Sh. Amit (Rahul) Gupta, Ludhiana V. ITO, Ludhiana

ITA 56/CHANDI/2016

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 8379 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-03-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2009-2010
• Appeal Filed On: 29-01-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K MITTAL
• Assessee Lawyers: SUBHASH AGGARWAL
• Keywords: Business income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH,CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER ITA NO. 56/CHD/2016 ASSESSMENT YEAR: 2009-10 SHRI AMIT (RAHUL) GUPTA, VS THE ITO, 11, GARDEN ENCLAVE, WARD 7(1), SOUTH CITY, LUDHIANA. LUDHIANA. PAN: ACVPG6755F (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SUBHASH AGGARW AL RESPONDENT BY : SHRI S.K. MITTAL DATE OF HEARING : 23.02.2016 DATE OF PRONOUNCEMENT : 01.03.2016 O R D E R THIS APPEAL BY ASSESSEE HAS BEEN DIRECTED AGAINST THE ORDER OF LD. CIT(APPEALS)-III LUDHIANA DATED 30.12.2015 FOR ASSESSMENT YEAR 2009-10 CHALLENGING THE DISALLOWANCE OF INTEREST OF RS. 2,18,410/- UNDER SE CTION 36(1)(III) OF THE INCOME TAX ACT. 2. BRIEFLY THE FACTS ARE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTICED THAT ASSESSE E HAD MADE PAYMENT OF RS. 18,20,000/- OUT OF BUSINESS RECEIPTS FOR REPAYMENT TOWARDS HOUSING BUILDING ADVANCE. THE ASSESSEE WAS ASKED TO EXPLAIN WHY THE INTEREST PAID TO THE BANK MAY NOT BE DISALLOWED PROPORTIONATELY TO THE EXTENT OF MONEY THE ASSESSEE HAS USED FOR NON-BUSINESS PURPOSES. THE DISALLOWANCE O F 2 RS. 2,18,400/- ON ACCOUNT OF INTEREST @ 12% ON HOUS E LOAN REPAYMENT AMOUNT OF RS. 18,20,000/- WAS MADE B Y THE ASSESSING OFFICER BEING PAYMENT FOR NON-BUSINES S. 3. THE ASSESSEE CHALLENGED THE ADDITION BEFORE LD. CIT(APPEALS) AND IT WAS SUBMITTED THAT ASSESSEE IS SOLE PROPRIETOR OF BUSINESS OF MANUFACTURE OF GARMENTS. THE RETURN WAS FILED CLAIMING DEDUCTION OF RS. 1,50,000 /- ON ACCOUNT OF HOUSING LOAN INTEREST PAID TO THE BANK. THE ASSESSEE MADE PAYMENT OF RS. 18,20,000/- TOWARDS REPAYMENT OF HOUSE BUILDING ADVANCE WHICH HAVE BEEN RAISED BY THE ASSESSEE FEW YEARS BACK. IT WAS SUBM ITTED THAT HOUSE BUILDING LOAN WAS REFUNDED IN INSTALLMEN TS FOR THE PAST NUMBER OF YEARS WHERE NO DISALLOWANCE HAVE BEEN MADE. IT WAS SUBMITTED THAT SAID AMOUNT HAD BEEN REFUNDED OUT OF OWN CAPITAL OF THE PROPRIETOR WHICH AS ON 01.04.2008 WAS SUM OF RS. 56,01,533/- AND THE CLOSING BALANCE AS ON 31.03.2009 IS IN A SUM OF RS. 48,40,605/-. THE ASSESSEE RELIED UPON SEVERAL DECI SIONS IN SUPPORT OF THE PROPOSITION THAT WHERE THE AMOUNT HAS BEEN PAID OUT OF OWN CAPITAL OF THE PROPRIETOR, NO DISALLOWANCE IS TO BE MADE. THE LD. CIT(APPEALS), HOWEVER, DID NOT ACCEPT CONTENTION OF THE ASSESSEE AND NOTED THAT REPAYMENT OF HOUSE BUILDING AMOUNT WAS N OT DEBITED TO THE CAPITAL ACCOUNT THEREFORE, ADDITION WAS CONFIRMED. 4. I HAVE HEARD LD. REPRESENTATIVES OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECOR D. 3 THE ASSESSEE SUBMITTED BEFORE ASSESSING OFFICER THA T AMOUNT PAID TOWARDS HOUSE BUILDING ADVANCE OUT OF O WN CAPITAL AND IT HAS GOT NOTHING TO DO WITH THE CURRE NT INTEREST GIVEN TO THE BANK. THE CASH-FLOW ALSO SHOW S THAT IT HAS BEEN GIVEN OUT OF CASH AVAILABLE WITH T HE ASSESSEE. THE ASSESSING OFFICER NOTED IN THE ASSESSMENT ORDER THAT ASSESSEE HAD UTILIZED CAPITAL OF BUSINESS TOWARDS NON BUSINESS PURPOSES AND AT THE SAME TIME, PAID BANK INTEREST. THE ASSESSING OFFICE R WAS THEREFORE, OF THE VIEW THAT REPAYMENT OF HOUSE LOAN WAS NON-BUSINESS PURPOSES. THE FINDINGS OF THE ASSESSING OFFICER THUS, WOULD CLEARLY SHOW THAT ASS ESSEE PAID THE AMOUNT IN QUESTION OUT OF THE CAPITAL, THEREFORE, THE ASSESSING OFFICER HAS NOT PROVED ANY NEXUS BETWEEN THE BORROWED FUNDS AND THE AMOUNT PAI D TOWARDS HOUSE BUILDING ADVANCE. CONSIDERING THE MATERIAL ON RECORD, IT IS CLEAR THAT ASSESSEE HAS SUFFICIENT CAPITAL AVAILABLE WITH HIM FOR THE PURPO SE OF GIVING HOUSE BUILDING ADVANCE. SINCE ASSESSING OFFI CER HAS FAILED TO PROVE ANY NEXUS BETWEEN THE AMOUNTS P AID FOR HOUSE BUILDING ADVANCE AND THE BORROWED FUNDS, THEREFORE, NO ADDITION COULD BE MADE AGAINST THE ASSESSEE. HON'BLE PUNJAB & HARYANA HIGH COURT IN T HE CASE OF BRIGHT ENTERPRISES PVT. LTD. VS CIT IN ITA 224/2013 DATED 24.07.2015 HELD THAT IF THE FUNDS A ND RESERVES OF THE APPLICANT ARE SUFFICIENT TO COVER T HE INVESTMENTS, NO DISALLOWANCE OF INTEREST SHOULD BE MADE. THE LD. COUNSEL FOR THE ASSESSEE ALSO RELIE D UPON 4 UNREPORTED DECISION OF ITAT AGRA BENCH IN THE CASE OF RAJIV SAGAR VS JCIT IN ITA 364/2013 DATED 20.06.201 4 AND SHRI KRISHAN MURARI LAL AGGARWAL VS DCIT 59 SOT 136 IN WHICH IT WAS HELD THAT IF THE ASSESSEE'S CA PITAL AND INTEREST FREE FUNDS ARE SUFFICIENT TO COVER THE ADVANCE, NO DISALLOWANCE IS CALLED FOR. 5. IN VIEW OF THE ABOVE DISCUSSION, I DO NOT FIND A NY JUSTIFICATION FOR AUTHORITIES BELOW TO CONFIRM THE DISALLOWANCE. THE ORDERS OF THE AUTHORITIES BELOW ARE ACCORDINGLY SET ASIDE AND ADDITION OF RS. 2,18,410/ - IS DISALLOWED. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- (BHAVNESH SAINI) JUDICIAL MEMBER DATED: 1 ST MARCH, 2016. POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT, DR ASSISTANT REGISTRAR, ITAT/CHD