MOTRAM G. CHAWLA, MUMBAI V. DCIT CIR 24(2), MUMBAI

ITA 2861/MUM/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 2242 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-07-2016
• Appeal Filed By: Assessee
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 13-05-2015
• Court: TRIBUNAL
• Department Lawyers: NEIL PHILIP
• Keywords: Earning of tax free income
• Section: 14A; 2

Judgement Text

, . . , IN THE INCOME TAX APPELLATE TRIBUNAL SMC , BENCH MUMBAI BEFORE SHRI R.C.SHARMA, ACCOUNTANT MEMBER ./ ITA NO. 2861 / MUM/20 1 5 ( / ASSESSMENT YEAR : 20 10 - 20 11 MOTRAM G. CHAWLA, 203, SHANTI SADAN, LOKHANDWALA COMPLEX, ANDHERI (WEST), MUMBAI - 58 VS. DCIT, CIRCLE - 24(2), MUMBAI ./ ./ PAN/GIR NO. : A CQPC 8601 H ( / APPELLANT ) .. ( / RESPONDENT ) /ASSESSEE BY : SHRI ADITYA AJGAONKAR /REVENUE BY : SHRI NEIL PHILIP / DATE OF HEARING : 12 / 0 7 /201 6 / DATE OF PRONOUNCEMENT 27 / 07 /201 6 / O R D E R THIS IS AN APPEAL FILED B Y THE ASSESSEE AGAINST THE ORDER OF CIT( A) - MUMBAI, FOR THE ASSESSMENT YEAR 20 10 - 20 11 . 2. IN THIS APPEAL THE ASSESSEE IS AGGRIEVED FOR DISALLOWANCE U/S 14A OF OF RS.2, 85,383/ - BEING INTEREST CHARGED BY MAMTA ENTERPRISES, IN WHICH ASSESSEE IS A PARTNER, HAD DEBIT BALANCE IN THE CAPITAL ACCOUNT. 3 . RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. THE ASSESSEE IS A PARTNER IN THE FIRM M/S MAMTA ENTERPRISES. DURING THE YEAR UNDER APPEAL THE FIRM CHARGED INTEREST OF RS.20,79,259/ - FROM ITS PARTNERS AND SHOWN THE SAME AS INCOME IN THE PROFIT AND L OSS ACCOUNT AS INTEREST FROM PARTNERS. OUT OF RS.20,79,259/ - THE ASSESSEE PAID RS.2,85,383/ - ON THE DEBIT BALANCE STANDING IN THE CAPITAL BALANCE. THE ASSESSEE ALSO RECEIVED PROFIT OF RS.2,06,868/ - FROM THE ABOVE FIRM WHICH WAS SHOWN AS ITA NO. 2861 / 1 5 2 EXEMPT U/S.10. THE ASSESSEE CLAIMED INTEREST OF RS.2,85,383/ - DEBITED BY M/S MAMTA ENTERPRISES . HOWEVER, THE AO HAS DISALLOWED INTEREST OF RS.2,85,383/ - U/S.14A. 4. I DO NOT FIND ANY MERIT IN THE ACTION OF AO, INSOFAR AS INTEREST WAS PAID ON THE LOAN TAKEN FROM THE FIRM AND IT WAS NOT AN EXPENDITURE INCURRED FOR EARNING ANY EXEMPT INCOME FROM THE PARTNERSHIP FIRM. ACCORDINGLY, I DO NOT FIND ANY MERIT IN THE DISALLOWANCE SO MADE BY THE AO. I ALSO FOUND THAT FIRM HAS PAID TAX ON THE INTEREST CHARGED FROM ITS PARTNERS. THERE CA NNOT BE DOUBLE TAX ON THE SAME INCOME. 5. DURING THE YEAR UNDER ASSESSMENT THE ASSESSEE HAS EARNED INTEREST OF RS.4,23,547/ - FROM LOANS AND ADVANCES GIVEN BY HIM. THE ASSESSEE ALSO PAID INTEREST OF RS.2,24,254/ - AGAINST THE INTEREST INCOME OF RS.3,63,973/ - AND HAS SHOWN NET INTEREST INCOME OF RS.1,39,715/ - AND DECLARED THE SAME UNDER THE HEAD INCOME FROM OTHER SOURCES. THE AO ALSO DISALLOWED INTEREST OF RS.2,24,254/ - . 6. I FOUND THAT THE AO HAS APPLIED THE PROVISION OF SECTION 57(III) AND DISALLOWED THE S AME MENTIONING IN THE ASSESSMENT ORDER THAT THE ASSESSEE HAS FAILED TO ESTABLISH THAT THE LOANS/BORROWINGS WERE MADE IN ORDER TO EARN INTEREST INCOME. FROM THE PROFIT & LOSS ACCOUNT I FOUND THAT THE ASSESSEE HAS RECEIVED INTEREST OF RS.3,63,973/ - FROM M/S SHREE LAXMI ENTERPRISES TO WHOM THE ASSESSEE HAS ADVANCED THE MONEY. AGAINST THE LOAN OF RS.20,40,000/ - RECEIVED BY THE ASSESSEE, ASSESSEE PAID INTEREST OF RS.2,24,254/ - TO THE LOAN PARTIES. THE AMOUNT ON WHICH INTEREST WAS ITA NO. 2861 / 1 5 3 PAID WAS USED BY THE ASSESSEE BY WAY O F LOANS GIVEN TO THE PARTIES FOR EARNING OF INTEREST. 7 . ACCORDINGLY, I DO NOT FIND ANY JUSTIFICATION FOR DISALLOWING THE INTEREST WITHOUT BRINING ANYTHING ON RECORD TO HOLD THAT THE ASSESSEE HAS DIVERTED INTEREST BEARING FUNDS FOR NON - BUSINESS PURPOSE. 8 . IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. O RDER PRONOUNCED IN THE OPEN COURT ON THIS 27 /07 / 201 6 . SD/ - ( R.C.SHARMA ) / ACCOUNTANT MEMBER MUMBAI ; DATED 27 /07 /201 6 . . /PKM , . / 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//