SUBHASHCHANDRA R PUNJA, MUMBAI V. ITO 10(3)(3), MUMBAI

ITA 5370/MUM/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 0516 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 11 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-08-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Assessment Year: 2010-2011
• Appeal Filed On: 25-08-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAM TIWARI
• Assessee Lawyers: JITENDRA SINGH

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E, MUMBAI BEFORE SHRI P K BANSAL, VICE PRESIDENT & SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO. 5370/MUM/2014 ASSESSMENT YEAR : 2010 2011 SUBHASHCHANDRA R PUNJA, 1501,15 TH FLOOR, AMBROSIA ORCHARD AVENUE, A S MARG, HIRANANDANI GARDENS POWAI, MUMBAI 400 076 PAN AADPP0457B VS. ITO 10(3)(3) MUMBAI (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI JITENDRA SINGH RESPONDENT BY : SHRI RAM TIWARI DATE OF HEARING : 02. 08 .2017 DATE OF PRONOUNCEMENT : 08 .0 8 .2017 O R D E R PER P K BANSAL, VICE-PRESIDENT: THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT(A), DATED 25.06.2014, FOR A.Y 2010-11. THE ASS ESSEE HAS RAISED AS MANY AS FIVE GROUNDS OF APPEAL. HOWEVER, THE SOLE ISSUE INVOLVED IN THIS APPEAL, PERTAINS TO THE DISALLOWANCE MADE BY THE ASSESSING OFFICER IN RESPECT OF INTEREST ON BORROWING CLAIMED. THE ASSESSING OFFIC ER RESTRICTED THE CLAIM TO ` .17,82,181/- AGAINST THE CLAIM OF ` .25,15,592/- MADE BY THE ASSESSEE. ITA NO.5370/MUM/2014 SUBHASHCHANDRA PUNJA 2 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSI NG OFFICER NOTED FROM THE INCOME TAX RETURN THAT THE ASSESSEE UNDER THE H EAD INCOME FROM OTHER SOURCES SHOWED INTEREST INCOME AT ` 23,98,947/- AGAINST WHICH IT CLAIMED A DEDUCTION OF ` 25,15,592/- AS INTEREST EXPENDITURE U/S. 57. THE ASSESSING OFFICER FURTHER NOTED THAT THE ASSESSEE HAS GIVEN L OAN TO ROBONIK INDIA P LTD, OUT OF THE BORROWED FUNDS. ON THE LOAN ADVANCED, T HE ASSESSEE HAD EARNED INTEREST OF ` 23,97,963/- WHILE THE ASSESSEE HAD PAID INTEREST A MOUNTING TO ` 25,15,592/- ON THE LOANS BORROWED BY HIM. THE ASSE SSING OFFICER, ON THE BASIS OF THE BANK STATEMENTS, FURTHER NOTED THAT OU T OF THE LOAN GIVEN TO ROBONIK INDIA PVT. LTD., A SUM OF ` 1,16,84,843/- HAS A DIRECT NEXUS TO THE LOAN RECEIVED BY THE ASSESSEE FROM CITI BANK FINANC IAL AMOUNTING TO ` .1,46,79,711/-. THE ASSESSING OFFICER FURTHER NOTE D THAT INTEREST FROM ROBONIK INDIA PVT LTD. HAS BEEN RECEIVED @12% WHILE THE INTEREST PAID TO CITI BANK FINANCIAL AND V K KAMBE (HUF) WAS MORE THAN 12 %. THE ASSESSING OFFICER THEREFORE, RESTRICTED THE INTEREST ON THE S UM OF `. 1,16,84,843/- @ 12% TO ` 14,02,181/-. SIMILARLY, THE ASSESSING OFFICER NOTE D THAT THERE WAS NEXUS BETWEEN LOAN TAKEN AND GIVEN TO THE COMPANY I N RESPECT OF INDIVIDUAL PARTIES AND, THEREFORE, RESTRICTED THE INTEREST TO 12% U/S. 57 OF THE ACT AT ` .3,80,000/-. THUS, HE ALLOWED INTEREST OF ` 17,82,181/-, WHICH WAS FURTHER CONFIRMED BY THE CIT(A). AGGRIEVED, THE ASSESSEE I S IN APPEAL BEFORE US. ITA NO.5370/MUM/2014 SUBHASHCHANDRA PUNJA 3 3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE CAR EFULLY CONSIDERED THE SAME ALONG WITH THE ORDERS OF THE AUTHORITIES BELOW . WE HAVE ALSO GONE THROUGH THE DECISION RELIED UPON BY THE LEARNED AR IN THE CASE OF CIT VS. M ETHURAJAN 273 ITR 95 (MAD). WE NOTED THAT THIS DECI SION HAS LAID DOWN THE ____ OF LAW AS HAS BEEN LAID DOWN BY HONBLE SUPREM E COURT IN THE CASE OF CIT VS. RAJENDRA PRASAD MOODY 115 ITR 519 (SC), WHI CH TOOK A VIEW THAT SECTION 57(III) REQUIRES THAT THE EXPENDITURE MUST BE LAID OUT OR EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF MAKING OR EARNING INCOME. IT DOES NOT MEAN THAT EXPENDITURE SHALL BE DEDUCTIBLE ONLY IF ANY INCOME IS MADE OR EARNED. IN THE CASE OF THE ASSESSEE, THE ASSESSING OFFICER HAS NOT DISALLOWED THE INTEREST PAID BY THE ASSESSEE IN TOTO, THEREFOR E, HE RECOGNIZES THE APPLICABILITY OF THE SAID DECISION. 4. WE FURTHER NOTED THAT THE ASSESSEE HAS CONTENDED THAT THE LOAN DISBURSED BY CITI BANK FINANCIAL CORPORATION WAS ` 1,46,79,711/- AND NOT ` 1,60,00,000/-. THE CIT(A), WE NOTED, HAS ALREADY DIRECTED THE ASSESSING OFFICER TO WORK OUT THE INTEREST @12% ON ` .1,47,27,000/-. WE ALSO FIND FORCE IN THE SUBMISSIONS OF THE LEARNED AR THAT THE PRIME LENDING RATE DURING THE YEAR WAS 13.5% AND NOT 12%. THEREFORE, TO THAT EXT ENT, WE DIRECT THE ASSESSING OFFICER TO RESTRICT THE ALLOWANCE OF INTE REST TO 13.5% AND NOT 12% AS TAKEN BY HIM. ITA NO.5370/MUM/2014 SUBHASHCHANDRA PUNJA 4 5. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 8 TH DAY OF AUGUST, 2017. SD/- SD/- (PAWAN SINGH) (P K BANSAL) JUDICIAL MEMBER VICE-PRESIDENT MUMBAI; DATED: 8 TH AUGUST, 2017 SA COPY OF THE ORDER FORWARDED TO : 1. THE APP ELL ANT. 2. THE RESPONDENT. 3. T HE CIT(A), MUMBAI 4. THE CIT 5. DR, E BENCH, ITAT, MUMBAI BY ORDER, #TRUE COPY # ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI