR ATTENTION TO PARA 4.2 TO 4.4 OF THE ORDER AS UNDER: 4.2 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE C ASE. I AM INCLINED TO AGREE WITH THE CONTENTION OF AO. THE PR OVISIONS OF THE INCOME-TAX ACT RELATING TO ALLOWANCES DISCLOSE THAT THE EXPENDITURE OR OUTGOING SOUGHT TO BE DEDUCTED SHOUL D BEAR A CHARACTER WHICH HAS A CONNECTION WITH OR RELATION T O THE PARTICULAR ACTIVITY WHICH PRODUCES THE INCOME OR CO NSTITUTES ITS SOURCE. SECTION 57{III) PROVIDES FOR DEDUCTION ONLY OF EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY 'FOR TH E PURPOSE OF MAKING OR EARNING SUCH INCOME'. 'SUCH INCOME' RE FERS TO 'INCOME FROM OTHER SOURCES'. THE EXPRESSION 'FOR TH E PURPOSE OF BUSINESS' IS NARROWER THAT THE EXPRESSION 'FOR T HE PURPOSE OF MAKING OR EARNING SUCH INCOME. 4.3 I HAVE CAREFULLY CONSIDERED FACTS OF THE CASE. I HAVE ALSO CONSIDERED CASE LAWS RELIED UPON BY THE ASSESS ING OFFICER. I AM INCLINED TO AGREE WITH THE CONTENTION OF AO. THE ASSESSING OFFICER AT PAGE NUMBER 3 OF THE ASSESSMEN T ORDER, HAS MENTIONED THAT LOAN WAS TAKEN BY THE ASSESSEE F ROM CHOLAMANDLAM INVESTMENT FINANCE LIMITED COMPANY AND ITA NO.21/CHD/2019 A.Y. 2014-15 PAGE 9 OF 13 PAID INTEREST OF RS.29,22,296/- AND ALSO TAKEN LOAN FROM TATA HOUSING FINANCE AND PAID INTEREST AT RS.11,30,430/- . HOWEVER THE A SSESSEE HAS EXTENDED LOAN TO M/S RAHUL SALES AND INVESTED IN THE MUTUAL FUNDS. THE AO OBSERVED T HAT THE ASSESSEE HAS FAILED TO ESTABLISH NEXUS BETWEEN LOAN TAKEN, AND INTEREST PAID THEREUPON AND HOW EXPENDITURE INC URRED, RELATES TO INCOME EARNED AS INTEREST U/S 57(III). T HE ASSESSEE HAS NOT ESTABLISH THE NEXUS AND AVAILABILITY OF FUN DS WHILE EXTENDING LOAN BY APPELLANT TO M/S RAHUL SALES AND INVESTMENT IN THE MUTUAL FUNDS AND HOW THIS EXPENDI TURE BY WAY OF PAYMENT OF INTEREST IS LINKED WITH THE INTER EST EARNED BY ASSESSEE . THEREFORE ASSESSEE HAS FAILED TO CLAI M AND JUSTIFY TO PROVE THE NEXUS OF INCOME EARNED FROM OT HER SOURCES AND INTEREST PAID AGAINST THIS INCOME. THE ONUS TO PROVE THE NEXUS LIES ON THE ASSESSEE WHO HAD CLAIME D THE DEDUCTION. I HAVE ALSO GONE THROUGH THE DETAILED SU BMISSION FILED BY THE APPELLANT AND I FIND MYSELF IN AGREEME NT WITH THE CONTENTION OF ASSESSING OFFICER , THAT ASSESSEE HAS NOT BEEN ABLE TO EXPLAIN THE CLEAR NEXUS BETWEEN THE EARNING OF INCOME FROM OTHER SOURCES AND TO ESTABLISH THE NEXUS OF EX PENDITURE WITH INCOME EARNED BY THE ASSESSEE. 4.4 IN ORDER TO EXPLAIN THAT AN EXPENDITURE MAY BE ADMISSIBLE UNDER SECTION 57FIII), IT IS NECESSARY T HAT THE PRIMARY MOTIVE OF INCURRING IT IS DIRECTLY TO EARN INCOME FALLING UNDER THE HEAD 'INCOME FROM OTHER SOURCES'. UNDER SECTION 57(III), DEDUCTION WILL NOT BE ALLOWED IF T HE EXPENDITURE IS NOT INCURRED FOR THE PURPOSE OF EARNING INCOME F AILING UNDER THE HEAD 'INCOME FROM OTHER SOURCES' C!T VS. SMT. A MIRTABEN R. SHAH (1999) 152 TAXATION 721 (BOM.).THE PLAIN NA TURAL CONSTRUCTION OF THE LANGUAGE OF SECTION 57(III) OF THE ACT, IRRESISTIBLY LEADS TO THE CONCLUSIONS THAT TO BRING A CASE WITHIN THAT SECTION IT IS NOT NECESSARY THAT ANY IN COME SHOULD IN FACT HAVE BEEN EARNED AS A RESULT OF THE EXPENDI TURE. WHAT SECTION 57{III) REQUIRES IS THAT THE EXPENDITURE MU ST BE LAID OUT OR EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF MAKING OR EARNING INCOME. THE SECTION DOES NOT REQUIRE THA T THIS PURPOSE MUST BE FULFILLED IN ORDER TO QUALIFY THE E XPENDITURE FOR DEDUCTION IT DOES NOT SAY THAT THE EXPENDITURE SHALL BE DEDUCTIBLE ONLY IF ANY INCOME IS MADE OR EARNED (CI T VS. RAJENDRA PRASAD MOODY (1978), TAXATION 51 (3)-52, 1 15 ITR 519 (SC) : CIT VS. MURLI MANOHAR (1998) IX SITC 673 (ALL) : CIT VS. RAMPUR TIMBER & TURNEY CO. LTD. (1981) 129 ITR 58 (ALL.) : CIT VS. ADMINISTRATOR GENERAL OF MADRAS (1 998) 142 TAXATION 85 (MAD.)). ITA NO.21/CHD/2019 A.Y. 2014-15 PAGE 10 OF 13 THE GUJARAT HIGH COURT IN PADMAVATI JAYKRISHNA VS. CIT (1981) 131 ITR 653 HAS HELD THAT IN ORDER TO DECIDE WHETHER AN EXPENDITURE IS A PERMISSIBLE DEDUCTION UNDER SEC TION 57(III), THE NATURE OF THE EXPENDITURE MUST BE EXAMINED. ALS O THE GUJARAT HIGH COURT IN THE CASE OF SARABHAI SONS (P) LTD. VS. CIT(1993) 113 TAXATION 407, 201 ITR 464 HAS HEL D THAT IF THE DOMINATE PURPOSE FOR WHICH THE EXPENDITURE WAS INCURRED NOT TO BE EARN THE INCOME, THE EXPENDITURE INCURRED IN THAT BEHALF WOULD FALL OUTSIDE THE PURVIEW OF SECTION 57 (III) OF THE ACT. WHERE THE DOMINANT PURPOSE OF THE ASSESSEE IN TAKING OVERDRAFTS WAS NOT TO EARN INCOME BUT TO MEE T THE PERSONAL LIABILITY, INTEREST PAYMENT ON OVERDRAFTS WAS HELD TO BE NOT ALLOWABLE DEDUCTION UNDER SECTION 57(III) OF THE ACT(H. H. MAHARAJA MARTAND SINGH JU DEO VS. CIT (1989) TAX ATION 92(3}-199, 174 ITR 515 (MP): PADMAVATI JAI KRISHNA VS. ADDL. CIT (1987) TAXATION 86(2)-1: 166 ITR 176 (SC) ). CONNECTION BETWEEN THE EXPENDITURE AND EARNING OF I NCOME NEED NOT BE DIRECT AND IT MAY BE INDIRECT. BUT, SIN CE THE EXPENDITURE MUST HAVE BEEN INCURRED FOR THE PURPOSE OF EARNING THAT INCOME, THERE SHOULD BE SOME NEXUS BET WEEN THE EXPENDITURE AND THE EARNING OF THE INCOME [ADDL. CI T VS. MADRAS FERTILISERS LTD. (1980) 122 ITR 139 (MAD.) : VIJAYA LAXMI SUGAR MILLS LTD. VS. CIT (1991) 191 ITR 641 ( SC): CIT VS. DWARAKA CHIT FUNDS PVT. LTD. (1996) 132 TAXATIO N 109 (MAD.). IN VIEW OF THE FACTS OF THE CASE AS MENTIONED ABOVE AND DIFFERENT JUDICIAL PRONOUNCEMENTS I FIND THAT THE A SSESSEE HAS CLEARLY FAILED TO ESTABLISH NEXUS BETWEEN THE I NTEREST INCOME EARNED AND EXPENDITURE CLAIMED BY THE ASSESS EE AGAINST EARNING THIS INCOME. ACCORDINGLY DISALLOWAN CE OF RS.40,53,426/- AS INTEREST PAID UNDER SECTION 57(II I) IS SUSTAINED. WITH THE RESULT THIS GROUND OF APPEAL IS DISMISSED. 6. AT THIS JUNCTURE THE LD.COUNSEL FOR THE ASSESSEE WAS ASKED TO DEMONSTRATE AS TO HOW THE ASSESSEE HAS ESTABLISHED THE NEXUS BETWEEN THE INTEREST EXPENSES CLAIMED AND THE INTEREST INCOME EARNED AND WAS ALSO ASKED WHETHER THE ASSESSEE HAD MADE SIMILAR CLAIMS IN PRECEDING YEARS ALSO. TO THIS THE LD.COUNSEL FOR TH E ITA NO.21/CHD/2019 A.Y. 2014-15 PAGE 11 OF 13 ASSESSEE STATED AT BAR THAT THE ASSESSEE HAD MADE IDENTICAL CLAIMS IN THE PRECEDING YEARS ALSO, HAVIN G MADE THE IMPUGNED INVESTMENTS FROM LOANS TAKEN 4 TO 5 YE ARS BACK, BUT AT THE SAME TIME POINTED OUT THAT NONE OF THE CLAIMS SO MADE HAS BEEN SUBJECTED TO SCRUTINY ASSES SMENT IN EARLIER YEARS U/S 143(3) OF THE ACT. FURTHER THE LD.COUNSEL FOR THE ASSESSEE REITERATED HIS SUBMISSI ONS MADE BEFORE THE AUTHORITIES BELOW. 7. AT THIS JUNCTURE, IT WAS POINTED OUT TO BOTH THE LD. DR AND THE LD.COUNSEL FOR THE ASSESSEE THAT IN THE IMPUGNED CASE IT APPEARED THAT THE ISSUE HAD BEEN ADJUDICATED DEHORS THE FACTS RELATING TO IT. THAT DESPITE THE SPECIFIC SUBMISSIONS OF THE ASSESSEE BEFORE THE LOWER AUTHORITIES OF THE INVESTMENT HAVING BEEN MADE OUT OF INTEREST BEARING FUNDS AND THE ASSESSEE HAVING FILE D CERTAIN COPIES OF ACCOUNTS RELATING TO THE LOAN TAK EN AND INVESTMENT MADE, THE FINDINGS OF THE LOWER AUTHORIT IES THAT THE ASSESSEE WAS UNABLE TO ESTABLISH NEXUS BET WEEN THE TWO, DOES NOT DEAL WITH THE AFORESTATED SUBMISS IONS AT ALL. AT THE SAME TIME, THE LD.COUNSEL FOR THE ASSES SEE WAS ALSO UNABLE TO DEMONSTRATE BEFORE US AS TO HOW THE SUBMISSIONS OF THE ASSESSEE JUSTIFIED HIS CLAIM, TH OUGH HE CONTENDED THAT THIS WAS NOT THE ONLY YEAR IN WHICH THE ITA NO.21/CHD/2019 A.Y. 2014-15 PAGE 12 OF 13 ASSESSEE HAD MADE THIS CLAIM AND THAT SIMILAR CLAIM HAD BEEN MADE IN EARLIER YEARS ALSO SINCE A PORTION OF THE INVESTMENT HAD BEEN MADE OUT OF LOANS TAKEN IN EARL IER YEARS. 8. IN THE ABSENCE OF THE NECESSARY FACTS RELATING T O THE ISSUE, WE ARE OF THE VIEW THAT IT WOULD NOT BE FAIR TO ADJUDICATE THE ISSUE EITHER WAYS. THAT IT WOULD BE IN THE INTEREST OF JUSTICE TO RESTORE THE MATTER TO THE AO FOR REEXAMINATION AFTER CONSIDERING ALL FACTS RELATING TO IT. 9. IN VIEW OF THE ABOVE THE ISSUE OF CLAIM OF DEDUC TION U/S 57(III) OF THE ACT AMOUNTING TO RS.40,53,426/- IS RESTORED BACK TO THE AO TO BE DECIDED IN ACCORDANCE WITH LAW AFTER CONSIDERING ALL FACTS RELATING TO THE SAM E AND THE ASSESSEE IS DIRECTED TO PRODUCE ALL NECESSARY DOCU MENTS BRINGING OUT THE SAID FACTS BEFORE THE AO. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE, THEREFORE, ALLOWED FOR STATISTICAL PURPOSES. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED FOR STATISTICAL PURPOSES SD/- SD/- (R.L. NEGI) (ANNAPURNA GUPTA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER DATED: 14 TH JUNE, 2021 ITA NO.21/CHD/2019 A.Y. 2014-15 PAGE 13 OF 13 ** * +, -,/ COPY OF THE ORDER FORWARDED TO : / THE APPELLANT *