Shri Ashwinbhai Laljibhai Varadia, Surat V. The Income Tax Officer, Ward-9(1), Surat

ITA 3267/AHD/2014

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 5894 (ITAT-SURAT)
• Duration Of Justice: 5 year(s) 2 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-02-2020
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2011-2012
• Appeal Filed On: 08-12-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ANUPAMA SINGHLA
• Assessee Lawyers: SAMIT M AGRAWAL
• Section: 13

Judgement Text

ASHWINBHAI LALJIBHAI VARADIA V. ITO, WARD-9(1),SURAT/ITA. 3267/AHD/2014/A.Y.2011-12 PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL SURAT BENCH, SURAT BEFORE SHRI SANDEEP GOSAIN, JUDICIAL MEMBER AND SHRI O.P.MEENA, ACCOUNTANT MEMBER . . ./ I.T.A NO.3267/AHD/2014 / ASSESSMENT YEAR: 2011-12 A SHWINBHAI LALJIBHAI VARADIA, D-1, GANGESHWAR SOCIETY, VARACHHA ROAD, HIRABAUG, SURAT-395 006. [PAN: ABXPV 0026 D] V S . INCOME TAX OFFICER, WARD-9(1), SURAT. / APPELLANT /RESPONDENT /ASSESSEE BY SHRI SAMIT M. AGRAWAL , CA /REVENUE BY MS. ANUPAMA SINGHLA, SR. DR / DATE OF HEARING: 12 - 02 - 2020 /PRONOUNCEMENT ON: 13 - 02 - 2020 /O R D E R PER O.P.MEENA, AM: 1. THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME-TAX (APPEALS)-V, SURAT [IN SHORT THE CIT(A)] DATED 08-10-2014, FOR THE ASSESSMENT YEAR 2011-12. 2. GROUND NO.1 RELATES TO DISALLOWANCE OF INTEREST OF RS.4,40,484/- ON THE GROUND THAT THE SAME CANNOT BE SET-OFF AGAINST INTEREST INCOME UNDER THE HEAD INCOME FROM OTHER SOURCES IN AS MUCH AS THE INTEREST PAID IS FOR THE INTRODUCTION OF CAPITAL IN THE FIRM. 3. BRIEF FACTS OF THE CASES ARE THAT THE AO FOUND THAT THE ASSESSEE HAS CLAIMED EXPENSES OF RS.4,40,484/- AGAINST THE INTEREST INCOME OF RS.21,513/- SHOWN IN THE HEAD INCOME FROM OTHER SOURCES THEREBY CLAIMING A LOSS FROM INTEREST FROM OTHER PARTIES AT RS.4,18,331/-. THE AO DISALLOWED THE CLAIM OF ASHWINBHAI LALJIBHAI VARADIA V. ITO, WARD-9(1),SURAT/ITA. 3267/AHD/2014/A.Y.2011-12 PAGE 2 OF 4 EXPENSES U/S.57 AS THE ASSESSEE FAILED TO ESTABLISH THAT THESE EXPENSES WERE ACTUALLY INCURRED TO EARN THE INTEREST INCOME SHOWN UNDER THE HEAD INCOME FROM OTHER SOURCES. THE ASSESSEE SUBMITTED THAT UNSECURED LOAN AMOUNTING OF RS.2,87,63,400/- WERE TAKEN FROM VARIOUS PARTIES AND INVESTED IN PARTNERSHIP FIRM NAMELY ASMI ENTERPRISES, ABHED ENTERPRISES & AKSHAR ENTERPRISES. THE INTEREST OF RS.4,40,484/- ON UNSECURED LOAN IS ELIGIBLE TO BE SET-OFF U/S.70 & 71 OF THE ACT AGAINST THE INTEREST INCOME OF RS.1,04,342/- ON CAPITAL INVESTED IN THREE PARTNERSHIP FIRMS. 4. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A). HOWEVER, THE CIT(A) OBSERVED THAT THE APPELLANT HAS RAISED UNSECURED LOAN AND THE PAID INTEREST ON THESE ACCOUNTS. THESE LOANS WERE UTILIZED FOR CAPITAL INTRODUCTION AND VARIOUS PARTNERSHIP FIRMS IMMEDIATE WHEREIN THE ASSESSEE IS A PARTNER. HE HAS RECEIVED INTEREST FROM VARIOUS PARTNERSHIP FIRMS AND SHOWN INTEREST OF INCOME UNDER THE HEAD INCOME FROM BUSINESS OR PROFESSION. THE APPELLANT HAD SUBMITTED BEFORE THE AO VIDE REPLY DATED 20-01-2014 THAT HE HAS NO BUSINESS ACTIVITIES DURING THE YEAR UNDER CONSIDERATION. THE APPELLANT HAD BORROWED UNSECURED LOANS AND HAD INVESTED/UTILIZED THE SAME IN THE PARTNERSHIP FIRM. THE APPELLANT HAS CLAIMED SET-OFF THE INTEREST OF RS.4,40484/- U/S.70 & 71 OF THE ACT AGAINST THE INTEREST INCOME OF RS.1,04,342/- SECTION 70 & 71 AS INCORPORATED IN CHAPTER-VI WHICH DEALS WITH AGGREGATION OF INCOME AND SET-OFF OF LOSS. THE APPELLANT FAILED TO SHOW THAT HOW THESE EXPENSES WERE ACTUALLY INCURRED TO INTEREST INCOME SHOWN UNDER THE HEAD INCOME FROM OTHER SOURCES. THE INTEREST FROM BUSINESS OR PROFESSION AND THEREFORE THE CLAIM OF THE APPELLANT HAS RIGHTLY DISALLOWED BY THE AO. ASHWINBHAI LALJIBHAI VARADIA V. ITO, WARD-9(1),SURAT/ITA. 3267/AHD/2014/A.Y.2011-12 PAGE 3 OF 4 5. BEING AGGRIEVED, THE ASSESSEE FILED THIS APPEAL BEFORE THIS TRIBUNAL. THE LD. COUNSEL FOR THE ASSESSEE REFERRING TO THE PAPER BOOK PLACED AT PAGE NO.3 AND SUBMITTED THAT THE ASSESSEE USED TO BORROW FUNDS FROM LENDERS FROM 2009 TO 2011 AND THE FUNDS BORROWED CONTRIBUTION IN VARIOUS PARTNERSHIP FIRMS IN WHICH HE IS A PARTNER. HOWEVER, THE CIT(A) HAS MISAPPRECIATED THE FACTS AND CONFIRMED THE DISALLOWANCE OF INTEREST OF RS.4,40,484/-. SINCE, THE ASSESSEE HAS ESTABLISHED THE INDEX BETWEEN BORROWING AND INVESTMENT, THE ASSESSEE ENTITLED TO CLAIM OF INTEREST OF RS.3,76,047/- (RS.4,40,484 64,437) FROM THE INTEREST RECEIVED FROM THE FIRM, IN THE LIGHT OF DECISION OF ITAT, MUMBAI IN THE CASE OF SUDHIR DATTARAM PATIL V. DCIT (2005) 2 SOT 678 (MUMBAI). 6. PER CONTRA, THE LD. SR. DR RELIED ON THE ORDER OF THE LOWER AUTHORITIES. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. WE FIND FROM THE COMPUTATION OF TOTAL INCOME FILED BY THE ASSESSEE THAT THE INTEREST HAS BEEN CLAIMED AS SET-OFF AGAINST THE INTEREST FROM OTHER PARTIES OF RS.4,40,484/- FROM THE INTEREST INCOME FROM OTHER PARTIES U/S. 57 OF THE ACT. THEREFORE, THE AO DISALLOWED THE SAME. AS THE SAME IS NOT ALLOWABLE SET-OFF U/S.70 & 71 OF THE ACT. WE HAVE FURTHER FOUND THAT THE APPEAL ALSO FILED BY THE ASSESSEE HAS MADE SAME CLAIM THAT THE ASSESSEES ENTITLE TO SET-OFF U/S.70 & 71 OF THE ACT. HOWEVER, IT IS ONLY BEFORE US, THE ASSESSEE CLAIMING THAT INTEREST PAID IS ALLOWABLE AT DEDUCTION AGAINST THE INTEREST INCOME ON BORROWED FUNDS UTILIZED FOR CAPITAL CONTRIBUTION IN THE PARTNERSHIP FIRM. HOWEVER, THIS CLAIM HAS BEEN RAISED BY THE ASSESSEE BEFORE AO AS WELL AS CIT(A). THEREFORE, THIS GROUND NOW RAISED BEFORE US IS ALSO NOT EMANATED FROM FINDINGS RECORDED BY THE LOWER AUTHORITIES NOR THE SAME HAS ASHWINBHAI LALJIBHAI VARADIA V. ITO, WARD-9(1),SURAT/ITA. 3267/AHD/2014/A.Y.2011-12 PAGE 4 OF 4 NOT BEEN RAISED AS ADDITIONAL GROUND OF APPEAL BEFORE US. THEREFORE, WE ARE NOT INCLINED TO INTERFERE WITH THE FINDINGS RECORDED BY THE LOWER AUTHORITIES. ACCORDINGLY, THE SAME IS UPHELD. 8. GROUND NO.2 RELATING TO MAKING ADDITION OF RS.21,513/- ON ACCOUNT OF ADDITIONAL SO PROPERTY IS NOT PRESSED BEFORE US BY THE LD. COUNSEL. HENCE, THE SAME IS TREATED AS DISMISSED, AS NOT PRESSED BEFORE US. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISMISSED. 10. THE ORDER PRONOUNCED IN THE OPEN COURT ON 13-02-2020 SD/- SD/- (SANDEEP GOSAIN) (O.P.MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER SURAT: DATED: 13 TH FEB, 2020 / SAMANTA, PS COPY OF ORDER SENT TO- ASSESSEE/AO/PR. CIT/ CIT (A)/ ITAT (DR)/ GUARD FILE OF ITAT. BY ORDER // TRUE COPY // ASSISTANT REGISTRAR, SURAT