Shri Vishnubhai Harjivandas Patel, Kadi V. The Asstt. Commissioner of Income Tax, Mehsana Circle, Mehsana

ITA 2755/AHD/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 8377 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 5 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-04-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2013-2014
• Appeal Filed On: 25-10-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: RUPESH R SHAH
• Keywords: Business income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH (BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER & SHRI S. S. GODARA, JUDICIAL MEMBER) ITA. NO: 2755/AHD/2016 (ASSESSMENT YEAR: 2013-14) SHRI VISHNUBHAI HARJIVANDAS PATEL 42, LAXMI NARAYAN SOCIETY, NR. SHEFALI CINEMA KADI V/S ACIT MEHSANA CIRCLE, MEHSANA (APPELLANT) (RESPONDENT) PAN: ACAPP2488H APPELLANT BY : SHRI RUPESH R.SHAH, AR RESPONDENT BY : SHRI MUDIT NAGPAL, SR. D.R. ( )/ ORDER DATE OF HEARING : 13 -04-201 8 DATE OF PRONOUNCEMENT : 17 -04-2018 PER N.K. BILLAIYA, ACCOUNTANT MEMBER 1. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD. CIT(A), GANDHINAGAR, AHMEDABAD DATED 30.09.2016 PERTAINING TO A.Y. 2013-14. ITA NO. 2755 -AHD-2016 . A.Y. 2013-1 4 2 2. THE SUM AND SUBSTANCE OF THE GRIEVANCE OF THE ASSES SEE IS THAT THE LD. CIT(A) ERRED ON FACTS IN PARTLY ALLOWING INTEREST EXPENSES AND ERRED IN CONFIRMING THE DISALLOWANCE OF INTEREST AT RS. 6,56,020/-. 3. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT DURIN G THE COURSE OF THE SCRUTINY ASSESSMENT PROCEEDINGS, THE A.O. NOTICED THAT THE A SSESSEE HAS CLAIMED INTEREST DEDUCTION AT RS. 19.08 LACS. THE A.O. FOUND THAT TH E ASSESSEE HAS DEPLOYED INTEREST BEARING FUNDS IN GIVING INTEREST FREE ADVA NCES AND WAS OF THE OPINION THAT THE TOTAL INTEREST EXPENSES CLAIMED BY THE ASS ESSEE IS NOT ALLOWABLE. THE ASSESSEE WAS ASKED TO JUSTIFY ITS CLAIM OF INTEREST AND IN ITS REPLY, THE ASSESSEE SUBMITTED THAT HE IS A PARTNER IN VARIOUS PARTNERSH IP FIRM AND HAS BORROWED MONEY FOR INVESTMENT IN THOSE PARTNERSHIP FIRMS FRO M WHICH HE IS EARNING INTEREST INCOME AND REMUNERATION. 4. AFTER CONSIDERING THE REPLY OF THE ASSESSEE, THE A. O. OBSERVED THAT THE ASSESSEE HAS FAILED TO PROVE THAT THE INTEREST BEARING FUNDS WERE UTILIZED FOR THE PURPOSE OF BUSINESS AND ACCORDINGLY DISALLOWED RS. 13,01,02 4/-. 5. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) A ND REITERATED ITS CLAIM OF DEDUCTION OF INTEREST IN TOTO. 6. AFTER CONSIDERING THE FACTS AND THE SUBMISSIONS, TH E LD. CIT(A) OBSERVED THAT THE ASSESSEE IS RECEIVING INTEREST INCOME FROM THRE E PARTNERSHIP FIRM WHICH IS SHOWN AS INCOME FROM BUSINESS AND PROFESSION. THE L D. CIT(A) FURTHER FOUND THAT THE ASSESSEE IS ALSO RECEIVING INTEREST INCOME UNDER THE HEAD INCOME FROM OTHER SOURCS AND HAS SHOWN TOTAL INTEREST OF RS. 1 8.69 LACS AGAINST WHICH TOTAL INTEREST EXPENDITURE IS CLAIMED AT RS. 18.93 LACS. THE LD. CIT(A) FURTHER ITA NO. 2755 -AHD-2016 . A.Y. 2013-1 4 3 OBSERVED THAT WHILE ARRIVING AT THE FIGURE OF DISAL LOWANCE OF INTEREST, A.O. WAS INCORRECT IN CONSIDERING ONLY INVESTMENT IN ASSETS FROM WHICH INCOME FROM OTHER SOURCES ARE EARNED. SINCE THE ASSESSEE WAS HA VING MIXED FUNDS AND SUCH FUNDS ARE EITHER INVESTED IN ASSETS WHICH GENERATE BUSINESS INCOME OR INCOME FROM OTHER SOURCES AND ON THESE FACTS, THE LD. CIT( A) DIRECTED THE A.O. TO RESTRICT THE DISALLOWANCE TO RS. 6,56,020/-. 7. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE REITERA TED WHAT HAS BEEN SUBMITTED BEFORE THE LOWER AUTHORITIES. THE LD. COUNSEL FURTH ER POINTED OUT THAT SIMILAR INTEREST EXPENSES WERE DISALLOWED IN THREE CONSECUT IVE YEARS AND THE FINAL POSITION OF THE INTEREST DISALLOWED IS AS UNDER:- E. RELIEF BY HON'BLE ITAT ON INTEREST EXPENSES IN A .Y.2011-12 ASSESSMENT YEAR INTEREST EARNED INTEREST PAID ITAT RESTRICTED TO THE EXTENT OF INTEREST A.Y. 2011 - 12 9,37,515 16,54,754 7,17,239 JA.Y.2012 - 13 15,56,849 20,36,553 3,79,704 A. RELIEF BY HON'BLE ITAT ON INTEREST EXPENSES IN A.Y. 2012-13 ASSESSMENT YEAR INTEREST EARNED INTEREST PAID ITAT RESTRICTED TO THE EXTENT OF INTEREST A.Y. 2012 - 13 15,56,849 20,36,553 - 3,79,704 8. IT IS THE SAY OF THE LD. COUNSEL THAT THE FACTS OF THE CASE IN HAND SHOULD BE CONSIDERED IN THE LIGHT OF THE PAST HISTORY. PER CO NTRA, THE LD. D.R. STRONGLY SUPPORTED THE FINDINGS OF THE A.O. ITA NO. 2755 -AHD-2016 . A.Y. 2013-1 4 4 9. WE HAVE CAREFULLY CONSIDERED THE ORDERS OF THE AUTH ORITIES BELOW. THERE IS NO DISPUTE THAT THE ASSESSEE IS SHOWING INTEREST EARNE D FROM PARTNERSHIP FIRMS UNDER THE HEAD PROFITS AND GAINS OF BUSINESS AND P ROFESSION AND INTEREST EARNED FROM OTHER SOURCES ARE SHOWN UNDER THE HEAD INCOME FROM OTHER SOURCES. IN OTHER WORDS, THE ASSESSEE HAS EARNED I NTEREST INCOME OF RS. 18.69 LACS WHEREAS INCURRED INTEREST EXPENDITURE AT RS. 1 8.93 LACS. CONSIDERING THE PAST HISTORY OF THE ASSESSEE THE DISALLOWABLE COMPO NENT IN RESPECT OF INTEREST COMES TO RS. 24,000/- ONLY. THIS IS IN LINE WITH TH E DECISION OF THE CO-ORDINATE BENCH IN ITA NO. 2983/AHD/2015 & 1618/AHD/2016. 10. CONSIDERING THE PAST HISTORY OF THE ASSESSEE IN THE LIGHT OF THE FINDINGS OF THE CO-ORDINATE BENCH, WE MODIFY THE FINDINGS OF THE LD . CIT(A) AND DIRECT THE A.O. TO RESTRICT THE DISALLOWANCE OF INTEREST TO RS . 24,000/-. APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 17 - 04- 20 18 SD/- SD/- (S. S. GODARA) (N. K. BILLAIYA) JUDICIAL MEMBER TRUE COPY ACCOUNTANT MEMBER AHMEDABAD: DATED 17 /04/2018 RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHME DABAD