DILIP KUMAR MURARKA - HUF, MUMBAI V. INCOME TAX OFFICER, WARD 20(1)(4), MUMBAI

ITA 2670/MUM/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 5777 (ITAT-MUMBAI)
• Duration Of Justice: 8 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Appeal Filed On: 01-05-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K BEPARI
• Assessee Lawyers: LALCHAND CHOUDHARY

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY , JUDICIAL MEMBER AND SHRI N.K. PRADHAN, ACCOUNTANT MEMBER ITA NO. 2670 / MUM . /2018 ( ASSESSMENT YEAR : 20 12 13 ) DILIP KUMAR MURARKA HUF FLAT NO.42, FALCONS CREST PATEL TANK ROAD PAREL MUMBAI 400 012 PAN AABHD9425R . APPELLANT V/S INCOME TAX OFFICER WARD 20 ( 1 ) (4) , MUMBAI . RESPONDENT ASSESSEE BY : SHRI LALCHAND CHOUDHARY REVENUE BY : SHRI S.K. BEPARI DATE OF HEARING 06 . 1 2 .201 8 DATE OF ORDER 30.01.2019 O R D E R THE AFORESAID APPEAL HAS BEEN FILED BY THE ASSESSEE CHALLENGING THE ORDER DATED 23 RD FEBRUARY 2018, PASSED BY THE LEARNED COMMISSIONER (APPEALS) 32, MUMBAI, PERTAINING TO ASSESSMENT YEAR 2012 13. 2 . THE DISPUTE IN THE PRESENT APPEALIS CONFINED TO DISALLOWANCE OF INTEREST EXPENDITURE AMOUNTING TO ` 5,04,833. 2 DILIP KUMAR MURARKA HUF 3 . BRIEF FACTS ARE, THE ASSESSEE HUF FILED ITS RETURN OF INCOME ON 30 TH JULY 2012, DECLARING TOTAL INCOME OF ` 17,713. DURING THE ASSESSMENT PROCEED INGS, THE ASSESSING OFFICER WHILE EXAMINING THE RETURN OF INCOME AND COMPUTATION OF TOTAL INCOME FILED BY THE ASSESSEE NOTICED THAT THE ASSESSEE HAS AVAILED LOAN OF ` 96,87,533, IN THE RELEVANT PREVIOUS YEAR INCLUDING INTEREST OUT OF WHICH THE ASSESSEE HAS ADVANCED LOAN TO THE INDIVIDUAL ACCOUNT AMOUNTING TO ` 78,49,297. HE ALSO NOTICED THAT ON THE LOAN ADVANCED TO THE INDIVIDUAL ACCOUNT, THE ASSESSEE HAS EARNED INTEREST INCOME AND HAS CLAIMED TDS AGAINST SUCH INCOME. WHEREAS, THE ASSESSEE HAS PAID INTEREST ON BORROWED LOAN WITHOUT DEDUCTING TDS AT SOURCE UNDER SECTION 194A OF THE INCOME TAX ACT, 1961 (FOR SHORT 'THE ACT' ). THEREFORE, HE CALLED UPON THE ASSESSEE TO EXPLAIN WHY THE TRANSFER OF LOAN FUND TO INDIVIDUAL ACCOUNT SHOULD NOT BE TREATED TO BE CAPITA L IN NATURE AND THE INTEREST EXPENDITURE CLAIMED AS DEDUCTION UNDER SECTION 57(III) OF THE ACT SHOULD NOT BE DISALLOWED. THOUGH, THE ASSESSEE JUSTIFIED THE DEDUCTION CLAIMED THROUGH REPLY DATED 25 TH FEBRUARY 2015, HOWEVER, REJECTING THE EXPLANATION OF THE ASSESSEE, THE ASSESSING OFFICER DISALLOWED THE INTEREST EXPENDITURE CLAIMED BY THE ASSESSEE AMOUNTING TO ` 5,04,833. 4 . THOUGH, THE ASSESSEE CHALLENGED THE AFORESAID DISALLOWANCE BEFORE THE FIRST APPELLATE AUTHORITY, HOWEVER, THE LEARNED 3 DILIP KUMAR MURARKA HUF COMMISSIONER (APPEALS) REJECTED ASSESSEES CLAIM BY OBSERVING THAT THE BASIC CONDITION OF SECTION 57(III) OF THE ACT IS NOT SATISFIED. 5 . THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED , THE ASSESSEE HAS ADVANCED LOAN TO THE INDIVIDUAL ACCOUNT OUT OF THE BORROWED FUNDS A ND HAS EARNED INTEREST INCOME .W HEREAS , IT HAS PAID INTEREST ON THE UNSECURED LOAN BORROWED FROM OTHERS. THUS, HE SUBMITTED , THERE IS A DIRECT NEXUS BETWEEN THE INTEREST INCOME AND INTEREST EXPENDITURE. THAT BEING THE CASE, THE INTEREST EXPENDITURE CLAIMED BY THE ASSESSEE SHOULD BE DISALLOWED. 6 . THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED UPON THE OBSERVATIONS OF THE LEARNED COMMISSIONER (APPEALS) AND THE ASSESSING OFFICER. 7 . WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED MATERIAL ON RECORD. AS COULD BE SEEN FROM THE FACTS DISCUSSED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER , THERE IS NO DISPUTE THAT OUT OF THE UNSECURED LOAN A VAILED BY THE ASSESSEE, SOME AMOUNT WAS TRANSFERRED TO THE IN DIVIDUAL ACCOUNT AS LOAN. IT IS ALSO A FACT THAT THE INTEREST INCOME ON THE LOAN ADVANCED TO THE INDIVIDUAL ACCOUNT HAS BEEN OFFERED AS INCOME. THEREFORE, THERE IS A DIRECT NEXUS BETWEEN THE UNSECURED LOAN AVAILED BY THE ASSESSEE AND LOAN ADVANCED TO THE I NDIVIDUAL ACCOUNT. THAT BEING THE CASE, THERE IS ALSO A DIRECT NEXUS 4 DILIP KUMAR MURARKA HUF BETWEEN THE INTEREST PAID ON THE UNSECURED LOAN AVAILED AND THE INTEREST INCOME EARNED ON THE LOAN ADVANCED TO THE INDIVIDUAL ACCOUNT. THEREFORE, IT CANNOT BE SAID THAT THE INTEREST EXPEN DITURE IS NOT WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF EARNING THE INTEREST INCOME AS PER SECTION 57(III) OF THE ACT. THAT BEING THE CASE, THE DISALLOWANCE MADE BY THE ASSESSING OFFICER AND SUSTAINED BY THE LEARNED COMMISSIONER (APPEALS) IS HEREBY DELETED . GROUND RAISED IS ALLOWED. 8 . IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 30.01.2019 SD/ N.K. PRADHAN ACCOUNTANT MEMBER SD/ SAKTIJIT DEY JUDICIAL MEMBER MUMBAI, DATED: 30.01.2019 COPY OF THE ORDER FORWARDED TO : ( 1 ) THE ASSESSEE; ( 2 ) THE REVENUE; ( 3 ) THE CIT(A); ( 4 ) THE CIT, MUMBAI CITY CONCERNED; ( 5 ) THE DR, ITAT, MUMBAI; ( 6 ) GUARD FILE . TRUE COPY BY ORDER PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY (SR. PRIVATE SECRETARY) ITAT, MUMBAI