M/S GRNVS BUILDERS, Chennai V. ITO NON CORP WARD 1 (2), Chennai

ITA 408/CHNY/2018

• Counselvise Citation: [2018] 112 COUNSELVISE.COM (IT) 5414 (ITAT-CHENNAI)
• Duration Of Justice: 8 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-10-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2005-2006
• Appeal Filed On: 05-02-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B SAGADEVAN
• Assessee Lawyers: MRS SUSHMA HARINI
• Keywords: Business income
• Section: 40(b)

Judgement Text

, (SMC) , IN THE INCOME TAX APPELLATE TRIBUNAL D(SMC) BENCH, CHENNAI . . . , , ' BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI S. JAYARAMAN, ACCOUNTANT MEMBER / .I.T.A. NO. 408/CHNY/2018 /ASSESSMENT YEAR : 2005-06 M/S. GRNVS BUILDERS, A-1-14, (BASEMENT), NELSOM CHAMBERS, 115, NELSON MANICKAM ROAD, CHENNAI 600 029. [PAN: AAAFG 0406E] VS. INCOME TAX OFFICER, NON CORPORATE WARD -1(2), NO. 121, NUNGAMBAKKAM HIGH ROAD, CHENNAI 600 034. ( /APPELLANT) ( /RESPONDENT) ASSESSEE BY : MRS.SUSHMA HARINI, ADVOCATE REVENUE BY : SHRI. B. SAGADEVAN, JCIT $ /DATE OF HEARING : 26.09.2018 $ /DATE OF PRONOUNCEMENT : 30.10.2018 / O R D E R PER S. JAYARAMAN, ACCOUNTANT MEMBER: THE ASSESSEE FILED THIS APPEAL AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-2, CHENNAI IN ITA NO 290/CIT(A )-2/2013-14/AY 2005-06 DATED 12.12.2017 FOR ASSESSMENT YEAR 2005-06 :- 2 -: ITA NO. 408/CHNY/2018 2. M/S. GRNVS BUILDERS, A FIRM, CLAIMED INTEREST RE CEIPTS FROM THE DEPOSITS HELD IN VARIOUS BANKS AS BUSINESS INCOME AND ADJUST ED THE INTEREST EXPENDITURE INCURRED TOWARDS PARTNERS CAPITAL ACCOUNT, CONSEQUE NTLY ADMITTED A NILL INCOME. DURING THE ASSESSMENT, THE AO HELD THAT THE INTERES T RECEIVED FROM BANK DEPOSITS HAS TO BE ASSESSED AS AN INCOME FROM OTHER SOURCES ONLY AND HENCE THE ASSESSEES CLAIM OF INTEREST EXPENDITURE TOWARDS PA RTNERS CAPITAL ACCOUNT WAS DENIED. AGGRIEVED, THE ASSESSEE FILED AN APPEAL BE FORE THE LD. CIT(A) AND THE LD. CIT(A) DISMISSED THE APPEAL. 3. AGGRIEVED AGAINST THE ORDER OF THE LD. CIT(A), T HE ASSESSEE FILED THIS APPEAL PLEADING THAT THE INTEREST PAID IS DEDUCTIBL E AGAINST THE INCOME OF THE FIRM IRRESPECTIVE OF WHETHER THE INCOME IS ASSESSABLE UN DER THE HEAD BUSINESS OR OTHER SOURCES. THE LD. CIT(A) ERRED IN STATING T HAT INTEREST RECEIVED WOULD NOT FORM PART OF BOOK PROFITS OF THE PARTNERSHIP FIRM . THE LD. CIT(A) FAILED TO APPRECIATE THE FACT THAT THE INTEREST FROM THE DEPO SITS AROSE OUT OF FUNDS CONTRIBUTED BY THE PARTNERS AND HENCE, THE INTEREST PAID TO THE PARTNERS IN ACCORDANCE WITH PARTNERSHIP DEED IS AN ALLOWABLE EX PENDITURE ETC. 4. AT THE TIME OF HEARING, THE LD. AR RELIED ON THE ITAT DECISION REPORTED IN CIT VS J.J. INDUSTRIES (2013) 35 TAXMANN.COM 103 (G UJ) AND PLEADED THAT THE TRIBUNAL HELD THAT FOR THE PURPOSE OF ASCERTAINING SUCH CEILING ON THE BASIS OF BOOK PROFIT, THE PROFIT SHALL BE IN THE PROFIT AND LOSS ACCOUNT AND IS NOT TO BE CLASSIFIED IN THE DIFFERENT HEADS OF INCOME U/S. 40 OF THE ACT . THE INTEREST INCOME, THEREFORE, CANNOT BE EXCLUDED FOR THE PURPOSES OF D ETERMINING THE ALLOWABLE :- 3 -: ITA NO. 408/CHNY/2018 DEDUCTION THE PARTNERS U/S. 40(B) OF THE ACT. PER CONTRA, THE LD. DR SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES. 5. WE HEARD THE RIVAL SUBMISSIONS AND GONE THROUGH THE RELEVANT MATERIAL. IT IS SEEN FROM THE PAPER BOOK FURNISHED BY THE ASSESS EE THAT THE SOURCES OF FUNDS ARE AT RS. 37,51,791/-, COMPRISING PARTNERS CAPITAL AT RS. 2 LAKHS, PARTNERS CURRENT ACCOUNT AT RS. 30,19,424/- AND UNSECURED LOAN OF RS . 5,32,367/-. OUT OF WHICH, THE DEPOSITS AND ADVANCES LYING WITH VARIOUS BANKS ARE AT RS. 35,56,837/-. THUS, IT IS CLEAR FROM THE BOOKS OF ACCOUNT THAT THE ENTI RE INTEREST FROM THE IMPUGNED DEPOSITS AROSE OUT OF PARTNERS FUNDS. THE FACTS BE ING SO, WHEN THE ASSESSEE PAID INTEREST ON THE CAPITAL CONTRIBUTED BY THE PARTNERS IN ACCORDANCE WITH PARTNERSHIP DEED, IT IS AN ALLOWABLE DEDUCTION. FURTHER, WE AR E OF THE VIEW THAT THE DECISION RELIED ON BY THE ASSESSEE, SUPRA, IS ALSO APPLICABL E TO THE FACTS OF THIS CASE AND HENCE THE ASSESSEE IS ENTITLED TO CLAIM THE INTERES T EXPENDITURE. THE AO SHALL ALLOW ACCORDINGLY. 6. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED ON TUESDAY, THE 30 TH DAY OF OCTOBER, 2018 AT CHENNAI. SD/- ( . . . ) (N.R.S. GANESAN) /JUDICIAL MEMBER SD/- ( ) (S. JAYARAMAN) /ACCOUNTANT MEMBER /CHENNAI, ) /DATED: 30 TH OCTOBER , 2018 JPV :- 4 -: ITA NO. 408/CHNY/2018 $*+,-, /COPY TO: 1. / /APPELLANT 2. *0/ /RESPONDENT 3. 1 ) ( /CIT(A) 4. 1 /CIT 5. ,* /DR 6. 4 /GF