Sh. Mukesh Miglani, New Delhi V. ITO, New Delhi

ITA 5336/DEL/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 81789 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 11 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 18-09-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 18-10-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J P CHANDRAKAR
• Keywords: Salary income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH `E NEW DELHI BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT AND SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER I.T.A.NO. 5336/DEL/2012 ASSESSMENT YEAR : 2009-10 SHRI MUKESH MIGLANI, VS INCOME TAX OFFICER, 10/6781, WARD-11(2), D.B. GUPTA ROAD, NEW D ELHI. NEW DELHI. (PAN: ACHPM4811E) (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI SHAILESH GUPTA RESPONDENT BY : SHRI J.P. CHANDRAKAR, SR. DR O R D E R PER CHANDRA MOHAN GARG, JUDICIAL MEMBER THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A)- XIII, NEW DELHI DATED 06.08.2012 IN APPEAL NO. 182 /11-12 PERTAINING TO AY 2009-10. 2. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS IN THI S APPEAL:- 1. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS GROSSLY ERRED BOTH IN LAW AND ON FACT S IN SUSTAINING THE DISALLOWANCE OF INTEREST PAID AMOUNT ING TO RS. 6,35,858/- UNDER SECTION 57 (III) OF THE ACT. 2. THAT THE LEARNED COMMISSIONER OF INCOME TAX (AP PEALS) HAS ERRED IN LAW AND ON FACTS IN DISALLOWING THE IN TEREST PAID ITA NO. 5336/DEL/2012 ASSTT.YEAR: 2009-10 PAGE 2 OF 5 TO M/S CITI FINANCIAL CONSUMERS LTD. AGAINST THE IN TEREST EARNED FROM M/S FABKNIT PVT. LTD. AMOUNTING TO RS . 6, 35, 858/-. 2.1 THAT IN DOING SO THE LEARNED COMMISSIONER OF I NCOME TAX (APPEALS) IGNORED THE BASIC FACT THAT THE ASSES SEE HAS BORROWED MONEY FROM M/S CITI FINANCIAL CONSUMERS LT D. FOR THE PURPOSE OF EARNING INTEREST INCOME FROM M/S FAB KNIT INDIA LTD, THUS, BOTH THE INTEREST EARNED AND INTEREST EX PENDED MUST HAVE BEEN ALLOWED SET OFF UNDER THE HEAD, 'INCOME F ROM OTHER SOURCES', AS THERE WAS CLOSE NEXUS BETWEEN THE ABOV E SAID TRANSACTIONS. 3 THAT THE LEARNED COMMISSIONER OF INCOME TAX (APP EALS) HAS GROSSLY IGNORED THE LEGISLATIVE INTENT BEHIND T HE PROVISIONS OF 'INCOME FROM OTHER SOURCES', UNDER CHAPTER III ( F) OF THE INCOME TAX ACT, AS THE ASSESSEE WAS NOT IN ANY BUSI NESS AND WAS HAVING ONLY SALARY INCOME, THUS, THE INTEREST E XPENDED ON LOANS TAKEN SHOULD HAVE BEEN ALLOWED AGAINST THE IN TEREST RECEIVED ON LOANS GIVEN DURING THE YEAR UNDER THE H EAD 'INCOME FROM OTHER SOURCES'. 3.1 THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) FURTHER ERRED IN LAW AND ON FACTS BY IGNO RING THE FACT THAT THE ASSESSING OFFICER ASSESSED THE INTEREST IN COME UNDER THE HEAD 'INCOME FROM OTHER SOURCES', THUS, ALL THE EXPENDITURES INCURRED FOR EARNING SUCH INCOME SHOUL D HAVE BEEN ALLOWED UNDER SECTION 57 (III) OF THE ACT. GROUND NO. 1, 2 AND 2.1 3. APROPOS THESE GROUNDS, WE HAVE HEARD ARGUMENTS O F BOTH THE SIDES AND CAREFULLY PERUSED THE RELEVANT MATERIAL PLACED ON R ECORD BEFORE US. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE LEARNED COMMISS IONER OF INCOME TAX (APPEALS) HAS GROSSLY ERRED BOTH IN LAW AND ON FACT S IN SUSTAINING THE DISALLOWANCE OF INTEREST PAID TO M/S CITI FINANCIAL CONSUMERS LTD. UNDER ITA NO. 5336/DEL/2012 ASSTT.YEAR: 2009-10 PAGE 3 OF 5 SECTION 57 (III) OF THE INCOME TAX ACT, 1961 (FOR S HORT THE ACT) AGAINST THE INTEREST INCOME EARNED FROM M/S FABKNIT PVT. LTD. A MOUNTING TO RS. 6,35,858/-. LD. COUNSEL FOR THE ASSESSEE FURTHER CONTENDED THAT THE CIT(A) IGNORED THE BASIC FACT THAT THE ASSESSEE HAS BORROWED MONEY FRO M M/S CITI FINANCIAL SERVICES PVT. LTD. FOR THE PURPOSE OF EARNING INTER EST FROM M/S FABKNIT INDIA LTD., THUS, BOTH THE INTEREST EARNED AND INTEREST E XPENDED MUST HAVE BEEN ALLOWED SET OFF UNDER THE HEAD INCOME FROM OTHER SOURCES AS THERE WAS CLOSE NEXUS BETWEEN THE ABOVE SAID TRANSACTIONS OF LOAN T AKING AND LOAN GIVING. 4. LD. DR REPLIED THAT THE ASSESSEE TOOK LOAN FOR H OUSING AND INSTEAD OF USING THE SAME FOR THE SAID PURPOSE, THE ASSESSEE G AVE IT AS LOAN TO M/S FABKNIT INDIA PVT. LTD., THEREFORE, THE CIT(A) RIGHTLY UPHE LD THE DISALLOWANCE IN THIS REGARD. 5. ON CAREFUL CONSIDERATION OF ABOVE CONTENTIONS, A T THE OUTSET, WE OBSERVE THAT THE REVENUE AUTHORITIES HAVE NOT DISPUTED THE TRUTHFULNESS AND GENUINENESS OF THIS FACT THAT THE ASSESSEE PAID INTEREST TO M/S CITI FINANCIAL SERVICES PVT. LTD. ON LOAN TAKEN AND THE SAME AMOUNT OF LOAN WAS FURTHER GIVEN TO M/S FAB KNIT INDIA PVT. LTD. AND ASSESSEE EARNED INTEREST T HEREFROM. NOW THE MAIN CONTENTION OF THE REVENUE IS THAT THE ASSESSEE HAS NOT UTILIZED THE LOAN RECEIVED FOR HOME LOAN PURPOSE, THEREFORE, THE INTEREST PAYM ENT ON SUCH LOAN CANNOT BE ADJUSTED AGAINST ANY OTHER INCOME. ITA NO. 5336/DEL/2012 ASSTT.YEAR: 2009-10 PAGE 4 OF 5 6. ON CAREFUL CONSIDERATION OF FACTUAL MATRIX OF TH E EXTANT CASE, WE ARE OF THE VIEW THAT IT IS NONE OF THE BUSINESS OF THE DEP ARTMENT TO TAKE NOTE OF THE FACT THAT THE ASSESSEE DID NOT USE THE AMOUNT OF LO AN RECEIVED FOR HOUSING PURPOSE. THE ASSESSEE HAS ESTABLISHED THAT THE SAM E AMOUNT WAS USED FOR EARNING INTEREST ON WHICH THE INTEREST WAS PAID, TH EN THE ASSESSEE IS ENTITLED FOR SET OFF OF INTEREST PAID AGAINST THE INTEREST EARNE D AND POSITIVE BALANCE, IF ANY, MAY BE TREATED AS AS INCOME FROM OTHER SOURCES. HENCE, AO IS DIRECTED TO GIVE SET OFF TO THE ASSESSEE AS INDICATED ABOVE. A CCORDINGLY, GROUND NOS. 1, 2 AND 2.1 ARE ALLOWED. GROUND NO. 3 & 3.1 7. APROPOS ABOVE GROUNDS, THE LD. COUNSEL FOR THE A SSESSEE SUBMITTED THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HA S GROSSLY IGNORED THE LEGISLATIVE INTENT BEHIND THE PROVISIONS OF 'INCOME FROM OTHER SOURCES', UNDER CHAPTER III (F) OF THE INCOME TAX ACT, AS THE ASSES SEE WAS NOT IN ANY BUSINESS AND WAS HAVING ONLY SALARY INCOME, THUS, ALL THE EX PENDITURES INCURRED FOR EARNING SUCH INCOME SHOULD HAVE BEEN ALLOWED UNDER SECTION 57 (III) OF THE ACT. 8. LD. DR CONTENDED THAT THE ASSESSEE IS NOT ENTITL ED TO ANY BENEFIT IN THIS REGARD. THE DR SUPPORTED THE ORDERS OF THE AUTHORI TIES BELOW. ITA NO. 5336/DEL/2012 ASSTT.YEAR: 2009-10 PAGE 5 OF 5 9. ON CAREFUL CONSIDERATION OF ABOVE SUBMISSIONS, W E ARE OF THE CONSIDERED VIEW THAT SINCE WE HAVE ALLOWED SET OFF OF INTEREST PAID AGAINST THE AMOUNT OF INTEREST RECEIVED BY EARLIER PART OF THIS ORDER, TH US, WE NOTE THAT THE MAIN GRIEVANCE OF THE ASSESSEE HAS BEEN REDRESSED, THERE FORE, GROUND NO. 3 AND 3.1 ARE ALSO ALLOWED IN THE SAME LINE OF ABOVE DIRECTIO N. 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D AS INDICATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 30.09.2014. SD/- SD/- (G.D. AGRAWAL) (CHANDRAMOHAN GARG) VICE PRESIDENT JUDICIAL MEMBER DT. 30TH SEPTEMBER, 2014 GS COPY FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. C.I.T.(A) 4. C.I.T. 5. DR BY ORDER ASSTT.REGISTRAR