Vinod Kumar Gupta, Kanpur V. DY. Commissioner of Income Tax, Kanpur

ITA 25/LKW/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 1144 (ITAT-LUCKNOW)
• Duration Of Justice: 1 year(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2013-2014
• Appeal Filed On: 06-01-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Section: 56

Judgement Text

I.T.A. NO.25/LKW/2017 ASSESSMENT YEAR:2013-14 1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH A, LUCKNOW BEFORE SHRI T. S. KAPOOR, ACCOUNTANT MEMBER AND SHRI PARTHA SARATHI CHAUDHURY, JUDICIAL MEMBER ITA NO.25/LKW/2017 ASSESSMENT YEAR:2013-14 SHRI VINOD KUMAR GUPTA, 1/33, KRISHNA NAGAR, KANPUR. PAN:ACZPG 0749 D VS. DY.C.I.T., CENTRAL CIRCLE-1, KANPUR. (APPELLANT) (RESPONDENT) O R D E R PER T. S. KAPOOR, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF CIT(A) DATED 21/11/2016. THE GROUNDS OF APPEAL TAKEN BY T HE ASSESSEE ARE REPRODUCED BELOW: 1. THAT THE LEARNED CIT (APPEAL) HAS ERRED IN CONF IRMING THE DISALLOWANCE ON ACCOUNT OF CHARITY AND DONATION OF RS.26,000.00. 2. THAT THE LEARNED CIT (APPEALS) HAS ERRED IN CONF IRMING THE DISALLOWANCE ON ACCOUNT OF INTEREST OF RS.2,29,353.00. 3. THAT THE LEARNED CIT (APPEALS) HAS ERRED IN CONF IRMING THE DISALLOWANCE ON ACCOUNT OF INTEREST DEDUCTED IN COMPUTATION OF INCOME OF RS.1,22,512.00. APPELLANT BY SHRI ASHISH JAISWAL, ADVOCATE RESPONDENT BY S HRI AMIT NIGAM, D. R. DATE OF HEARING 30/01/2018 DATE OF PRONOUNCEMENT 31 / 01 /201 8 I.T.A. NO.25/LKW/2017 ASSESSMENT YEAR:2013-14 2 4. THAT THE ADDITION / DISALLOWANCES CONFIRMED BY LEARNED CIT (APPEAL) ARE ARBITRARY AND UNLAWFUL. 2. AT THE OUTSET, LEARNED A. R. STATED THAT HE WILL NOT BE PRESSING GROUND NO. 1 THEREFORE, THE SAME IS DISMISSED AS NOT PRESS ED. 3. AS REGARDS GROUND NO. 2 REGARDING DISALLOWANCE O F INTEREST OF RS.2,29,353/-, LEARNED A. R. SUBMITTED THAT ASSESSE E HAD INCLUDED THE INCOME OF HIS MINOR DAUGHTER IN HIS COMPUTATION OF INCOME AND THE INTEREST PAID BY HER ON LOANS TAKEN FOR CONSTRUCTION OF GUES T HOUSE WAS CLAIMED AS DEDUCTION FROM THE INTEREST INCOME WHICH THE AUTHOR ITIES BELOW HAD DISALLOWED. LEARNED A. R. SUBMITTED THAT ASSESSEE A LONG WITH HIS DAUGHTER HAD ENTERED INTO A LEASE AGREEMENT WITH M/S KADAK F AMILY TEA PRIVATE LIMITED FOR CONSTRUCTION OF A GUEST HOUSE ON THE LA ND BELONGING TO THE MINOR DAUGHTER ARADHANA GUPTA AND AS PER THE TERMS OF AGR EEMENT THE CONSTRUCTION COSTS OF THE GUEST WERE TO BE BORNE OU T OF LOAN ADVANCED BY KADAK FAMILY TEA TO ARADHANA GUPTA. IT WAS SUBMITT ED THAT THE SAID LOAN TAKEN FROM KADAK FAMILY TEA PRIVATE LIMITED WAS LAT ER ON REPAID BY TAKING FRESH LOANS FROM THE RELATED PARTIES AT A MARGINAL INTEREST RATE OF 6% PER YEAR. IT WAS FURTHER SUBMITTED THAT AS THE GUEST H OUSE DID NOT GENERATE ANY REVENUE DURING THE YEAR UNDER APPEAL THEREFORE, NO INCOME WAS DECLARED IN THE RETURN OF INCOME. HOWEVER FROM THE FINANCIAL YE AR 2015-16 THE GUEST HOUSE HAD BECOME OPERATIONAL AND INCOME FROM IT HAS BEEN CLUBBED WITH THE INCOME OF THE ASSESSEE. IT WAS ARGUED THAT SIN CE ALL THE INCOME AND EXPENDITURE OF THE MINOR DAUGHTER OF THE ASSESSEE A RE CLUBBED WITH THE INCOME OF THE ASSESSEE THEREFORE, THE DENIAL OF INT EREST PAID WAS NOT JUSTIFIED. 4. AS REGARDS OTHER DISALLOWANCE OF INTEREST OF RS. 1,22,512/-, LEARNED A. R. SUBMITTED THAT THE ASSESSING OFFICER, WITHOUT AF FORDING ANY REASONABLE I.T.A. NO.25/LKW/2017 ASSESSMENT YEAR:2013-14 3 OPPORTUNITY AND WITHOUT CONFRONTING THE ASSESSEE, H AD MADE DISALLOWANCE. IT WAS SUBMITTED THAT THE AUTHORITIES BELOW HAD FAI LED TO APPRECIATE THAT THE ASSESSEE HAD RAISED UNSECURED LOANS WHICH WERE NOT INTRODUCED INTO THE BUSINESS OF THE ASSESSEE BUT THESE FUNDS WERE UTILI ZED BY THE ASSESSEE FOR EARNING INTEREST INCOME WHICH WAS OFFERED TO TAX AS INCOME FROM OTHER SOURCES AND THEREFORE, THE INTEREST PAID WAS DEDUCT IBLE FROM INCOME FROM OTHER SOURCES AS THE FUNDS OBTAINED THROUGH LOANS W ERE UTILIZED FOR EARNING INTEREST INCOME. LEARNED A. R. IN THIS RESPECT INV ITED OUT ATTENTION TO THE COMPUTATION OF INCOME AND STATED THAT THE GROSS INT EREST INCOME AMOUNTED TO RS.20,87,296/- WHICH WAS MUCH MORE THAN THE INTE REST PAID. IT WAS FURTHER SUBMITTED THAT THE LOAN WAS TAKEN FROM ONE PARTY M/S BHARTIYA AGENCY AND DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAD PAID INTEREST ON SUCH LOAN AMOUNTING TO RS.1,20,000/- ON WHICH TAX WAS ALSO DEDUCTED AMOUNTING TO RS.12,000/-. IN THIS RESPECT OUR ATTENTION WAS INVITED TO COPY OF ACCOUNT OF M/S BHARTIYA AGENCY P LACED AT PAGES 39 AND 40 OF THE PAPER BOOK. OUR ATTENTION WAS ALSO INVIT ED TO PAGES 41 AND 42 OF THE PAPER BOOK TO HIGHLIGHT THAT THE TAX WAS DEDUCT ED ON THE INTEREST OF RS.1,20,000/- AND TDS RETURN WAS DULY FILED. 5. LEARNED D. R., ON THE OTHER HAND, HEAVILY PLACED HIS RELIANCE ON THE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT THE ASSESSEE HAD CLAIMED INTEREST ON BEHALF OF HIS MINOR DAUGHTER FOR THE PR OPERTY WHICH HAD NOT BEEN PUT TO USE AND THERE WAS NO MATCHING INCOME AG AINST SUCH EXPENDITURE AND THEREFORE, THE AUTHORITIES BELOW HA VE RIGHTLY MADE THE ADDITIONS. SIMILARLY, HE ARGUED THAT FOR ANOTHER DI SALLOWANCE OF RS.1,22,512/- THE ASSESSEE WAS NOT ABLE TO SUBSTANT IATE THAT THE BORROWED FUNDS WERE UTILIZED FOR EARNING INTEREST INCOME. I.T.A. NO.25/LKW/2017 ASSESSMENT YEAR:2013-14 4 6. WE HAVE HEARD THE RIVAL PARTIES AND HAVE GONE T HROUGH THE MATERIAL PLACED ON RECORD. AS REGARDS THE SECOND GROUND REG ARDING DISALLOWANCE OF INTEREST WHICH THE ASSESSEE HAD CLAIMED THAT HIS MI NOR DAUGHTER HAD PAID THE SAME TO RELATED PARTIES FOR MAKING INVESTMENT I N THE GUEST HOUSE, WE FIND THAT IT IS AN ADMITTED FACT THAT NO INCOME FRO M THE GUEST HOUSE HAS ACCRUED TO THE MINOR DAUGHTER OF THE ASSESSEE AND T HEREFORE, NO INCOME WAS DECLARED IN THE RETURN OF INCOME. THE ASSESSEE IN THE COMPUTATION OF INCOME, PLACED AT PAGE NO. 29 OF THE PAPER BOOK, HA D CLAIMED THE DEDUCTION ON ACCOUNT OF INTEREST PAID BY MINOR DAUG HTER AGAINST THE INCOME FROM OTHER SOURCES. THE INCOME FROM OTHER SOURCES IS TAXABLE UNDER THE PROVISIONS OF I.T. ACT AND THESE PROVISIONS ARE CON TAINED IN SECTION 56 ONWARDS. THE DEDUCTIONS PERMITTED TO BE MADE FROM THE INCOME U/S 56 ARE CONTAINED IN SECTION 57 OF THE ACT. THE DEDUCTIONS AS CONTAINED IN SECTION 57 ARE SPECIFIC AND APPLY TO VARIOUS INCOME UNDER T HE HEAD INCOME FROM OTHER SOURCES. CLAUSE (III) OF SECTION 57 STATES T HAT ANY OTHER EXPENDITURE LAID OUT OR EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF MAKING OR EARNING SUCH INCOME WILL BE ALLOWED AS DEDUCTION AG AINST INCOME FROM OTHER SOURCES. THE ASSESSEE HAD NOT BEEN ABLE TO SUBSTAN TIATE THAT THE INTEREST PAID BY HIS MINOR DAUGHTER WAS FOR EARNING OF ANY I NCOME AS DEFINED IN SECTION 56 AS INCOME FROM OTHER SOURCES. RATHER TH E ASSESSEE HAS MADE OUT A CASE THAT THE INTEREST WAS PAID ON BORROWED F UNDS WHICH WERE UTILIZED FOR CONSTRUCTION OF GUEST HOUSE AND WHICH TOO HAD N OT BECOME OPERATIONAL. THEREFORE, WE FIND THAT AUTHORITIES BELOW HAVE RIGH TLY DISALLOWED THE CLAIM OF THE ASSESSEE AND WE DO NOT FIND ANY INFIRMITY IN THE SAME. THEREFORE, GROUND NO. 2 IS DISMISSED. 6.1 AS REGARDS DISALLOWANCE OF INTEREST AMOUNTING T O RS.1,22,512/-, WHICH THE ASSESSEE HAD PAID FOR EARNING OF INCOME UNDER T HE HEAD INCOME FROM OTHER SOURCES, WE FIND THAT THE ASSESSEE HAD EARNED A GROSS INCOME OF I.T.A. NO.25/LKW/2017 ASSESSMENT YEAR:2013-14 5 RS.20,87,296/- WHICH INCLUDES INTEREST ON FDR AND W HICH THE ASSESSEE HAS CLAIMED TO HAVE UTILIZED THE BORROWED FUNDS FOR EAR NING INTEREST. THEREFORE, THIS DEDUCTION CLAIMED BY THE ASSESSEE IS DIRECTLY COVERED BY THE PROVISIONS OF CLAUSE (III) OF SECTION 57 WHICH ALLOWS DEDUCTIO N FOR ANY EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF EARNING SUCH INCOME. WE FURTHER FIND THAT THE ASSESSEE HAS DULY DEDUCTED TD S WHICH IS APPARENT FROM PAGES 41 AND 42 OF THE PAPER BOOK AND FURTHER THE PAYMENT OF INTEREST IS EVIDENCED FROM THE COPY OF ACCOUNT OF LENDER PLA CED AT PAGE NO. 40 OF THE PAPER BOOK WHICH REFLECTS THAT THERE WAS OPENIN G BALANCE OF RS.11,08,000/- AS UNSECURED LOAN IN THE HANDS OF TH E ASSESSEE. THEREFORE, WE ARE IN AGREEMENT WITH THE ARGUMENTS OF THE ASSES SEE THAT DISALLOWANCE WAS NOT WARRANTED AS THE SAME WAS PAID FOR EARNING OF THE INCOME. IN VIEW OF THE ABOVE GROUND NO. 3 IS ALLOWED. 7. IN NUTSHELL THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. (ORDER PRONOUNCED IN THE OPEN COURT ON 31/01 /2018) SD/. SD/. (PARTHA SARATHI CHAUDHURY) ( T. S. KAPOOR ) JUDICIAL MEMBER A CCOUNTANT MEMBER DATED:31/01/2018 *SINGH COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. CONCERNED CIT 4. THE CIT(A) 5. D.R., I.T.A.T., LUCKNOW