ACIT, Ludhiana V. Sh. Jagdeep Singal, Ludhiana

ITA 333/CHANDI/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 77032 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 year(s) 1 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-04-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 07-04-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 15-03-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR AMA RVEER SINGH
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH B CHANDIGARH BEFORE SHRI T.R.SOOD ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO. 333/CHD/2012 ASSESSMENT YEAR 2008-09 THE A.C.I.T., VS SHRI JAGDEEP SINGAL, CIRCLE V, C/O M/S EASTMAN IMPEX, LUDHIANA. INDUSTRIAL AREA C, SUA ROAD, DHANDARI KALAN, LUDHIANA. LUDHIANA. PAN : ADVPS8357G (APPELLANT) (RESPONDENT) APPELLANT BY : DR. AMARVEER SINGH RESPONDENT BY : SHRI ASHWANI KUMAR DATE OF HEARING : 07.04.2014 DATE OF PRONOUNCEMENT : 16.04.2014 O R D E R PER SUSHMA CHOWLA, JM THE APPEAL BY THE REVENUE IS DIRECTED AGAINST THE O RDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) II, LUDHIANA D ATED 09.01.2012 AGAINST THE ORDER PASSED UNDER SECTION 1 43(3) OF THE INCOME-TAX ACT, 1961 ( 'THE ACT' FOR SHORT). 2. THE GROUNDS OF APPEAL RAISED BY THE REVENUE READ AS UNDER : 1. (A) THE LD. CIT(A)-II, LUDHIANA, ON FACTS AS WELL A S IN LAW, HAS ERRED IN ALLOWING RELIEF OF RS. 15,54,258/- OUT OF AMOUNT OF INTEREST DISALLOWED U/S 34(L)(III) BY FOLLOWING THE JUDGMENT OF THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF M/S ABHISHEK INDUSTRIES LTD., LUDHIANA. (B) THE LD. CIT(A)-II, LUDHIANA HAS ERRED IN DELE TING THE ABOVE DISALLOWANCE WITHOUT GIVING ANY REASON. (C) THE LD. CIT(A)-II, LUDHIANA HAS FAILED TO APP RECIATE THAT THE RATIO OF THE JUDGMENT OF THE HON'BLE PUNJAB & H ARYANA HIGH COURT IN THE CASE OF M/S ABHISHEK INDUSTRIES LTD., SQUARE LY APPLIES TO THE CASE. 2 3. THE ONLY ISSUE RAISED IN THE PRESENT APPEAL FILE D BY THE REVENUE IS AGAINST DELETION OF ADDITION OF RS. 15,5 4,228/-. 4. THE BRIEF FACTS OF THE CASE ARE THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE WAS A PARTNER IN M/S EA STMAN IMPEX. THE ASSESSEE HAD RECEIVED INTEREST ON HIS CAPITAL C ONTRIBUTION WITH THE SAID PARTNERSHIP FIRM AND IN ADDITION, THE ASSE SSEE HAD ALSO RECEIVED INTEREST AGAINST LOAN GIVEN TO VARIOUS PAR TIES. THE ASSESSEE HAD BORROWED FUNDS ON INTEREST WHICH IN-TURN WERE A DVANCED BY THE ASSESSEE. THE ASSESSEE HAD ALSO DECLARED INCOME FR OM COMMODITY BUSINESS. IN VIEW OF THE ASSESSEE HAVING COMMON BA NK ACCOUNT IN WHICH BOTH THE ASSESSEE'S OWN FUNDS AND BORROWED F UNDS WERE POOLED, THE ASSESSING OFFICER WAS OF THE VIEW THAT THE INTEREST PAID ON BORROWED FUNDS WAS NOT ALLOWABLE UNDER SECTION 3 6(1)(III) OF THE ACT IN VIEW OF THE RATIO LAID DOWN BY THE HON'BLE P UNJAB & HARYANA HIGH COURT IN CIT VS ABHISHEK INDUSTRIES 286 ITR 1 (P&H). 5. THE COMMISSIONER OF INCOME TAX (APPEALS) NOTED T HAT THE ASSESSEE HAD TOTAL BORROWED FUNDS OF RS. 6.76 CR AS AGAINST INTEREST EARNING FUNDS OF RS. 6.83 CR. THE ASSESSEE HAD EAR NED INTEREST INCOME OF RS. 15,54,256/- AND HAD INCURRED INTEREST EXPENDITURE OF RS. 16,17,835/-. THE NET INTEREST EXPENDITURE WAS, THUS RS. 6,35,279/-. THE COMMISSIONER OF INCOME TAX (APPEALS ) RESTRICTED THE DISALLOWANCE TO RS. 63,579/-. 6. THE REVENUE IS IN APPEAL AGAINST THE ALLOWANCE O F INTEREST EXPENDITURE OF RS. 15,54,258/-. ADMITTEDLY THE ASSE SSEE HAS NOT FILED ANY APPEAL AGAINST THE ORDER OF THE COMMISSIO NER OF INCOME TAX (APPEALS). 3 7. SHRI ASHWANI KUMAR APPEARED FOR THE ASSESSEE AND DR. AMARVEER SINGH APPEARED FOR THE REVENUE AND PUT FOR WARD THEIR RIVAL CONTENTIONS. 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ISSUE ARISING IN THE PRESENT APPEAL IS IN RELAT ION TO THE DISALLOWANCE MADE BY THE ASSESSING OFFICER UNDER SE CTION 36(1)(III) OF THE ACT WHICH HAS BEEN RESTRICTED BY THE COMMISS IONER OF INCOME TAX (APPEALS) TO RS. 63,579/-. THE ASSESSEE HAD SH OWN INTEREST INCOME AS ITS INCOME UNDER THE HEAD INCOME FROM OT HER SOURCES. THE SAID INTEREST INCOME WAS EARNED ON THE CAPITAL INVESTED IN THE PARTNERSHIP FIRM IN WHICH THE ASSESSEE WAS PARTNER AND ALSO ON LOANS ADVANCED BY THE ASSESSEE. IN ORDER TO MEET THE REQ UIREMENT OF FUNDS FOR THE SAID PURPOSE, THE ASSESSEE IN ADDITION TO O WN FUNDS HAD BORROWED FUNDS ON WHICH HE WAS PAYING INTEREST. THE ASSESSING OFFICER WAS OF THE VIEW THAT BECAUSE OF THE MIXED F UNDS AVAILABLE WITH THE ASSESSEE, THE RATIO LAID DOWN BY THE HON'B LE PUNJAB & HARYANA HIGH COURT IN CIT VS ABHISHEK INDUSTRIES (S UPRA) WAS SQUARELY APPLICABLE. THE ASSESSING OFFICER FURTHER OBSERVED THAT EVEN ON ACCOUNT OF TAX FREE INCOME WAS WARRANTED UN DER SECTION 14A OF THE ACT. THE COMMISSIONER OF INCOME TAX (APPEAL S), HOWEVER RESTRICTED THE DISALLOWANCE TO RS. 63,579/- BEING T HE NET INTEREST EXPENDITURE BOOKED BY THE ASSESSEE. THE ASSESSEE D URING THE YEAR UNDER CONSIDERATION HAD EARNED INTEREST INCOME OF R S. 15,54,256/- AND HAD CLAIMED INTEREST EXPENDITURE OF RS. 16,17,8 35/-. THE TOTAL BORROWED FUNDS OF THE ASSESSEE WERE RS. 6.76 CR AS AGAINST INTEREST EARNING FUNDS OF RS. 6.83 CR. THE NET INTEREST EXP ENDITURE WAS CLAIMED UNDER THE HEAD INCOME FROM OTHER SOURCES. IN THE TOTALITY OF THE FACTS AND CIRCUMSTANCES, WE HOLD THAT AS THE NET INTEREST 4 EXPENDITURE CLAIMED BY THE ASSESSEE WAS ONLY RS. 63 ,579/-, THE DISALLOWANCE UNDER SECTION 36(1)(III) OF THE ACT IS TO BE RESTRICTED TO SAME. ACCORDINGLY, WE UPHOLD THE ORDER OF COMMI SSIONER OF INCOME TAX (APPEALS) IN THIS REGARD AND DISMISS GRO UNDS OF APPEAL RAISED BY THE REVENUE. 9. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 16 TH APRIL,2014. SD/- SD/- ( T.R.SOOD) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 16 TH APRIL,2014 POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT, DR. ASSISTANT REGISTRAR ITA T,CHD.