KRISHNAGOPAL RAJENDRAKUMAR BIYANI, MUMBAI V. DCIT - 4(1)(1), MUMBAI

ITA 6121/MUM/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 0048 (ITAT-MUMBAI)
• Duration Of Justice: 10 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-08-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Appeal Filed On: 14-10-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N HEMALATHA
• Assessee Lawyers: SHARAD J MEHTA
• Keywords: Business income; Opportunity of being heard

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI B.R. BASKARAN (AM) I.T.A. NO. 6121 /MUM/ 2 016 (ASSESSMENT YEAR 20 13 - 14 ) SHRI KRISHANAGOPAL RAJENDRAKUMAR BIYANI 111/113, SINDH CLOTH MARKET, 4 TH FLOOR VITHAL WADI KALBADEVI ROAD MUMBAI - 40 0 002. VS. DCIT 4(1)(1) MUMBAI ( APPELLANT ) ( RESPONDENT ) PAN NO . AAAPB7773M ASSESSEE BY SHRI SHARAD J. MEHTA DEPARTMENT BY MS. N. HEMALATHA DATE OF HEARING 2 2 . 8 . 201 7 DATE OF PRONOUNCEMENT 22 . 8 . 201 7 O R D E R THE ASSESSEE HAS FILED T HIS APPEAL CHALLENGING THE ORDER DATED 27 - 07 - 2016 PASSED BY LD CIT(A) - 9, MUMBAI AND IT RELATES TO THE ASSESSMENT YEAR 2013 - 14. THE ASSESSEE IS AGGRIEVED BY THE DECISION OF LD CIT(A) IN CONFIRMING THE DISALLOWANCE OF INTEREST EXPENDITURE OF RS.4,58,222/ - . 2. I HEARD THE PARTIES AND PERUSED THE RECORD. THE ASSESSEE DECLARED LOSS UNDER THE HEAD INCOME FROM OTHER SOURCES. THE AO NOTICED THAT THE ASSESSEE HAS SHOWN INTEREST INCOME OF RS.1,78,518/ - AND CLAIMED INTEREST EXPENDITURE OF RS.6,36,470/ - AGAINST THE SAME. THE AO TOOK THE VIEW THAT THE ASSESSEE HAS USED INTEREST BEARING LOAN FUNDS FOR GIVING NON - INTEREST BEARING LOANS. ACCORDINGLY HE DISALLOWED THE DIFFERENCE AMOUNT OF RS.4,58,222/ - (RS.6,36,470/ - LESS RS.1,78,518/ - ) BY INVOKING THE PROVISIONS O F SEC. 36(1)(III) OF THE ACT. THE ASSESSEE COULD NOT WIN BEFORE LD CIT(A) AND HENCE HE HAS FILED APPEAL BEFORE THE TRIBUNAL. SHRI KRISHANAGOPAL RAJENDRAKUMAR BIYANI 2 3. THE CASE OF THE LD A.R IS THAT THE ASSESSEE HAS ACTUALLY RECEIVED INTEREST INCOME OF RS.10.66 LAKHS, OUT OF WHICH A SUM OF RS .8.23 LAKHS WAS OFFERED UNDER THE HEAD BUSINESS. HE SUBMITTED THAT THE ABOVE SAID SUM OF RS.8.23 LAKHS REPRESENTS INTEREST RECEIVED FROM PARTNERSHIP FIRMS AGAINST THE CAPITAL CONTRIBUTIONS AND HENCE THE SAME HAS BEEN DISCLOSED UNDER THE HEAD INCOME FROM B USINESS AS PER THE REQUIREMENT OF LAW. HE SUBMITTED THAT THE MAJOR PORTION OF LOAN FUNDS HAVE BEEN INTRODUCED AS CAPITAL CONTRIBUTIONS IN THE PARTNERSHIP FIRMS. ACCORDINGLY HE SUBMITTED THAT THE INTEREST EXPENDITURE SHOULD HAVE BEEN CLAIMED BY THE ASSESS EE AGAINST THE BUSINESS INCOME AND IT WAS ERRONEOUSLY CLAIMED AGAINST INCOME FROM OTHER SOURCES. ACCORDINGLY HE SUBMITTED THAT THE LD CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE DISALLOWANCE. 4. THE LD D.R, ON THE CONTRARY, SUBMITTED THAT THE INTEREST EXPENDITURE IS ALLOWABLE AGAINST THE INTEREST INCOME ONLY IF THE SAME IS SHOWN AS HAVING BEEN INCURRED IN CONNECTION WITH EARNING OF INTEREST INCOME. SHE SUBMITTED THAT THE ASSESSEE IS BRINGING NEW FACTS ON RECORD AND THE SAME REQUIRES VERIFICATION. SHE SUBMITTED THAT THE ASSESSEE SHOULD SHOW THE NEXUS BETWEEN THE BORROWED FUNDS AND THE INVESTMENT MADE IN PARTNERSHIP FIRM/LOANS GIVEN. 5. HAVING HEARD RIVAL SUBMISSIONS, I AM OF THE VIEW THAT THIS ISSUE REQUIRES FRESH EXAMINATION AT THE END OF THE ASSES SING OFFICER. IF THE ASSESSEE IS ABLE TO SHOW THE NEXUS BETWEEN THE BORROWED FUNDS AND THE INVESTMENTS MADE IN PARTNERSHIP FIRM, THEN THE RELEVANT INTEREST SHOULD BE ALLOWED AGAINST THE BUSINESS INCOME. IF THE LOAN FUNDS HAVE BEEN USED TO MAKE INVESTMENT S OR TO GIVE LOANS AND THE INCOME THERE FROM IS OFFERED UNDER THE HEAD INCOME FROM OTHER SOURCES, THEN THE RELEVANT INTEREST EXPENDITURE SHOULD BE ALLOWED UNDER THE HEAD INCOME FROM OTHER SOURCES. IF THE ASSESSEE HAS NOT EARNED ANY INCOME OUT OF INVESTMEN TS MADE/LOAN GIVEN, THEN IT IS THE RESPONSIBILITY OF THE ASSESSEE TO SHOW AS TO HOW THE INTEREST EXPENDITURE IS ALLOWABLE AS DEDUCTION. SINCE THESE FACTUAL ASPECTS REQUIRE VERIFICATION, I SET ASIDE THE ORDER PASSED BY LD CIT(A) AND RESTORE THIS ISSUE TO T HE FILE OF THE AO WITH THE DIRECTION TO SHRI KRISHANAGOPAL RAJENDRAKUMAR BIYANI 3 EXAMINE THIS ISSUE AFRESH IN THE LIGHT OF DISCUSSIONS MADE SUPRA AND TAKE APPROPRIATE DECISION IN ACCORDANCE WITH THE LAW AFTER AFFORDING ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 6. IN THE RESULT, TH E APPEAL FILED BY THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER HAS BE EN PRONOUNCED IN THE COURT ON 2 2 . 8 . 201 7. SD/ - (B.R.BASKARAN) ACCOUNTANT MEMBER MUMBA I ; DATED : 2 2 / 8 / 20 1 7 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// ( DY./ASSTT. REGISTRAR) PS ITAT, MUMBAI