JAY MANUFACTURING COMPANY LTD, MUMBAI V. ITO 10(2)(1), MUMBAI

ITA 2385/MUM/2017

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 9363 (ITAT-MUMBAI)
• Duration Of Justice: 5 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-09-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 07-06-2017
• Assessment Year: 2012-2013
• Appeal Filed On: 05-04-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAM TIWARI
• Assessee Lawyers: SANJAY R PARIKH

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC , BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM ITA NO. 2385 / MUM/20 17 ( ASSESSMENT YEAR : 2012 - 13 ) M/S. JAY MANUFACTURING COMPANY LTD., BHANU 6 VITHAL NAGAR SOCIETY N.S. ROAD NO.10, JUHU SCHEME VILE PARLE (W) MUM BAI 400 049 VS. ITO 10(2)(1) C - 10, PRATYAKSHKAR BHAVAN BKC BANDRA (E), MUMBAI 400 051 PAN/GIR NO. AABCJ4585D APPELLANT ) .. RESPONDENT ) ASSESSEE BY SHRI SANJAY R. PARIKH REVENUE BY SHRI RAM TIWARI DATE OF HEARING 26 / 0 9 /201 7 DATE OF PRONOUNCEME NT 27 / 09 /201 7 / O R D E R PER R.C.SHARMA (A.M) : THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) - 17, MUMBAI DATED 28/12/2016 FOR A.Y.2012 - 13 IN THE MATTER OF ORDER PASSED U/S.143(3) OF TH E IT ACT. 2. THE ONLY GRIEVANCE OF ASSESSEE RELATES TO DISALLOWANCE OF INTEREST EXPENDITURE OF RS.7,19,910/ - U/S.57(III) OF THE IT ACT. 3. RIVAL CONT ENTIONS HAVE BEEN HEARD AND RECORD PERUSED. FACTS IN BRIEF ARE THAT T HE ASSESSEE COMPANY IS A PRIVATE LIMI TED COMPANY AND IS BUILDER AND DEVELOPER. THE ASSESSE E HAD E - FILED ITS RETURN OF INCOME FOR A.Y.2012 - 13 ON 14.12,2012 DECLARING TOTAL INCOME OF RS.NI L . THE SAID RETURN WAS PROCESSED U/S. 143(1 ) OF THE ACT. SUBSEQUENTLY, THE CASE WAS ITA NO. 2385/MUM/2017 M/S. JAY MANUFACTURING CO. PVT. LTD., 2 SELECTED FOR SCRUTINY A SSESSMENT WHICH WAS ASSESSED BY AO AT A TOTAL INCOME OF RS.7,19,910/ - . DURING THE COURSE OF SCRUTINY, THE AO OBSERVED THAT THE ASSESSEE COMPANY HAS RECEIVED INTEREST BEARING U NSECURED LOAN FOR THE PURPOSE OF UTILIZING THEM FOR BUSINESS ACTIVITY. HOWEVER, B ORROWED FUNDS TAKEN FOR BUSINESS WERE DIVERTED TO ADVANCE LOAN TO TWO FIRMS. IN OTHER WORDS, THE COMPANY WAS PAYING INTEREST AS WELL AS WELL AS RECEIVING INTEREST AND AFTER NETTING THE SAME, IT WAS TRANSFERRED TO WORK IN PROGRESS. HOWEVER, THE AO DECLINED NETTING OF INTEREST EXPENDITURE AGAINST THE INTEREST INCOME ON THE PLEA THAT AMOUNT WAS BORROWED FOR THE PURPOSE OF BUSINESS, THEREFORE, CANNOT BE ALLOWED AS DEDUCTION AGAINST THE INCOME WHICH IS CHARGEABLE UNDER THE HEAD INCOME FROM OTHER SOURCES. 4. BY THE IMPUGNED ORDER, CIT(A) CONFIRMED THE ACTION OF THE AO. 5. I HAVE CONSIDERED RIVAL CONTENTIONS AND CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. I HAD ALSO DELIBERATED ON THE JUDICIAL PRONOUNCEMENTS REFERRED BY LOWER AUTHORITIES IN THEIR RESPECTIVE ORDERS AS WELL AS CITED BY LEARNED AR DURING THE COURSE OF HEARING BEFORE US. 6. THERE IS NO DISPUTE TO THE FACT THAT FIRST ASSESSEE HAS BORROWED FUNDS ON INTEREST AND THEREAFTER THE SAME FUND WAS GIVEN AS ADVANCE ON INTEREST . THE FUND S SO ADVAN CED EARNED INTEREST INCOME AND ASSESSEE HAS CLAIMED DEDUCTION OF INTEREST PAID ON THE BORROWED FUNDS AGAINST SUCH INTEREST INCOME. U/S.57(III) ANY EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY FOR EARNING SUCH INCOME IS TO BE ALLOWED AGAINST THE INCOME SO EA RNED. IN THE INSTANT CASE, INTEREST INCOME WAS EARNED BY ADVANCING THE FUNDS WHICH THE ASSESSEE HAS BORROWED AT INTEREST. UNDER THESE FACTS ITA NO. 2385/MUM/2017 M/S. JAY MANUFACTURING CO. PVT. LTD., 3 AND CIRCUMSTANCES, WE DO NOT FIND ANY JUSTIFICATION FOR DISALLOWANCE OF INTEREST EXPENDITURE AGAINST INTEREST INCOME . I DIRECT ACCORDINGLY. 7. IN THE RESULT, APPEAL IS ALLOWED IN TERMS INDICATED HEREINABOVE. O RDER PRONOUNCED IN THE OPEN COURT ON THIS 27 / 09 /2017 S D/ - ( R.C.SHARMA ) ACCOUNTANT MEMBER MUMBAI ; DATED 27 / 09 /201 7 KARUNA SR. PS COPY OF THE ORDER FORWARDED TO : BY ORDER, ( ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//