KGA INVESTMENTS, MUMBAI V. ITO 17(2)(1), MUMBAI

ITA 3774/MUM/2017

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 9106 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-10-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Appeal Filed On: 24-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAM TIWARI
• Assessee Lawyers: SUNIL LALA
• Keywords: Business income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC , BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM ITA NO. 3774/MUM/ 20 17 ( ASSESSMENT YEAR : 2013 - 14 ) M/S. KGA INVESTMENTS 601, COMMERCE HOUSE, 140 NAGINDAS MASTER ROAD, FORT MUMBAI 400 023 VS. ITO 17(2)(1) IT OFFI CE AAYAKAR BHAVAN 1 ST FLOOR, CHURCHGATE MUMBAI PAN/GIR NO. AAHFK9638F APPELLANT ) .. RESPONDENT ) ASSESSEE BY SHRI SUNIL LALA REVENUE BY SHRI RAM TIWARI DATE OF HEARING 16 / 08/ 201 7 DATE OF PRONOUNCEME NT 09 / 10 /201 7 / O R D E R PER R.C.SHARMA (A.M) : THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) - 28, MUMBAI DATED 02/03/2017 FOR A.Y.2013 - 14 IN THE MATTER OF ORDER PASSED U/S.143(3) OF THE IT ACT. 2. THE ONLY GRIEVANCE OF ASSE SSEE RELATES TO DECLINE OF DEDUCTION U/S.57(III) IN RESPECT OF INTEREST PAID ON THE BORROWINGS WHICH WAS USED FOR EARNING INTEREST INCOME. 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. 4. FACTS IN BRIEF ARE THAT ASSESSEE IS ENGAGED IN THE BUSIN ESS OF BUILDING CONSTRUCTION. DURING THE YEAR UNDER CONSIDERATION, ASSESSEE HAS BORROWED SOME FUNDS FOR THE PURPOSE OF ITS BUSINESS. SINCE THE FUNDS WERE NOT IMMEDIATELY REQUIRED IN ORDER TO REDUCE INTEREST LIABILITY / EXPENDITURE, THE ITA NO. 3774/MUM/2017 M/S. KGA INVESTMENTS 2 ASSESSEE PUT FUND TE MPORARILY IN FIXED DEPOSIT . ON SUCH DEPOSIT S, THE ASSESSEE HAS INT EREST INCOME WHICH HE NETTED OUT OF THE INTEREST EXPENDITURE AND THE BALANCE INTEREST EXPENDITURE WERE CARRIED TO THE BALANCE SHEET AND ADDED TO THE WORK IN PROGRESS. THE AO WAS OF THE VIEW THAT SINCE FUND WAS BORROWED FOR THE BUSINESS PURPOSE, THE SAME IS DEDUCTABLE OUT OF BUSINESS INCOME ONLY AND ASSESSEE WAS TO PAY TAX ON THE INTEREST INCOME EARNED FROM THE DEPOSIT SO MADE UNDER THE HEAD INCOME FROM OTHER SOURCES. 5. BY THE IMPUGNED ORDER, CIT(A) CONFIRMED THE ACTION OF THE AO. 6. I HAVE CONSIDERED RIVAL CONTENTIONS AND CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIE S BELOW. I HAD ALSO VERIFIED THE BANK STATEMENT INDICATING TAKING OVERDRAFT / LOAN FROM THE BANK WHICH WAS SUBSEQUENTLY US ED BY ASSESSEE TEMPORARILY FOR MAKING FDRS ON WHICH INTEREST WAS EARNED. THERE IS NO DISPUTE TO THE ONE TO ONE LINK BETWEEN THE AMOUNT BORROWED AND THE AMOUNT INVESTED. INTEREST EXPENDITURE INCURRED AND THE INTEREST INCOME EARNED BOTH ARE IN REVENUE IN NAT URE. ACCORDINGLY, I DO NOT FIND ANY JUSTIFICATION FOR DECLINE OF NETTING OF INTEREST EXPENDITURE AGAINST INTEREST INCOME WHEN THERE IS NO DISPUTE TO THE FACT THAT ONLY BORROWED FUND WAS PUT IN THE DEPOSIT FOR EARNING INTEREST INCOME. THE ACT OF BORROWING WAS FIRST AND THEN SUCH BORROWED FUNDS WERE PUT IN THE FIXED DEPOSIT EARNING INTEREST INCOME. ACCORDINGLY, I DIRECT THE AO TO SET OFF THE INTEREST INCOME AGAINST THE INTEREST EXPENDITURE SO INCURRED BY THE ASSESSEE. ITA NO. 3774/MUM/2017 M/S. KGA INVESTMENTS 3 7. IN THE RESULT, APPEAL OF THE ASSE SSEE IS ALLOWED. O RDER PRONOUNCED IN THE OPEN COURT ON THIS 09 / 10 /2017 SD/ - ( R.C.SHARMA ) ACCOUNTANT MEMBER MUMBAI ; DATED 09 / 10 /201 7 KARUNA SR. PS COPY OF THE ORDER FORWARDED TO : BY ORDER, ( ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPE LLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//