ACIT - 32(3), MUMBAI V. SURENDRA D. SHAH, MUMBAI

ITA 5374/MUM/2016

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 1920 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-11-2018
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 31-08-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAJIV GUBGUTRA
• Assessee Lawyers: V G GINDEKUMAR KALE
• Keywords: Gift; Opportunity of being heard; Deemed to accrue or arise in india
• Section: 54F; 54; 56

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA, AM AND SHRI PAWAN SINGH, JM ITA NO. 5374/MUM/2016 ( ASSESSMENT YEAR: 2012 - 13 ) ACIT - 32(3) R. NO. 108, 1 ST FLOOR, C - 11, PRATAYAKSHKAR BHAVAN, BKC, BANDRA, MUMBAI - 400 051 VS. SHRI SURENDRA D. SHAH 1 ST FLOOR, DEEPAVALI BUNGLOW CARTER ROAD NO.5, BORIWALI (W), PAN/GIR NO. AAAJPS 0365 B ( APPELLANT ) : ( RESPONDENT ) APPELLANT BY : SHRI RAJIV GUBGUTRA RESPONDENT BY : SHRI V. G. GINDE/KUMAR KALE DATE OF HEARING : 28.0 8.2018 DATE OF PRONOUNCEMENT : 19.11 .2018 O R D E R PER SHAMIM YAHYA, A. M.: THIS A PPEAL BY THE REVENUE IS DIRECTED AGAINST THE O RDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - 44, MUMBAI (LD.CIT(A) FOR SHORT) DATED 27.06.2016 AND PERTAI NS TO THE A SSESSMENT YEAR (A.Y.) 2012 - 13. 2. THE GROUNDS OF APPEAL READ AS UNDER: 1. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) ERRED IN DELETING THE ADDITION OF RS.38,34,200/ - MADE U/S 56(2)(VII)(B) &(C} WITHOUT CONSIDER ING THE FACT THAT ASSESSEE PURCHASED PROPERTY JOINTLY AND PAYMENT WAS MADE BY SHRI KUNDANMAL JAIN AND ALSO NO LIABILITY WAS SHOWN IN THE NAME OF SHRI KUNDANMAL JAIN.' 2. ' ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) ERRED IN DELETING ADDITION MADE AS SHORT TERM CAPITAL GAIN WITHOUT APPRECIATING THE FACT THAT ASSESSEE HAS REGISTERED HIS FLAT ON 21.11.2009 AND SOLD ON 08.01.2011 AND THE PURCHASE AGREEMENT WAS MERELY AN AGREEMENT FOR BOOKING OF FLAT FROM ASSESSEE'S OWN PROPRIE TARY CONCERN OF M/S SURENDRA D. SHAH HUF.' 3. ' ON THE FACT AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD .CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.18,87,500/ - ON ACCOUNT OF RENTAL INCOME 2 ITA NO. 5374/MUM/2016 SHRI SURENDRA D. SHAH IGNORING THE FACT THAT RENT WAS CALCULATED AS PER AGREEMENT AND NOT ON ESTIMATION BASIS.' 4. ' ON THE FACT AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD .CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE MADE BY THE AO ON ACCOUNT OF INTEREST EXPENSES WITHOUT CONSIDERING THE FACT THAT THE ASSESSEE HAS USED MIXED POOL OF FUND I.E; INTEREST BEARING FUND AND INTEREST FREE FUND.' 5. THE APPELLANT PRAYS THAT THE ORDER OF THE LD. CIT(A} ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE A.O BE RESTORED. APROPOS GROUND NO.1: 3. BRIEF FACTS OF THE CASE A RE THAT THE RETURN OF INCOME WAS FILED ON 31.10.2013 DECLARING TOTAL INCOME OF RS.50,43,424/ - . THE ASSESSEE IS AN INDIVIDUAL RUNNING HIS PROPRIETARY BUSINESS IN THE NAME AND STYLE OF M/S SHRI SAI SHRADDHA ASSOCIATES. DURING THE COURSE OF ASSESSMENT PROCEED INGS, IT WAS NOTED BY THE AO THAT THERE IS AN AIR INFORMATION ACCORDING TO WHICH PROPERTY HAS BEEN PURCHASED BY THE ASSESSEE ALONGWITH KUNDANMAL K JAIN FOR WHICH SHRI JA IN HAS MADE PAYMENT OF RS. 38,34,200 / - . IT IS THE CONTENTION OF THE AO THAT SHRI KUNDANM AL JAIN HAS MADE PAYMENT ON BEHALF OF THE ASSESSEE WITHOUT ANY CONSIDERATION AND THEREFORE THE ASSESSEE IS DEEMED TO HAVE RECEIVED GIFT FROM AN UNRELATED PERSON WITHOUT ANY CONSIDERATION. THE ASSESSEE SUBMITTED LETTERS FROM SHRI KUNDANMAL JAIN WHEREIN IT W AS STATED THAT HE HAS MADE PAYMENT OF RS 38,34,200/ - BUT 50% OF THE COST OF THE PROPERTY IS RECOVERABLE FROM THE ASSESSEE . THE AO HOWEVER, DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE . THE AO ALSO STATED THAT THE ASSESSEE HAD NOT SHOWN ANY LIABILITY IN HI S RETURN OF INCOME. THE AO THEREFORE ADDED RS 38,34,200/ - AS INCOME UNDER THE PROVISION/OF SEC. 56 (2)(VII)(A) TO THE TOTAL INCOME OF THE ASSESSEE . 4. UPON THE ASSESSEES APPEAL, THE LD. CIT(A) DELETED THE ADDITION BY HOLDING AS UNDER: 3 ITA NO. 5374/MUM/2016 SHRI SURENDRA D. SHAH IT IS AN UNDISPUTE D FACT THAT THE PROPERTY IN QUESTION HAS REGISTERED JO INTLY IN THE NAMES OF SURENDRA D SHAH I.E. APPELLANT AND SHRI KUNDANMAL N JAIN. THE PAYMENT AT THE TI ME OF THE REGISTRATION OF THE PROPERTY HAS HOWEVER BEEN MADE BY KUNDANMAL JAIN ALONE. SHRI JAIN HAS SUBMITTED IN WRITING THAT 50% OF ALL PAYMENTS MADE BY HIM TOWARDS PURCHASE OF THIS PROPERTY IS TO BE BORNE BY THE APPELLANT AND THE SAME AMOUN T IS TO BE RECOVERED BY SHRI JAIN F ROM THE APPELLANT. FROM THE FACTS OF THE CASE IT DOES NOT SEEM THAT THE APPE LLANT HAS RECEIVED ANY MONEY OR PROPERTY FROM SHRI JAIN WITHOUT ANY CONSIDERAT ION. FURTHER THE REGISTRATION OF PROPERTY ALSO CONTAINS THE NAME OF SHRI JAIN. THUS IT IS NOT THE CASE THAT SHRI JAIN HAS PURCHASED PROPERTY IN THE NAME OF THE APPELLANT. ON THE OTHER HAND' SIMPLY SEEMS TO BE A CASE WHERE PROPERTY IS JOINTLY PURCHASE D BY TWO PERSONS, ONE OF WHOM MAKES THE INITIAL PAYMENT AND RECOVERS THE SAME FROM OTHER PARTY SUBSEQUENTLY. IN THIS SITUATION, THERE WILL BE NO APPLICATION OF SEC. 56(2)(VII)(A). THE GROUNDS OF APPEAL NO. 2 IS THEREFORE ALLOWED AND AN ADDITION OF RS 38,34,200/ - IS DELETED. 5. AGAINST THE ABOVE ORDER, THE REVENUE IS IN APPEAL BEFORE US. 6. UPON HEARING BOTH THE COUNSEL AND PERUSING THE RECORDS, WE FIND THAT SHRI KUNDANMAL JAIN HAD PA ID A SUM OF RS.38,34,200/ - FOR THE REGISTRATION OF A FLAT IN THE NAME OF SHRI KUNDANMAL JAIN AND THE ASSESSEE. THE ASSESSEE IN THIS REGARD HAS SUBMITTED LETTERS FROM SHRI KUNDANMAL JAIN THAT HE HAD MADE A PAYMENT OF RS.38,34,200/ - , I.E., 50% OF THE COST OF THE PROPERTY AS RECOVER ABLE FROM THE ASSESSEE. IN THIS REGARD, IT IS NOTED THAT NEITHER THERE IS ANY AGREEMENT ON RECORD NOR THERE IS ANY INFORMATION THAT THE AFORESAID SUM HAS BEEN PAID BY THE ASSESSEE. THE A.O. HAS ALSO NOTED THAT THE ASSESSEE HAS NOT S HOWN THE AMOUNT AS HIS LIABILITY. IN THESE CIRCUMSTANCES, THE CLAIM OF THE ASSESSEE AND THE SAID LETTERS ARE TOTALLY SELF SERVING STATEMENTS DEVOID OF ANY COGENCY. THE LD. CIT(A) HAS WITHOUT ANY APPLICATION OF MIND HELD THAT SECTION 56(2)(VII )( A) IS NOT AP PLICABLE ON THE FACTS OF THE CASE. WHEN THE PAYMENT IS MADE BY ANOTHER PERSON, THERE IS NO REASON WHY THE PROPERTY IN QUESTION WILL BE REGISTERED IN THE JOINT NAME OF THE 4 ITA NO. 5374/MUM/2016 SHRI SURENDRA D. SHAH ASSESSEE. AS A MATTER OF FACT, THE ABOVE TRANSACTION IS SQUARELY HIT BY THE PROHIBITI ON OF BENAMI PROPERTY TRANSACTION ACT. HENCE, WE SET ASIDE THE ORDERS OF THE LD. CIT(A) AND RESTORE THAT OF THE A.O. APROPOS GROUND NO. 2: 7. BRIEF FACTS OF THE CASE THAT T HE APPELLANT HAS SHOWN LONG TERM CAPITAL LOSS OF RS . 16,97,738/ - ON SALE OF HIS F LAT AT SWASTIK SCTY. IT WAS OBSERVED BY THE AO WITH RESPECT TO THIS FLAT THAT THE PURCHASE AGREEMENT DATED 21.11.2007 IS MERELY AN AGREEMENT FOR BOOKING OF A FLAT IN A BUILDING WHICH IS YET TO BE DEVELOPED. IT WAS STATED THAT THE ASSESSEE HAS REGISTERED TH E SAID FLAT ONLY ON 21.11.2009. SINCE THE FLAT WAS SOLD ON 08.01.2011 THE AO CAME TO A CONCLUSION THAT THE FLAT WAS SOLD BY THE ASSESSEE WITHIN THREE YEARS OF PURCHASE AND ACCORDINGLY THE ASSESSEE IS LIABLE FOR SHORT TERM CAPITAL GAIN INSTEAD OF LONG TERM CAPITAL LOSS. THE AO COMPUTED THE SHORT TERM CAPITAL GAIN IN THE FOLLOWING MANNER. SALE CONSIDERATION RS 50,00,000 / - COST OF FLAT RS 47,71,992 / - STCG RS 2,28,008 / - THE AO ACCORDINGLY ADDED RS . 2,28,008/ - TO THE TOTAL INCOME OF THE ASSESSEE . 8. UPON TH E ASSESSEES APPEAL, THE LD. CIT(A) DELETED THE ADDITION BY HOLDING AS UNDER: THE ONLY ISSUE INVOLVED IN THIS GROUND IS WHETHER THE APPELLANT HAS PURCHASED FLAT ON 21.11.2007 I.E. ON THE DATE OF AGREEMENT. IN MODERN TIMES MOST OF THE PURCHASES OF RESIDEN TIAL HOUSES ARE BY WAY OF PURCHASE OF FLATS. IN BIGGER CITIES LIKE MUMBAI & DELHI AN OVERWHELMING PROPORTION OF RESIDENTIAL HOUSES CONSTITUTE OF FLATS WHICH ARE UNITS IN A RESIDENTIAL BLOCK DEVELOPED BY SOME BUILDER. AS PER MARKET NORMS AND PRACTICE THE LE GAL FORMALITIES OF REGISTRATION OF PROPERTY IS NEVER DONE AT THE TIME OF ALLOTMENT OF A FLAT. BUT THIS CANNOT BE INTERPRETED TO MEAN THAT A BUYER WHO HAS MADE PAYMENTS AND WHO HAS BEEN ISSUED AN ALLOTMENT LETTER HAS NOT 5 ITA NO. 5374/MUM/2016 SHRI SURENDRA D. SHAH PURCHASED THE SAID RESIDENTIAL FLAT. THE LETTER OF ALLOTMENT IS INVARIABLY THE FIRST STAGE OF PURCHASING THE RESIDENTIAL FLAT FROM A BUILDER. IT IS ALSO IMPORTANT TO NOTE THAT ON THE BASIS OF ALLOTMENT LETTER ITSELF BANKS AND FINANCIAL INSTITUTIONS DISBURSE LOAN TO THE BUYER OF FLATS. THEREF ORE, IN TERMS OF MARKET PRACTICE ALLOTMENT LETTER IS EQUIVALENT TO PURCHASE OF FLATS. 4.4 T HE CBDT HAS ISSUED CIRCULAR NO. 471 DATED 15.10.1986 AND ALSO CIRCULAR NO. 672 DATED 10.12.1993 TAKING THE VIEW THAT EVEN ALLOTMENT OF THE FLAT OR HOUSE BY STATE HOU SING BOARDS OR COOPERATIVE SOCIETIES WOULD TANTAMOUNT TO PURCHASE AS ON THE DATE OF ALLOTMENT ITSELF. THE ABOVE TWO CIRCULARS WERE EXPLAINED IN MRS. SEETHA SUBRAMANIAN V. ACIT [1996] 59 ITD 94 (CHENNAI - TRIB.) WITH THE FOLLOWING OBSERVATIONS: '. . THE ASSE SSEE ALSO RELIED UPON CERTAIN CIRCULARS ISSUED BY THE CBDT. ONE OF THE CIRCULARS WAS [CIRCULAR NO. 471, DATED 15TH OCTOBER, 1986. THIS WAS ISSUED BY THE CBDT CLARIFYING THE POSITION THAT WHERE AN ASSESSEE ACQUIRES A FLAT BY AN ALLOTMENT UNDER THE SELF - FINA NCING SCHEME OF THE DELHI DEVELOPMENT AUTHORITY, THE ALLOTMENT ITSELF IS SUFFICIENT COMPLIANCE FOR GETTING THE BENEFIT UNDER SECTION 54F, EVEN THOUGH THE ASSESSEE HAS NOT PAID ALL THE INSTALMENTS DUE UNDER THE SAID SCHEME. LATER BY ANOTHER CIRCULAR NO. 672 , DATED 1 6TH DECEMBER, 1993, THE CBDT HAS ISSUED CLARIFICATION EXTENDING THE SAME BENEFITS FOR ACQUISITION OF HOUSES OR FLATS ON ALLOTMENT UNDER SIMILAR SCHEMES. THEREFORE, IT WAS CONTENDED THAT THE INTENTION OF THE LEGISLATURE WAS TO INVEST IN THE ACQU ISITION OF A RESIDENTIAL HOUSE AND COMPLETION OF CONSTRUCTION OR OCCUPATION IS NOT REQUIRED. WE FIND FORCE IN THE ARGUMENT OF THE LEARNED COUNSEL FOR THE ASSESSEE. THE SAID INTENTION IS VERY CLEAR FROM THE TWO CIRCULARS ISSUED BY THE CBDT, WHERE IT WAS HEL D THAT AN ASSESSEE IS ENTITLED TO THE BENEFIT OF SECTIONS 54 AND 54F, IF AN ASSESSEE GETS AN ALLOTMENT UNDER THE SELF - FINANCING SCHEME AND PAYS THE FIRST INSTALMENT OF THE COST OF THE CONSTRUCTION. FROM THAT IT IS CLEAR THAT IN ORDER TO GET THE BENEFIT UND ER SECTION 54F THE ASSESSEE NEED NOT COMPLETE THE CONSTRUCTION OF THE HOUSE AND OCCUPY THE SAME. . . .' 4.5 THE SAME LOGIC SHOULD APPLY TO SUCH CASES AS PURCHASE OF A FLAT TO BE CONSTRUCTED UNDER AN AGREEMENT. ON A RELATED ISSUE IT HAS BEEN HELD BY THE HON 'BLE SUPREME COURT OF INDIA IN THE CASE OF CIT VS T N ARVIND REDDY (1979) 120 ITR 46 (SC) THAT THE PURCHASE IN THE CONTEXT OF SEC. 54 SHOULD BE UNDERSTOOD IN A LIBERAL SENSE WITHOUT ANY UNDUE RESTRICTION LIMITING THE MEANING TO 'LEXICAL LEGALESE'. CONSIDER ING THE FACTS OF THE CASE THE GROUNDS OF APPEAL NO. 3 IS ALLOWED AND ADDITION OF RS 2,28,008/ - IS DELETED. 9. AGAINST THE ABOVE ORDER, THE REVENUE IS IN APPEAL BEFORE US. 10. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. WE FIND THAT THE LD. CI T(A) ON THIS ISSUE IS GRANTING RELIEF TO THE ASSESSEE BY MAKING THEORETICAL CONSIDERATION 6 ITA NO. 5374/MUM/2016 SHRI SURENDRA D. SHAH ONLY. HE HAS NOT GONE TO THE FACTS OF THE MATTER. THERE WAS A PURCHASE AGREEMENT WHICH IS DATED 2 1 .11.2007. THE REGISTRATION WAS DONE ONLY ON 2 1 .11.2009. WITHOUT EXAM INING THE QUANTUM OF PAYMENT MADE AT THE TIME OF AGREEMENT AND THE QUANTUM OF CONSTRUCTION, THE LD. CIT(A) HAS GRANTED RELIEF. THE CBDT CIRCULAR REFERRED BY HIM IS TOTALLY IN CONNECTION WITH THE OTHER FACTS. IN OUR CONSIDERED OPINION, IF THE SUBSTANTIAL PA YMENT HAS BEEN DONE AND SUBSTANTIAL CONSTRUCTION HAS BEEN DONE, BY THE TIME OF AGREEMENT, THE SAME CAN BE CONSIDERED AS THE DATE OF ACQUISITION OF THE PROPERTY. SINCE THESE FACTS ARE NOT CLEARLY EMANATING OUT OF THE RECORDS, IN THIS CASE, WE REMIT THIS ISS UE TO THE FILE OF THE A.O. TO CONSIDER THE SAME AFRESH. NEEDLESS TO ADD THE ASSESSEE SHOULD BE GRANTED ADEQUATE OPPORTUNITY OF BEING HEARD. APROPOS GROUND NO.3 : 11. BRIEF FACTS OF THE CASE ARE THAT T HE ASSESSEE HAD SHOWN INCOME FROM HOUSE PROPERTY ALS O. IT WAS NOTED BY THE AO THAT THE ASSESSEE HAD SHOWN PROPERTY LET OUT TO M/S NEXT RETAIL AND M/S HSBC INVEST SECURITIES FOR ONLY PART OF THE YEAR. THE AO SHOW CAUSED THE ASSESSEE TO EXPLAIN AS TO WHY THE RENTAL INCOME FROM THESE TWO CONCERNS NOT BE COMPUT ED FOR THE WHOLE YEAR. THE ASSESSEE STATED BEFORE THE AO THAT M/S HSBC VACATED ITS PREMISES FROM 16.06.2011 AND M/S NEXT RETAIL VACATED ON 01.01.2012. FOR THIS REASON, RENT FOR PART OF THE YEAR WAS CONSIDERED BY THE ASSESSEE . THE AO NOTED THAT THE AGREEMEN T WITH M/S HSBC WAS UPTO 30.08.2012 WHILE THE SAME FOR M/S NEXT RETAIL WAS UPTO APRIL 2012. IT WA S FURTHER NOTED BY THE AO THAT TH E ASSESSEE HAD NOT PAID THE DEPOSIT AMOUNT TO M/S NEXT RETAIL, I N THE BASIS OF THIS FACT THE AO CAME TO A CONCLUSION THAT THE RENT R ECEIVED FROM THE ABOVE TENANTS WILL BE CONSIDERED AS UNREALIZED RENT AS PER THE PROVISION 7 ITA NO. 5374/MUM/2016 SHRI SURENDRA D. SHAH OF SECTION 23 OF THE IT ACT. THE AO THEREAFTER COMPUTED THE RENT FOR THE WHOLE YEAR BY MULTIPLYING MONTHLY RENT PAID BY THESE TWO TENANTS WITH 12. IN THIS WAY A FTER ALLOWING STANDARD DEDUCTION AO ADDED RS 18,87,553/ - . 12. UPON THE ASSESSEES APPEAL, THE LD. CIT(A) DELETED THE ADDITION BY HOLDING AS UNDER: AFTER AMENDMENT OF SEC. 23 THE INCOME RELATED TO A PROPERTY WHICH WAS PARTIALLY VACANT DURING A PART OF A PREVIOUS YEAR IS TO BE DETERMINED BY SUB CLAUSE (C) OF SEC. 23(1). THE SUB CLAUSE (C) STATES 'WHERE THE PROPERTY OR ANY PART OF THE PROPERTY IS LET AND WAS VACANT DURING THE WHOLE OR ANY PART OF THE PREVIOUS YEAR AND OWING TO SUCH VACANCY THE ACTUAL RENT R ECEIVED OR RECEIVABLE BY THE OWNER IN RESPECT THEREOF IS LESS THAN THE SUM REFERRED TO IN CLAUSE (A), THE AMOUNT SO RECEIVED OR RECEIVABLE:' THUS FROM A PERUSAL OF SEC. 23(L)(C) IT IS CLEAR THAT THE ACTUAL SUM RECEIVED BY THE APPELLANT AS RENT AFTER ALLOWI NG PERMISSIBLE DEDUCTIONS WILL BE ASSESSED AS HOUSE PROPERTY INCOME. IN THIS SITUATION THERE IS NO SCOPE FOR MAKING ESTIMATION OF DEEMED INCOME. AFTER CONSIDERING THE FACTS AND THE POSITION OF LAW GROUNDS OF APPEAL NO. 4 IS ALLOW ED AND ADDITION OF RS 26,96 ,500/ - IS DELETED. 13. AGAINST THE ABOVE ORDER, THE REVENUE IS IN APPEAL BEFORE US. 14. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. ON THE FACTS OF THE CASE IT IS CLEAR THAT ALTHOUGH THE AGREEMENT WAS FOR A LONGER PERIOD BUT THE TENANT HAD V ACATED THE PREMISES DURING THE YEAR ITSELF. THE ASSESSEE HAS NOT BEEN ABLE TO LET OUT THE SAME IN THE INTERVENING PERIOD. IN OUR CONSIDERED OPINION, THE ASSESSEE IN THIS CASE IS ENTITLED TO VACANCY ALLOWANCE AND, HENCE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A). APROPOS GROUND NO.4: 15. BRIEF FACTS OF THE CASE ARE THAT D URING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTED BY THE AO THAT THE ASSESSEE HAS CLAIMED INTEREST EXPENDITURE AMOUNTING TO RS 65,59,931 / - WHICH ALSO INCLUDES PAYMENT OF INTEREST TO HIS CLOSELY HELD FIRM TO THE TUNE OF 8 ITA NO. 5374/MUM/2016 SHRI SURENDRA D. SHAH RS 16,54,380 / - . IT WAS STATED BY THE AO THAT DESP ITE PAYING INTEREST TO RELATED P ARTIES THE APPELLANT HAS RECEIVED INTEREST FROM ONLY ONE FIRM EVEN THOUGH HE HAS MADE INVESTMENT IN MANY REGISTERED FIRMS AND PROPRIETARY CONCERNS. THE INTEREST RECEIVED FROM ASSOCIATED CONCERNS IS RS. 1,03,744 / - . THE AO D ISALLOWED INTEREST AMOUNT OF RS. 15,50,636 / - (16,54,380 - 1,03,744) UNDER THE PROVISION OF SEC. 36(L)(III) OF THE IT ACT 1961. 16. UPON THE ASSESSEES APPEAL, T HE LD. CIT(A) DELETED THE ADDITION BY HOLDING AS UNDER: 6.3 I HAVE CONSIDERED THE RIVAL SUBMISSIONS AS ABOVE. THE INTEREST EXPENDITURE CAN BE DISALLOWED U/S. 36(1)(III) IF IT IS ESTABLISHED THAT THE INTEREST PAID IS NOT IN RESPECT OF CAPITAL BORROWED FO R THE PURPOSE OF BUSINESS OR PROFESSION. THE AO HAS SIMPLY STATED THAT THE APPELLANT HAS DIVERTED INTEREST BEARING FUNDS TO NON - REVENUE GENERATING ACTIVITIES. HOWEVER, THE AO HAS NOT ESTABLISHED THAT THE ADVANCEMENT OF INTEREST FREE LOANS HAVE BEEN MADE FR OM INTEREST BEARING FUNDS. IN FACT THE AO HAS NOT CONSIDERED THE FACTS THAT THE APPELLANT HAS MORE OF INTEREST FREE FUND THAN WHAT HAS BEEN ADVANCED AS LOAN WITHOUT INTEREST. IT HAS BEEN HELD BY THE HON'BLE SUPREME COURT OF INDIA IN A RECENT JUDGMENT GIVEN IN THE CASE OF HERO CYCLES PVT. LTD. VS CIT 379 ITR 347 (SC) (2015) THAT ONCE IT IS ESTABLISHED THAT THERE IS NEXUS BETWEEN EXPENDITURE AND PURPOSE OF BUSINESS, REVENUE CANNOT JUSTIFIABLY CLAIM TO PUT ITSELF IN ARM CHAIR OF BUSINESSMAN AND ASSUME ROLE TO DECIDE HOW MUCH IS REASONABLE EXPENDITURE. IN THE PRESENT CASE IT HAS NOT BEEN ESTABLISHED THAT THE INTEREST EXPENDITURE HAS NOT BEEN MADE FOR THE PURPOSE OF BUSINESS. THE TERM 'FOR THE PURPOSE OF BUSINESS' HAS WIDER CONNOTATION THAN THE TERM 'FOR THE PURP OSE OF EARNING PROFIT'. CONSIDERING THE TOTALITY OF FACTS AND POSITION OF LAW I HAVE COME TO A CONCLUSION THAT THERE IS NO JUSTIFICATION FOR DISALLOWING CLAIM OF INTEREST OF RS 15,50,636/ - U/S 36(L)(III) OF THE IT ACT 1961. GROUNDS OF APPEAL NO. 5 IS ACCOR DINGLY ALLOWED. 17. AGAINST THE ABOVE ORDER, THE REVENUE IS IN APPEAL BEFORE US. 18. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. WE FIND THAT IT IS UNDISPUTED THAT THE ASSESSEE HAS SUFFICIENT NONINTEREST BEARING FUNDS. THE REVENUES GRIEVANC E IS THAT THE ASSESSEE HAS A MIXED POOL FUNDS, I.E., INTEREST BEARING FUNDS AND 9 ITA NO. 5374/MUM/2016 SHRI SURENDRA D. SHAH INTEREST FREE FUNDS. HENCE, THE RELIEF TO THE ASSESSEE SHOULD NOT BE GRANTED. WE FIND THAT THIS ISSUE IS SETTLED IN FAVOUR OF THE ASSESSEE THAT WHEN THE INVESTMENT IS FROM A MI XED POOL OF FUNDS, T HE ASSESSEE HAS A RIGHT OF A ATTRIBUTION AND, HENCE, IN THIS VIEW OF THE MATTER, THE REVENUES GRIEVANCE IS LIABLE TO BE REJECTED. ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A). ACCORDINGLY, WE UPHOLD THE SAME . 18. IN THE RESULT, TH IS APPEAL BY THE R EVENUE STANDS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 19.11.2018 SD/ - SD/ - ( PAWAN SINGH ) (S HAMIM YAHYA) J UDICIAL MEMBER A CCOUNTANT MEMBER MUMBAI ; DATED : 19.11.2018 ROSHANI , SR. PS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT - CONCERNED 5. DR, ITAT, MUMBAI 6. GUARD F ILE BY ORDER, (DY./ASSTT. REGISTRAR) ITAT, MUMBAI