SHRI AJAY BANSAL, MUMBAI V. ACIT,CIRCLE-19(1), MUMBAI

ITA 4946/MUM/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 0853 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-08-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 24-08-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: CHAITANYA ANJARIA
• Keywords: Business expenditure; Capital expenditure
• Section: 142(1); 143(2)

Judgement Text

1 ITA 4946/MUM/2018 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH SMC, MUMBAI BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO. 4946/MUM/2018 (ASSESSMENT YEAR: 2011-12) SHRI AJAY BANSAL C/O B.M. PAREKH & CO. 203/3, NAVJIVAN SOCIETY, LAMINGTON ROAD, MUMBAI-400 008. PAN : AACPB6224B VS ACIT-CIRCLE 19(1), MUMBAI APPELLANT RESPONDEDNT APPELLANT BY NONE (ADJOURNMENT APPLICATION) RESPONDENT BY SHRI CHAITANYA ANJARIA, SR. DR DATE OF HEARING 01-08-2019 DATE OF PRONOUNCEMENT 20-08-2019 O R D E R PER PAWAN SINGH, JUDICIAL MEMBER : 1. THIS APPEAL BY ASSESSEE IS DIRECTED AGAINST THE ORD ER OF LEARNED COMMISSIONER (APPEALS)-34, MUMBAI DATED 31 ST MAY 2018 WHICH IN TURN ARISES FROM ASSESSMENT ORDER PASSED UNDER SECTION 1 43(3) DATED 24 TH FEBRUARY 2014. THE ASSESSEE HAS RAISED FOLLOWING GR OUNDS OF APPEAL. (A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, LEARNED COMMISSIONER (APPEALS) HAS ERRED IN ASSESSING TOTAL INCOME OF ASSESSEE AT RS. 41,94,710/- INSTEAD OF RS. 21,75,251/- AS RETURNED BY THE ASSESSEE. THE RETURN INCOME OF ASSESSEE MAY PLEASE BE ACCEPTED. (B) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE LEARNED COMMISSIONER (APPEALS) HAS ERRED IN LAW IN CONFIRMING THE ADDITI ON OF RS. 20,19,454/- PAID TO STANDARD CHARTERED BANK AS CLAIMING THE EXPENDITURE UNDER SECTION 57 OF THE 2 ITA 4946/MUM/2018 ACT, IN RESPECT OF AMOUNT BORROWED FROM STANDARD CH ARTERED BANK. THE SAID INTEREST RATE MAY PLEASE BE ALLOWED AS DEDUCTION. (C) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE LANDED COUNSEL APPEAL HAS ERRED IN LAW IN CONFIRMING NOT ALLOWING THE INTEREST PAID AS DEDUCTION UNDER SECTION 36 (L)(III) OF THE INCOME TAX ACT AS BUSINESS EXPENSES . THE SAID INTEREST MAY PLEASE BE ALLOWED AS DEDUCTION. 2. BRIEF FACTS OF THE CASE ARE THAT ASSESSEE DERIVES I NCOME FROM SALARY, BUSINESS AND OTHER SOURCES. THE ASSESSEE FILED HIS RETURN OF INCOME ON 09- 03-2012 FOR ASSESSMENT YEAR 2011-12 DECLARING TOTAL INCOME OF RS. 21,75,251/-. THE RETURN OF INCOME WAS SELECTED FOR SCRUTINY. THE ASSESSING OFFICER AFTER SERVING THE STATUTORY NOTICES UNDER S ECTION 143(2) AND 142(1) COMPLETED ASSESSMENT ON 24 TH FEBRUARY 2014. THE ASSESSING OFFICER WHILE MAKING ASSESSMENT ORDER, BESIDES OTHER ADDITIONS/DI SALLOWANCES, MADE ADDITION ON ACCOUNT OF INTEREST DISALLOWANCES OF RS . 20,19,454/- UNDER SECTION 57 OF THE ACT. ON APPEAL BEFORE LEARNED COM MISSIONER (APPEALS) THE ACTION OF ASSESSING OFFICER WAS CONFIRMED. FUR THER AGGRIEVED BY THE ORDER OF LEARNED COMMISSIONER (APPEALS), THE ASSESS EE HAS FILED THIS APPEAL BEFORE THE TRIBUNAL. 3. NONE APPEARED ON BEHALF OF THE ASSESSEE. HOWEVER, AN APPLICATION FOR ADJOURNMENT WAS FILED ON BEHALF OF THE ASSESSEE WIT HOUT ANY VALID REASONS. THEREFORE, THE APPLICATION FOR ADJOURNMEN T WAS REJECTED. 4. WE HAVE HEARD THE SUBMISSION OF LEARNED DEPARTMENTA L REPRESENTATIVE (LD. DR) FOR THE REVENUE AND PERUSED THE MATERIAL AVAILA BLE ON RECORD. THE LD. 3 ITA 4946/MUM/2018 DR FOR THE REVENUE SUPPORTED THE ORDER OF LOWER AUT HORITIES. THE LD. DR FURTHER SUBMITTED THAT ASSESSEE HAS NOT PROVED THE NEXUS OF INTEREST. THE CERTIFICATE ISSUED BY STANDARD CHARTERED BANK INDIC ATES THAT THE ASSESSEE HAS TAKEN LOAN FOR HOUSING PURPOSE ONLY AND IS ELIG IBLE FOR DEDUCTION UNDER SECTION 24(B). THE LEARNED COMMISSIONER (APP EALS) ALSO RIGHTLY CONFIRMED ACTION OF ASSESSING OFFICER. 5. WE HAVE CONSIDERED THE SUBMISSION OF LD. DR FOR THE REVENUE AND PERUSED THE ORDERS OF AUTHORITIES BELOW. DURING THE ASSESS MENT, THE AO NOTED THAT ASSESSEE HAS CLAIMED INTEREST EXPENSES OF RS.20,19, 455 U/S 57. THE ASSESSEE WAS ASKED TO EXPLAIN THE NEXUS OF EXPENDIT URE TO JUSTIFY THE INTEREST EXPENSES AGAINST THE INCOME. THE ASSESSEE FILED A CERTIFICATE OF STANDARD CHARTERED BANK DATED 126-06-2011. THE ASS ESSING OFFICER HAS RECORDED THE CONTENTS OF CERTIFICATE IN THE FOLLOWI NG MANNER:- YOUR CERTIFICATE OF PRINCIPAL AND INTEREST FOR THE FINANCIAL PERIOD APRIL, 2010 TO MARCH 31, 2011. GREETINGS FROM STANDARD CHARTERED PRIORITY BANKING. WE ARE WRITING TO YOU TO CERTIFY THAT THE HOME LO AN (A/C NO.47935251) GRANTED BY US IS HELD IN THE NAME/S OF : MR. AJAY NARENDRA BANSAL MS. USHA AJAY BANSAL MR. NARENDRA BANSAL AND M/S SHIV JAGANNATH STEEL PVT LTD DETAILS WITH RESPECT TO INTEREST AND PRINCIPAL PAI D DURING THE PERIOD APRIL 1,2010 TO 31,2011 ARE AS UNDER:- INTEREST PAYABLE RS. 2,019,454.85 INTEREST PAID RS.20,10,454.85 PRINCIPAL AMOUNT REPAID RS. 8,92,717.15 THE LOAN BALANCE OUTSTANDING AS ON MARCH 31, 2011 IS RS. 23,958,970.13 NOTE: 4 ITA 4946/MUM/2018 DEDUCTION UNDER SECTION 24(B) OF THE INCOME TAX AC T, 1961 (THE ACT) IN RESPECT OF INTEREST ON THE BORROWED PRINCIPAL AMOUNT AND DE DUCTION UNDER SECTION 80C(2)(XVIII) OF THE ACT IN RESPECT OF REPAYMENT OF THE PRINCIPAL AMOUNT CAN BE CLAIMED, IF THE BORROWED AMOUNT IS BEING USED FOR T HE PURPOSE SPECIFIED IN SECTION 24(B) AND SECTION 80C(2)(XVIII) OF THE INCO ME TAX ACT, SUBJECT TO THE FULFILMENT OF CONDITIONS SPECIFIED THEREIN. 6. AFTER CONSIDERING THE CERTIFICATE FURNISHED BY THE ASSESSEE, THE ASSESSING OFFICER CONCLUDED THAT THE ASSESSEE IS ELIGIBLE FOR DEDUCTION UNDER SECTION 24(B)AS WELL AS UNDER SECTION 80C. THE ASSESSEE COULD NOT PROVE THAT INTEREST EXPENSES WERE INCURRED WHOLLY AND EXCLUSIV ELY FOR THE PURPOSE OF MAKING OR EARNING INCOME FROM OTHER SOURCES. THE A SSESSING OFFICER DISALLOWED THE ENTIRE INTEREST EXPENSES. BEFORE LE ARNED COMMISSIONER (APPEALS), IN THE STATEMENT OF FACTS, THE ASSESSEE SPECIFICALLY STATED THAT ASSESSEE CLAIMED DEDUCTION OF INTEREST UNDER SECTIO N 57 OF THE ACT. THE ASSESSING OFFICER MADE DISALLOWANCE WITHOUT VERIFIC ATION OF FACT AND PROVIDING OPPORTUNITY TO THE ASSESSEE. THE ASSESSE E, AGAIN VIDE SUBMISSIONS DATED 06-04-2018 STATED THAT THE ASSESS EE MADE THE PAYMENT OF PRINCIPAL AMOUNT OF RS.8,92,717 AND THE INTEREST AMOUNT OF RS.20,19,455. THE ASSESSEE FURTHER STATED THAT THE ASSESSEE HAS GRANTED LOAN TO HARI OM CARRIERS, SHIV AUM STEEL (P) LTD AN D SOFTEN CARRIERS PVT LTD AND RECEIVED INTEREST @15% P.A. FROM SUCH PARTI ES. THE ASSESSEE HAS OFFERED SAID INTEREST INCOME UNDER THE HEAD INCOME FROM OTHER SOURCES IN THE RETURN OF INCOME. THE ASSESSEE HAS CLAIMED DEDUCTION OF THE 5 ITA 4946/MUM/2018 INTEREST PAID TO STANDARD CHARTERED BANK AGAINST TH E INTEREST DECLARED UNDER THE HEAD, INCOME FROM OTHER SOURCES, THEREF ORE, ENTITLED FOR DEDUCTION 57(III). THE ASSESSEE ALSO RELIED UPON T HE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS TAJ INTERNAT IONAL JEWELERS (2012) 20 TAXMANN.COM 217 (DEL). 7. THE LEARNED COMMISSIONER (APPEALS) AFTER CONSIDERIN G THE CONTENTION OF ASSESSEE HELD THAT DURING THE ASSESSMENT THE ASSESS EE FAILED TO PROVE THE NEXUS OF INTEREST EXPENSES AGAINST THE INCOME EARNE D. IT WAS OBSERVED BY LEARNED COMMISSIONER (APPEALS) THAT PERUSAL OF CERT IFICATE / LETTER OF STANDARD CHARTERED BANK REFERRED BY ASSESSING OFFIC ER IN THE ASSESSMENT ORDER THAT INTEREST ON THE LOAN GRANTED TO THE ASSE SSEE CAN BE CLAIMED UNDER SECTION 24(B) AND DEDUCTION OF PRINCIPAL AMOU NT UNDER SECTION 80C. HOWEVER, THE ASSESSEE CLAIMED DEDUCTION IN RESPECT OF INTEREST U/S 57(III) WITHOUT ESTABLISHING DIRECT NEXUS FOR INTEREST CLAI MED AND AGAINST THE INTEREST INCOME DECLARED UNDER THE HEARD INCOME F ROM OTHER SOURCES. FOR CLAIMING INTEREST EXPENDITURE UNDER SECTION 57( III), THE ASSESSEE MUST BE LAID OR EXPENDED WHOLLY AND EXCLUSIVELY, MUST NO T BE IN THE NATURE OF CAPITAL EXPENDITURE, MUST NOT BE IN THE NATURE OF P ERSONAL EXPENSES AND MUST BE INCURRED IN THE RELEVANT PREVIOUS YEAR AND NOT IN PRIOR OF SUBSEQUENT YEAR. THUS, THE ASSESSEE HAS NOT FULFILL ED THE AFORESAID 6 ITA 4946/MUM/2018 CONDITIONS AND FAILED TO PROVE THE DIRECT NEXUS FOR INTEREST PAID AND EARNED. 8. WE HAVE CAREFULLY SEEN THE CONTENTS OF THE CERTIFIC ATE ISSUED BY STANDARD CHARTED BANK (SCB), CONTENTS OF WHICH ARE EXTRACTED BY ASSESSING OFFICER IN HIS ORDER. WE HAVE NOTED THAT SCB HAS CLEARLY ME NTIONED IN THE SAID CERTIFICATE THAT DE DUCTION UNDER SECTION 24(B) OF THE INCOME TAX ACT, 1961 (THE ACT) IN RESPECT OF INTEREST ON THE BORROWED PR INCIPAL AMOUNT AND DEDUCTION UNDER SECTION 80C(2)(XVIII) OF THE ACT IN RESPECT OF REPAYMENT OF THE PRINCIPAL AMOUNT CAN BE CLAIMED, IF THE BORROWE D AMOUNT IS BEING USED FOR THE PURPOSE SPECIFIED IN SECTION 24(B) AND SECTION 80C(2)(XVIII) OF THE INCOME TAX ACT. IN OUR VIEW THE LOWER AUTHORITY HAS ESCAPED THEIR ATTENTION IN NOTING THE CONTENTS OF THE CERTIFICATE OF SCB. ADMITTEDLY NO INVESTIGATION IS MADE BY ASSESSING OFFICER OR BY LE ARNED COMMISSIONER (APPEALS) EITHER FROM SCB OR FROM THE DEBTOR OF THE ASSESSEE. THE LOWER AUTHORITY DISALLOWED THE INTEREST EXPENSES WITHOUT BRINGING ANY ADVERSE MATERIAL ON RECORD THAT THE ASSESSEE BORROWED THE C APITAL AS HOME LOAN AND NOT FOR THE PURPOSE OF BUSINESS OR PROFESSION. 9. THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS TAJ INTERNATIONAL JEWELLERS (SUPRA), ON THE FACTS THAT ASSESSEE AVAIL ED LOAN FROM BANK. THE SUM WAS DEPOSITED WITH THE BANK AND CONVERTED INTO FIXED DEPOSIT FOR OPENING LETTERS OF CREDIT, ETC. THE ASSESSEE EARNE D INTEREST ON THE SAID 7 ITA 4946/MUM/2018 DEPOSIT AND THE SAME WAS OFFERED UNDER THE HEAD, I NCOME FROM OTHER SOURCES. IT ADJUSTED INTEREST PAID ON THE LOAN AG AINST THE INTEREST EARNED ON FDR WHILE COMPUTING ITS TAXABLE INCOME UNDER THE HEAD, INCOME FROM OTHER SOURCES. THE AO DID NOT ALLOW NETTING OF INTEREST FROM INTEREST EARNED ON DEPOSIT AND MADE ADDITION. ON A PPEAL BEFORE THE TRIBUNAL, THE ADDITION WAS DELETED. ON FURTHER APP EAL BEFORE HONBLE HIGH COURT IT WAS HELD THAT INTEREST PAID SHOULD BE ALLOWED U/S 57(III) AS THE AMOUNT WAS BORROWED FROM THE BANK TAKING ADVANT AGE OF EXIM POLICY AS WELL AS LOWER LIBOR RATE OF INTEREST AND THE INT EREST PAID WAS EXPENDITURE LAID OUT AND EXPENDED WHOLLY AND EXCLUS IVELY FOR THE PURPOSE OF MAKING OR EARNING OF INTEREST INCOME AND DISMISS ED THE APPEAL OF THE REVENUE. 10. WE HAVE NOTED THAT IN THE PRESENT APPEAL DESPITE TH E SPECIFIC CONTENTION OF ASSESSEE THAT ASSESSEE HAS GRANTED LOAN TO THREE CONCERNS, VIZ. HARI OM CARRIERS, SHIV AUM STEEL (P) LTD AND SOFTEN CARRIER S PVT LTD AND EARNED INTEREST @15% FROM THESE PARTIES. THE ASSESSEE HAS OFFERED THE SAID INTEREST INCOME UNDER THE HEAD INCOME FROM OTHER S OURCES, IN THE RETURN OF INCOME AND CLAIMED INTEREST EXPENSES PAID TO STA NDARD CHARTERED BANK. WE HAVE FURTHER NOTED THAT DESPITE SPECIFIC CONTENTION OF THE ASSESSEE THAT ASSESSEE HAS OFFERED INTEREST INCOME AGAINST EXPENDITURE INCURRED ON INTEREST, THE LOWER AUTHORITIES HAVE NO T VERIFIED THE FACTS. IN 8 ITA 4946/MUM/2018 OUR CONSIDERED VIEW, THE RATIO OF DECISION IN TAJ I NTERNATIONAL JEWELLERS (SUPRA) IS SQUARELY APPLICABLE ON THE FACTS OF THE PRESENT CASE. THEREFORE, WE DIRECT THE AO TO ALLOW INTEREST EXPENDITURE OF R S.20,19,454. 11. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 20-08-2019. SD/- SD/- (SHAMIM YAHYA) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DT : 20 TH AUGUST, 2019 PK/- COPY TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI