Ranjana Sehgal, Lucknow V. Deputy Commissioner of Income Tax, Range-4, Lucknow

ITA 430/LKW/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 7647 (ITAT-LUCKNOW)
• Duration Of Justice: 8 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-01-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Appeal Filed On: 15-05-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Revenue expenditure

Judgement Text

I.T.A. NO.430/LKW/2018 ASSESSMENT YEAR:2013-14 1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH SMC, LUCKNOW BEFORE SHRI T. S. KAPOOR, ACCOUNTANT MEMBER ITA NO.430/LKW/2018 ASSESSMENT YEAR:2013-14 SMT. RANJANA SEHGAL, C/O SWARN ENTERPRISES, 110/76, NAYA GAON EAST, LUCKNOW. VS. DY.C.I.T., RANGE-4, LUCKNOW. (APPELLANT) (RESPONDENT) O R D E R THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF LEARNED CIT(A)-2, LUCKNOW DATED 23/03/2018 PERTAINING TO AS SESSMENT YEAR 2013- 2014. THE ONLY GROUND TAKEN BY THE ASSESSEE IS THE ACTION OF LEARNED CIT(A) BY WHICH HE HAS UPHELD THE DISALLOWANCE MADE BY THE ASSESSING OFFICER OF INTEREST EXPENDITURE. 2. THE BRIEF FACTS, AS NOTED IN THE ASSESSMENT ORDE R, ARE THAT THE ASSESSEE IS A PARTNER IN M/S SWARN ENTERPRISES AND HAS DECLARED RECEIPT OF INTEREST AND REMUNERATION FROM FIRM AS HER INCOME. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE OBTAINED A HOUSING LOAN OF RS.50,00,000/- FROM VIJAYA BANK AND OUT OF THIS SHE SPENT RS.20,00,000/ - FOR THE PURCHASE AND REPAIR OF HER HOUSE AND REMAINING RS.30 LAC WAS TRA NSFERRED AS PART OF CAPITAL IN THE FIRM SWARN ENTERPRISES. THE ASSESSE E CLAIMED THE EXPENDITURE APPELLANT BY SHRI ASHOK SETH, FCA RESPONDENT BY S HRI C. K. SINGH, D.R. DATE OF HEARING 10/01/2019 DATE OF PRONOUNCEMENT 18/01/2019 I.T.A. NO.430/LKW/2018 ASSESSMENT YEAR:2013-14 2 OF RS.2,28,331/- AS INTEREST PAID TO BANK ON THE AM OUNT OBTAINED FROM BANK WHICH WAS INVESTED IN THE FIRM. THE ASSESSING OFFI CER HOWEVER DID NOT ALLOW THE CLAIM OF THE ASSESSEE BY HOLDING THAT SINCE THE INTEREST HAS BEEN PAID ON HOUSING LOAN, WHICH WAS UTILIZED FOR SELF-OCCUPATIO N, THE MAXIMUM DEDUCTION WAS LIMITED TO RS.1,50,000/-. THE LEARNE D CIT(A) ALSO UPHELD THE ADDITION. 3. BEFORE US, LEARNED A. R. SUBMITTED THAT IT IS AN UNDISPUTED FACT THAT OUT OF RS.50 LAC, RS.30 LAC WAS TRANSFERRED TO THE FIRM AND WAS CREDITED IN THE CAPITAL ACCOUNT OF THE ASSESSEE AND IN THIS RES PECT OUR ATTENTION WAS INVITED TO THE CAPITAL ACCOUNT OF THE ASSESSEE PLAC ED AT PAGES 10 AND 11 OF THE PAPER BOOK. OUR SPECIFIC ATTENTION WAS INVITED TO THE ENTRIES OF RS.6,00,000/-, RS.8,00,000/-, RS.4,00,000/- AND RS. 12,00,000/- REPRESENTING IN ALL RS.30,00,000/- WHICH THE ASSESSEE HAD INVEST ED AS CAPITAL AFTER OBTAINING LOAN OF RS.50,00,000/- FROM VIJAYA BANK. THE ENTRIES IN THE SAVINGS BANK ACCOUNT OF THE ASSESSEE ALSO SHOWS THE SE AMOUNTS AS HAVING BEEN TRANSFERRED TO THE FIRM SWARN ENTERPRISES WHIC H IS APPARENT FROM THE COPY OF SAVING ACCOUNT OF THE ASSESSEE PLACED AT PA GE NO. 5 OF THE PAPER BOOK. LEARNED A. R. SUBMITTED THAT THE ASSESSEE HA D PAID INTEREST TO BANK ON THE ENTIRE RS.50,00,000/- AND SINCE OUT OF RS.50 ,00,000/-, RS.30,00,000/- WAS INVESTED IN THE FIRM ON WHICH TH E ASSESSEE RECEIVED INTEREST AS INTEREST ON PARTNERS CAPITAL, THE EXPE NDITURE INCURRED IN THE FORM OF PAYMENT TO VIJAYA BANK ON RS.30,00,000/- IS AN A LLOWABLE EXPENDITURE AS THE FUNDS ON WHICH THE ASSESSEE GOT INTEREST WERE B ORROWED FROM THE BANK. 4. LEARNED D. R., ON THE OTHER HAND, SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 5. I HAVE HEARD THE RIVAL PARTIES AND HAVE GONE THR OUGH THE MATERIAL PLACED ON RECORD. I FIND THAT IT IS AN UNDISPUTED FACT THAT THE ASSESSEE, AS I.T.A. NO.430/LKW/2018 ASSESSMENT YEAR:2013-14 3 PARTNER IN THE FIRM, HAD INTRODUCED RS.30,00,000/- VIDE FOUR ENTRIES OF RS.6,00,000/-, RS.8,00,000/-, RS.4,00,000/- AND RS. 12,00,000/- RECEIVED BY THE FIRM ON 20/12/2012, 28/12/2012, 31/12/2012 AND 11/-02/2013 RESPECTIVELY. THE ASSESSEE HAD OPENING BALANCE OF RS.50,18,262/- AS OPENING CAPITAL AS IS APPARENT FROM PAGE 10 OF THE PAPER BOOK WHERE A COPY OF CAPITAL ACCOUNT IS PLACED. THE DETAIL OF DAYWIS E CALCULATION OF INTEREST ON THE CAPITAL IS PLACED AT PAGES 10 & 11 OF THE PAPER BOOK AND TOTAL INTEREST EARNED BY THE ASSESSEE AMOUNTED TO RS.5,60,865/-. THIS INCOME OF THE ASSESSEE COMPRISED OF INTEREST ON OPENING BALANCE O F CAPITAL AS WELL AS THE NEW ADDITIONS IN THE CAPITAL THEREFORE, THE FINDING S OF THE ASSESSING OFFICER THAT THE INTEREST RECEIVED BY THE ASSESSEE FROM THE FIRM RELATED TO ONLY OPENING BALANCE IS NOT CORRECT BECAUSE OF THE FACT THAT THE ASSESSEE HAD FILED A DETAILED CALCULATION OF INTEREST CALCULATED @10% ON A DAILY BASIS. OUT OF THIS INTEREST THE ASSESSEE OBVIOUSLY PAID INTERE ST TO THE EXTENT OF RS.2,28,331/- TO VIJAYA BANK AND CLAIMED DEDUCTION AGAINST THE INTEREST INCOME. I AM IN AGREEMENT WITH THE ARGUMENTS OF LE ARNED A. R. THAT SINCE THE INTEREST INCOME EARNED FROM THE FIRM INCLUDED I NTEREST ON ADDITION MADE IN CAPITAL ACCOUNT BY TAKING LOAN FROM THE BANK, TH E PROPORTIONATE AMOUNT RELATING TO INTEREST ON BORROWED FUNDS IS AN ALLOWA BLE REVENUE EXPENDITURE AGAINST THE INTEREST INCOME. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS ALLOWED. SD/. ( T. S. KAPOOR ) ACCOUNTANT MEMBER DATED:18/01/2019 *SINGH COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. CONCERNED CIT 4. THE CIT(A) 5. D.R., I.T.A.T., LUCKNOW