Sh. Vipul Gupta, New Delhi V. DCIT, New Delhi

ITA 5820/DEL/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 3370 (ITAT-DELHI)
• Duration Of Justice: 5 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-04-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 24-04-2017
• Assessment Year: 2013-2014
• Appeal Filed On: 15-11-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BEDOBANI CHAUDHURI
• Keywords: Business expenditure; Onus to prove

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH SMC NEW DELHI BEFORE SHRI B.P. JAIN, ACCOUNTANT MEMBER ITA NO.5820/DEL/2016 ASSESSMENT YEAR 2013-14 VIPUL GUPTA, 43/1, RAJAPUR ROAD, CIVIL LINE, NEW DELHI. PAN: AEDPG6789D VS. DCIT, CENTRAL CIRCLE- 29, NEW DELHI. (APPELLANT) (RESPONDENT) REVENUE BY : MS. BEDOBANI CHAUDHURI, SR.D.R. ASSESSEE(S) BY : S/SHRI R.S. SINGHVI AND SHRI SATYAJEET GOEL, CA. / DATE OF HEARING : 24/04/2017 / DATE OF PRONOUNCEMENT: 27/04/2017 ORDER THIS APPEAL OF THE ASSESSEE ARISES FROM THE ORDER OF LEARNED CIT(A)-31, NEW DELHI, VIDE ORDER DATED 31.08.2016 F OR THE ASSESSMENT YEAR 2013-14. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL AS UNDER: 1 (I) . THAT ON FACTS AND CIRCUMSTANCES OF THE CASE , THE LD. CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE DISALLOWANCE OF CLAIM O F INTERE S T IN RESPECT OF BUSINES S LO S S TO THE E X T E NT OF R S. 45 , 97 , 092 / - AS AGAINST 54 , 31 , 979 / - MADE B Y THE A S SE S SING OFFICER . ( II ) . THAT THE LOWER AUTHORITIES HAVE FAILED TO APPRE C IATE THAT THE CLAIM OF INTEREST IS IN RESPECT O F O LD LOAN O BTAINED FOR THE PURPOSE OF BU S INES S AND AS SUCH THE REJECTION OF CLAIM AND C ONSEQUENTIAL BENEFIT OF SET-OFF IS ILLEGAL , ARBITRAR Y AND ON MECHANICAL BASIS. ( III ) . THAT THE DISALLOWANCE IS IN TOTAL DISREGARD TO PA ST HISTOR Y AND RULE OF CONSISTENC Y. 2.THAT EVEN OTHERWISE, PART OF THE C LAIM OF INTEREST BEING ACCEPTED BY LD. CIT(A ), THERE IS NO GROUND OR BASIS FOR REJECTING THE REMAI NIN G AS THE SAME IS ARISING OUT OF S AME LOAN TRANSACTION. 3. THAT THE ORDERS OF THE LOWERS AUTHORITIES ARE BAD I N LAW. 4.THE APPELLANT CRAVES LEAVE TO ADD , ALTER , AMEND , OR V AR Y THE ABOVE GROUND S OF APPEAL AT OR BEFORE THE TIME O F HEARING . ITAS NO.5820/DEL/2016 2 2. THE BRIEF FACTS OF THE CASE ARE AS PER ASSESSING OFFICERS ORDER IN PARAGRAPHS 4 AND 5 WHICH ARE REPRODUCED HEREINBELOW : 4. THE DETAILS SUBMITTED BY ASSESSEE WERE EXAMINED . IT WAS OBSERVED THAT THE ASSESSEE HAS DECLARED INTEREST RECEIPT FRO M TWO PARTNERSHIP FIRMS NAMELY KALKI BUILDERS & DEVELOPERS AND M/S. SUYRAY KIRAN TRADING CORPORATION AMOUNTING TO RS.13,38,958/-. THE INTERE ST FROM PARTNERSHIP FIRM IS DECLARED UNDER THE HEAD INCOME FROM BUSINES S AND PROFESSIONS. AGAINST THE SAME, INTEREST PAID TO PARTNERSHIP FIRM M/S. SURYAKIRAN FINANCE CORPORATION AMOUNTING TO RS.67,70,937/- IS ADJUSTED. THE ASSESSEE ALSO DECLARED LOSS OF RS.27,903/- ON COMMO DITIES TRADING AND PROFIT OF RS.11915/- ON SHARE TRADING. THUS THE RES ULTING LOSS OF RS.54,47,967/- IS CLAIMED UNDER THE HEAD BUSINESS A ND PROFESSION. THE ASSESSEE HAD EARNED INCOME OF RS.84,000/- UNDER THE HEAD INCOME FROM HOUSE PROPERTY. IT HAS ALSO EARNED INTEREST OF RS.1 7,91,023/- FROM OTHER PARTIES, AGAINST WHICH INTEREST EXPENSES OF RS.14,6 9,844/- HAS BEEN CLAIMED U/S.57 THE ASSESSEE ALSO HAD BANK INTEREST AND MINORS INTEREST INCOME. THE RESULTING INCOME OF RS.4,65,422/- IS AL SO ADJUSTED AGAINST THE BUSINESS LOSS CLAIMED FOR THE YEAR UNDER CONSIDERAT ION. THE ASSESSEE WAS ASKED TO EXPLAIN HOW THE INTEREST PAID ON LOAN FROM PARTNERSHIP FIRM IS ALLOWED AS BUSINESS EXPENSES. THE ASSESSEE SUBMITTE D THAT THE LOAN IS OLD ONE WHICH HAD BEEN UTILIZED FOR THE PURPOSE OF ADVA NCING LOAN/CAPITAL TO PARTNERSHIP FIRMS AND OTHERS FROM WHOM INTEREST INC OME IS RECEIVED, THEREFORE, THE INTEREST ON LOAN IS ALLOWABLE EXPENS ES. THE ASSESSEE FURTHER SUBMITTED THAT THE LOSS CLAIMED UNDER THE HEAD BUSI NESS AND PROFESSION IS SET OFF TO THE EXTENT OF INCOME AND NO CARRY FORWAR D OF THE SAME IS CLAIMED IN THE RETURN OF INCOME. 5. THE SUBMISSION OF ASSESSEE IS CAREFULLY CONSIDER ED. THE ASSESSEE WAS ASKED TO SUBMIT THE DETAILS OF LOAN RAISED, LOAN AD VANCED, INTEREST PAID ON LOANS AND INTEREST CHARGED ON THE LOANS. HE WAS ALS O ASKED TO PROVE THE NEXUS OF LOAN RAISED WITH THE INTEREST BEARING LOAN ADVANCED. HE WAS ALSO ASKED TO SUBMIT THE CRITERIA ON WHICH INTEREST EARNED AND PAID ARE CLASSIFIED UNDER THE HEAD BUSINESS AND INCOME FROM OTHER SOURCES. THE ASSESSEE SUBMITTED THAT THE INTEREST RECEIVED AND P AID FROM THE PARTNERSHIP FIRM IS CLASSIFIED UNDER THE HEAD BUSIN ESS INCOME WHEREAS OTHER INTEREST RECEIVED ON INVESTMENT IS TREATED AS INCOME FROM OTHER SOURCES. THE ASSESSEE COULD NOT ESTABLISH THE NEXUS BETWEEN THE LOANS RAISED BY HIM TO INTEREST BEARING LOANS ADVANCED BY HIM. THE ONUS TO PROVE THAT THE ANY EXPENDITURE MADE FOR THE PURPOSE OF BUSINESS IS ON THE ASSESSEE. IT WAS OBSERVED THAT ASSETS OF ASSESSEE I NCLUDE SUBSTANTIAL AMOUNT OF INTEREST FREE LOAN ADVANCED AND INVESTMEN T IN THE PLOTS. IT WAS ALSO FOUND THAT THE OPENING BALANCE OF LOAN FROM SU RYA KISAN FINANCE CORPORATION WAS RS.4.90 CRORE. DURING THE YEAR UNDE R CONSIDERATIONS ADDITIONAL LOAN OF RS.1.99 CRORE WAS RECEIVED WHERE AS AMOUNT OF RS.74.60 LAKH WAS REPAID. ALONG WITH THE INTEREST, THE CLOSING BALANCE WAS RS.6.76 CRORE. A SUBSTANTIAL PORTION OF LOAN IS RECEIVED DURING THE YEAR. IN VIEW OF ABOVE FACTS THE INTEREST PAID BY T HE ASSESSEE IS ALLOWED ITAS NO.5820/DEL/2016 3 ONLY TO THE EXTENT OF INTEREST EARNED BY HIM FROM T HE PARTNERSHIP FIRM. THE ASSESSEE COULD NOT ESTABLISH THAT LOAN FROM SURYA K IRAN FINANCE CORPORATION IS UTILIZED FOR THE PURPOSE OF LOAN ADV ANCE AS INVESTMENT. IN FACT IN THE PRECEDING YEAR ALSO THE ASSESSEE DID NO T CLAIM INTEREST PAID TO SURYA KIRAN FINANCE CORPORATIONS AGAINST THE INTERE ST RECEIVED OF INVESTMENT. THEREFORE, THE CLAIM OF ASSESSEE WITH R EGARD TO ADJUSTMENT OF INTEREST PAYMENT TO SURYA KIRAN FINANCE CORPORATION S AGAINST INCOME FROM OTHER SOURCES IS DISALLOWED. THE ASSESSEE COUL D NOT ESTABLISH THAT THE INTEREST BEARING FUND IS EXCLUSIVELY UTILIZED I N THE BUSINESS HENCE THE EXCESS CLAIM OF INTEREST (AFTER SET OFF OF INTEREST FROM PARTNERSHIP FIRM) IS NOT ALLOWED TO BE CARRIED FORWARD. THE ASSESSEE CON CEALED PARTICULARS OF HIS INCOME, THEREFORE PENALTY PROCEEDINGS U/S.271(1 )(C) ARE INITIATED. 3. LEARNED CIT(A) ALLOWED THE BENEFIT OF RS.8,34,88 7/-. 4. I HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED T HE FACTS OF THE CASE. THE LD. COUNSEL FOR THE ASSESSEE HAS PLACED ON RECO RD FACTS OF THE CASE BY WAY OF CHART AS UNDER: SHRI VIPUL GUPTA A.Y 2013-14 PARTICULARS RECEIVED OPENING BALANCE OF SURYAKIRAN FINANCE CORPORATION AS ON 01.04.2013 49,056,308.23 TOTAL AMOUNT RECEIPT FROM SURYAKIRAN DURING THE YEAR 12,300,000.00 INTEREST PAID TO SURYAKIRAN FINANCE CORPORATION NET OF TDS (RS.67,70,937 RS.677094) 6,093,843.00 AMOUNT OF LOSS AS A PARTNER 183,735.00 TOTAL 67,633,886.83 DETAILS OF INVESTMENT AND UTILIZATION OF ABOVEMENTIONED LOAN: AMOUNT INVESTED INTEREST RECEIVED VENUS DWELLERS PVT. LTD. (DIRECTOR) 21,633,920.00 1,750,373.00 KALKI BUILDERS & DEVELOPERS (PARTNER) 3,115,316.00 1,315,133.00 INVESTMENT IN PROPERTY (WITHOUT INTEREST) 42,884,650.00 INTEREST CAPITALIZED TOTAL (B) 67,633,886.00 3,065,506.00 SHRI VIPUL GUPTA A.Y 2013-14 ITAS NO.5820/DEL/2016 4 DETAILS OF INTEREST EXPENSE CLAIMED TOTAL INTEREST EXPENSE CLAIMED IN THE ROI IN RESPEC T OF LOAN FROM M/S. SURYA KIRAN FINANCE CORPORATION 6,770,937.00 INTEREST SETOFF AGAINST INTEREST INCOME FROM M?S. K ALKI BUILDERS AND DEVELOPERS AND M/S. SURYA KIRAN FINANCE CORP. (AS PER PARA 5 PAGE 2 OF ASSESSMENT ORDER) (RS.13,15,133 + RS.23,825) (-) 1,338,958.00 BALANCE INTEREST DISALLOWED BY ASSESSING OFFICER 5,431,979.00 BENEFIT GIVEN BY CIT(A) OF THE PROPORTIONATE INTERE ST EXPENSES RELATING TO THE INTEREST BEARING FUNDS WHI CH WERE INVESTED FOR PURCHASE OF LAND TO BE CAPITALIZE D [PARA 5.1 OF PAGE 5 OF CIT(A) ORDER] (-)834,887.00 BALANCE LOSS DISALLOWED BY CIT(A) 4,597,092.00 SETOFF OF THE FOLLOWING INCOMES CLAIMED BY ASSESSEE : INCOME FROM HOUSE PROPERTY 84,000.00 (-) 561,337.00 INCOME FROM TRADING IN SHARES 11,915.00 INCOME FROM OTHER SOURCES 465,422.00 BALANCE LOSS TO BE CARRIED FORWARD TO SUBSEQUENT YEARS 4,035,755.00 5. IT WAS ARGUED BY THE LD. COUNSEL FOR THE ASSE SSEE, MR. R.S. SINGHVI, C.A. THAT TOTAL INTEREST EXPENSES WAS RS.6 7,70,937/- OUT OF WHICH INTEREST WAS SET OFF AGAINST INTEREST INCO ME AS ABOVE SAID FOR AN AMOUNT OF RS.13,38,958/- AND BENEFIT GI VEN BY THE LD. CIT(A), THE BALANCE LOSS WAS DISALLOWED BY LD. CIT(A) WAS RS.45,97,092/- AND AFTER SETTING OFF BALANCE LOSS W AS CARRIED FORWARD TO SUBSEQUENT YEAR WAS RS.40,35,755/-. IT W AS FURTHER ARGUED THAT INTEREST RECEIVED AMOUNTING TO RS.30,65 ,506/- SHOULD BE SET OFF AGAINST THE SAID CARRIED FORWARD LOSS AND BALANCE SHOULD BE TREATED AS CAPITAL LOSS. I AGREE TO THE SUBMISSION MADE BY THE LD. COUNSEL FOR THE ASSESSEE THAT INTEREST RECEIVED SHOULD BE SET OFF AGAINST THE SAID BALANCE LOSS AND THE ITAS NO.5820/DEL/2016 5 BALANCE AMOUNT SO REMAINS SHOULD BE TREATED AS CAPI TAL LOSS AND ASSESSING OFFICER IS DIRECTED TO ACT ACCORDINGLY. T HUS, THE GROUNDS OF THE ASSESSEE ARE PARTLY ALLOWED. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY 27 TH APRIL, 2017 SD/- (B.P. JAIN) ACCOUNTANT MEMBER DATED: 27/04/2017 PRABHAT KUMAR KESARWANI, SR.P.S. COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(APPEALS) 5.DR: ITAT ASSTT. REGISTRAR, ITAT, NEW DELHI