Kumari Nisha Surana, CHENNAI V. ITO, CHENNAI

ITA 249/CHNY/2017

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 4844 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-04-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2012-2013
• Appeal Filed On: 27-01-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M MURALI MOHAN
• Assessee Lawyers: D ANAND
• Keywords: Business income; Salary income
• Section: 5(2)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D (SMC) BENCH : CHENNAI . , ! [BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT M EMBER ] ./I.T.A. NO. 249/MDS/2017 / ASSESSMENT YEAR : 2012-2013. SHRI. KUMARI NISHA SURANA, NO.402, MINT STREET, SOWCARPET, CHENNAI 600 079. [PAN ACBPN 5248A ] VS. THE INCOME TAX OFFICER, NON CORPORATE WARD 5(2) CHENNAI -6. ( '# / APPELLANT) ( $%'# /RESPONDENT) / APPELLANT BY : SHRI. D. ANAND, ADVOCATE /RESPONDENT BY : SHRI M. MURALI MOHAN, JCIT. /DATE OF HEARING : 26-04-2017 ! /DATE OF PRONOUNCEMENT : 27-04-2017 & / O R D E R ASSESSEE IN THIS APPEAL IS AGGRIEVED THAT INTERES T EXPENDITURE CLAIMED BY IT U/S. 57(III) OF INCOME TA X ACT, 1961 (IN SHORT THE ACT) WAS NOT ALLOWED. ALTERNATIVELY AS PE R ASSESSEE IF THE EXPENDITURE WAS NOT ALLOWED U/S.57(III) OF THE ACT, IT OUGHT HAVE BEEN ALLOWED U/S.36(1)(III) OF THE ACT. ITA NO. 249/MDS/2017 :- 2 -: 2. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT ASSESSE E WAS A PARTNER IN ONE M/S. CHARIOT REALTY. AS PER LD. AUT HORISED REPRESENTATIVE ASSESSEE HAD CLAIMED DEDUCTION OF B1 0,16,503/- U/S. 57(III) OF THE ACT. FURTHER AS PER LD. AUTHORISED REPRESENTATIVE, THE LOANS ON WHICH INTEREST WAS PAID BY THE ASSESSEE WE RE USED FOR INVESTING IN THE CAPITAL OF M/S. CHARIOT REALTY. AC CORDING TO HIM, IF IT WAS NOT ALLOWABLE U/S. 57(III) OF THE ACT, IT OUGHT TO HAVE ALLOWED U/S.36(1)(III) OF THE ACT. LD. AUTHORISED REPRESEN TATIVE ALSO POINTED OUT THAT IN THE CASE OF ONE ANOTHER ASSESSEE NAMEL Y SHRI. LALITH KUMAR GULECHA WHO WAS ALSO A PARTNER IN M/S. CHARIO T REALTY, A SIMILAR ISSUE WAS ALLOWED BY THE TRIBUNAL IN APPEAL ITA NO .2958/MDS/2016, DATED 25.01.2017. 3. PER CONTRA, LD. DEPARTMENTAL REPRESENTATIVE STRONGL Y SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 4. I HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. CASE OF THE ASSESSEE IS THAT LOANS TAKEN ON WHICH INTEREST WERE PAID WERE INVESTED AS CAPITAL IN M/S. CHARIOT REALTY WHERE HE WAS A PARTNER. AS PER ASSESSEE JUST BECAUSE IT MADE A N ERRONEOUS CLAIM U/S. 56(III) OF THE ACT AN ALLOWANCE WHICH WAS OTH ERWISE DEDUCTABLE U/S.36 OF THE ACT OUGHT NOT HAVE BEEN DISALLOWED. IN A SIMILAR SITUATION IN THE CASE OF SHRI. LALITH KUMAR GULECHA (SUPRA ) WHO WAS ITA NO. 249/MDS/2017 :- 3 -: ALSO A PARTNER IN M/S. CHARIOT REALTY, THIS TRIBUNA L HAS HELD AT PARA 2 TO 12 AS UNDER:- 2. FACTS APROPOS ARE THAT ASSESSEE A PARTNER IN M/S. CHARIOT REALTY, WAS ALSO EARNING INCOME FROM SALARY . HE HAD FILED RETURN OF INCOME FOR THE IMPUGNED ASSESSM ENT YEAR DISCLOSING INCOME OF 68,320/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS IT WAS NOTED BY THE LD. ASS ESSING OFFICER THAT ASSESSEE HAD CLAIMED INTEREST EXPENDIT URE OF 7,15,694/- U/S.57(III) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). FROM THE DETAILS PRODUCED, LD. ASSES SING OFFICER FOUND THAT ASSESSEE HAD NOT EARNED ANY INCO ME UNDER THE HEAD INCOME FROM OTHER SOURCES. HE DISAL LOWED A CLAIM OF EXPENDITURE OF 7,15,694/-. 3. LD. ASSESSING OFFICER ALSO NOTED THAT IN THE BOOKS OF ACCOUNTS ASSESSEE HAD SHOWN UNSECURED LOANS OF 5,06,500/- FROM ONE SMT. KAMALA BAI AND 40,000/- FROM THE ESTATE OF PUKHRAJ GULECHA. AS PER LD. ASSESSIN G OFFICER ASSESSEE COULD NOT BRING IN ANY EVIDENCE TO PROVE THE ABOVE CREDITS. AN ADDITION OF 5,46,500/- WAS MADE. 4. ASSESSEE HAD CLAIMED IN THE RETURN OF INCOME A LOSS OF 4,31,677/-. AS PER LD. ASSESSING OFFICER THERE WAS NO DETAILS IN SUPPORT OF THE ABOVE CLAIM OF LOSS. HE ALSO MADE AN ADDITION OF 4,31,677/-. 5. AGGRIEVED, ASSESSEE MOVED IN APPEAL BEFORE LD. COMMISSIONER OF INCOME TAX (APPEALS). VIZ-A-VIZ DISALLOWANCE OF EXPENDITURE CLAIMED U/S.57 (III) OF THE ACT, ARGUMENT OF THE ASSESSEE WAS THAT IT REPRESENTED IN TEREST EXPENDITURE ON UNSECURED LOANS RAISED FROM VARIOUS PARTIES, WHICH WERE INVESTED IN M/S. CHARIOT REALTY . AS PER THE ASSESSEE DURING THE RELEVANT PREVIOUS YEAR IT COULD NOT EARN ANY INTEREST INCOME FROM M/S. CHARIOT REALTY A ND THEREFORE INTEREST OUTGO WAS CLAIMED AS EXPENDITURE . ASSESSEE ALSO MENTIONED THAT THE EXPENDITURE WAS ERRONEOUSLY SHOWN UNDER THE HEAD INCOME FROM OTHE R SOURCES IN THE RETURN OF INCOME. AS PER ASSESSEE IT OUGHT HAVE BEEN SHOWN UNDER THE HEAD INCOME FROM BUSINESS . ITA NO. 249/MDS/2017 :- 4 -: 6. VIZ-A-VIZ ADDITION MADE FOR LOAN CREDITORS, CONTENT ION OF THE ASSESSEE WAS THAT CONFIRMATIONS FROM BOTH CRED ITORS WERE PRODUCED, TRANSACTIONS WERE THROUGH BANK AND B OTH CREDITORS WERE ASSESSED TO TAX. 7. VIZ-A-VIZ DISALLOWANCE OF LOSS, ARGUMENT OF THE ASS ESSEE WAS THAT THE SAID SUM WAS THE RESULT OF NETTING INT EREST INCOME OF 2,86,199/- AGAINST INTEREST PAYMENT OF 7,15,694/-. CONTENTION OF THE ASSESSEE WAS THAT C LAIM OF 7,15,694/- WAS ALREADY DISALLOWED BY THE LD. ASSESS ING OFFICER AND THEREFORE DISALLOWANCE OF THE LOSS WOUL D RESULT IN DOUBLE ADDITION. 8. LD. COMMISSIONER OF INCOME TAX (APPEALS) AFTER GOI NG THROUGH THE SUBMISSIONS OF THE ASSESSEE HELD THAT I NTEREST OF 7,15,694/- CLAIMED U/S.57(III) OF THE ACT WAS RIGH TLY DISALLOWED BY THE LD. ASSESSING OFFICER SINCE NO IN TEREST WAS RECEIVED BY THE ASSESSEE FROM THE FIRM IN WHICH HE WAS A PARTNER AND SUCH INTEREST EVEN IF RECEIVED WO ULD ONLY BE BUSINESS INCOME U/S.28(V) OF THE ACT. VIZ-A -VIZ ADDITION FOR LOAN CREDITORS, OBSERVATION OF THE LD . COMMISSIONER OF INCOME TAX (APPEALS) WAS THAT ASSESSEE COULD NOT PROVE THE RECEIPTS TO HAVE BEEN THROUGH CHEQUES. VIZ-A-VIZ DISALLOWANCE OF LOSS, OBSERVATION OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) WAS THAT COMPUTATION OF THE LOSS BY SETTI NG OFF INTEREST INCOME WITH THE INTEREST EXPENDITURE WAS N OT EVIDENCED. IN THE RESULT, HE DISMISSED THE APPEAL OF THE ASSESSEE ON ALL THE ISSUES. 9. NOW BEFORE ME, LD. AUTHORISED REPRESENTATIVE STRONG LY ASSAILING THE ORDERS OF THE LOWER AUTHORITIES SUBMI TTED THAT BY VIRTUE OF CIRCULAR NO.14/1955 OF CBDT, OFFICERS OF THE DEPARTMENT WAS OBLIGED NOT TO TAKE ADVANTAGE OF THE IGNORANCE OF THE ASSESSEE BUT TO ASSIST A TAX PAYER IN EVERY REASONABLE WAY. AS PER LD. AUTHORISED REPRESENTATIVE ASSESSEE CLAIMED INTEREST EXPENDITUR E ERRONEOUSLY U/SEC.57(III) OF THE ACT. HOWEVER, ACC ORDING TO HIM, SINCE THE LOANS TAKEN WERE USED FOR ENHANCING ASSESSEES CAPITAL IN M/S. CHARIOT REALTY WHERE HE WAS A PARTNER, INTEREST EXPENDITURE ON SUCH LOANS HAD TO BE ALLOWED UNDER THE HEAD INCOME FROM BUSINESS. AS PE R LD. AUTHORISED REPRESENTATIVE JUST BECAUSE ASSESSEE MAD E A CLAIM UNDER THE WRONG HEAD OF INCOME, IT OUGHT NOT HAVE BEEN DISALLOWED. IN SO FAR AS LOAN CREDIT WAS CONS IDERED, ITA NO. 249/MDS/2017 :- 5 -: LD. AUTHORISED REPRESENTATIVE SUBMITTED THAT CONFIRMATIONS, PAN DETAILS ETC WERE SUBMITTED BUT T HESE WERE IGNORED. FURTHER LD. AUTHORISED REPRESENTATIVE SUBMITTED IF THE INTEREST EXPENDITURE WAS CONSIDERE D UNDER THE HEAD INCOME FROM BUSINESS, THE RELEVANT LOSS WO ULD HAVE TO BE ALLOWED. 10. PER CONTRA, LD. DEPARTMENTAL REPRESENTATIVE SUPPOR TED THE ORDERS OF THE AUTHORITIES BELOW. 11. I HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE ORDERS. IN SO FOR AS INTEREST EXPENDITURE OF 7,15,694/- IS CONCERNED CONTENTION OF THE ASSESSEE IS THAT LOANS RAISED WERE USED FOR ENHANCING THE CAPITAL IN THE FIRM IN WHICH HE WAS A PARTNER. SINCE INTEREST INCOME AND PROFIT SH ARE FROM THE FIRM WOULD BE ASSESSABLE UNDER THE HEAD INCOME FROM BUSINESS, INTEREST ON LOANS IF ANY RAISED BY THE AS SESSEE FOR INVESTING IN THE CAPITAL OF A FIRM WOULD DEFINI TELY BE ALLOWABLE UNDER THE SAME HEAD. JUST BECAUSE ASSESS EE MADE A CLAIM UNDER THE HEAD INCOME FROM OTHER SOURC ES WOULD NOT DEMERIT ITS CLAIM IN ANY MANNER. LD. ASS ESSING OFFICER IN MY OPINION WAS DUTY BOUND TO CONSIDER TH E CLAIM OF THE ASSESSEE EVEN IF IT WAS MADE UNDER A WRONG H EAD. VIZ-A-VIZ CLAIM OF THE LOAN CREDITORS, NONE OF THE LOWER AUTHORITIES HAD VERIFIED WHETHER CONCERNED CREDITOR S WERE ASSESSED TO TAX AND WHETHER DETAILS GIVEN BY THE AS SESSEE IN THIS REGARD WAS CORRECT OR NOT. VIZ-A- VIZ DISA LLOWANCE OF LOSS ONCE INTEREST EXPENDITURE IS CONSIDERED UNDER THE HEAD INCOME FROM BUSINESS THE CLAIM OF THE LOSS IF ANY WOULD GET SHIFTED TO THAT HEAD AND HAS TO BE CONSID ERED SEPARATELY. NO DOUBT AS MENTIONED BY THE LD. AUTHOR ISED REPRESENTATIVE ANY DISALLOWANCE SHOULD NOT RESULT I N A DOUBLE ADDITION. IN THE CIRCUMSTANCES, WE ARE OF TH E OPINION THAT ALL THE ISSUES RAISED BY THE ASSESSEE REQUIRES A FRESH LOOK BY THE LD. ASSESSING OFFICER. WE SET A SIDE THE ORDERS OF THE LOWER AUTHORITIES AND REMIT THE MATTE R BACK TO THE FILE OF THE LD. ASSESSING OFFICER FOR CONSIDER ATION DENOVO. 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWE D FOR STATISTICAL PURPOSE. ITA NO. 249/MDS/2017 :- 6 -: SINCE THE FACTS SITUATION IS SAME, I GIVE SIMILAR D IRECTION AS GIVEN IN SHRI. LALITH KUMAR GULECHA (SUPRA), AT PARA 11 OF THE SAID ORDER. 5. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED F OR STATISTICAL PURPOSE. ORDER PRONOUNCED ON THURSDAY, THE 27TH DAY OF APRIL, 2017, AT CHENNAI. SD/- ( . ) (ABRAHAM P. GEORGE) / ACCOUNTANT MEMBER '# / CHENNAI $% / DATED: 27 TH APRIL, 2017. KV %& '()( / COPY TO: 1 . / APPELLANT 3. *+, / CIT(A) 5. (-. / / DR 2. / RESPONDENT 4. * / CIT 6. .01 / GF