Income tax Officer -4, BHILAI(CG) V. Shri Santosh Golechhha, BHILAI(CG)

ITA 66/BIL/2012

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 2288 (ITAT-RAIPUR)
• Duration Of Justice: 3 year(s) 6 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 24-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHITAL SHASHWAT VARMA
• Assessee Lawyers: S R RAO
• Keywords: Business income; Business expenditure
• Section: 37

Judgement Text

1 ITA NO. 66/ BLPR /201 IN THE INCOME TAX APPELLATE TRIBUNAL, RAIPUR BENCH, RAIPUR. BEFORE SHRI MUKUL K. SHRAWAT, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER. I.T.A. NO. 66/BLPR/2012 ASSESSMENT YEAR : 2009 - 10. THE INCOME - TAX OFFICER - 4, SHRI SANTOSH GOLECHHA, BHILAI. VS. BHILAI. PANACZPG6957H APPELLANT. RESPONDENT. APPELLANT BY : SHRI SHITAL SHASHWAT VARMA. RESPONDENT BY : SHRI S.R. RAO. DATE OF HEARING : 15 - 10 - 2015. DATE OF PRONOUNCEMENT : 30 TH NOV., 2015. O R D E R PER SHRI SHAMIN YAHYA, A.M . THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF LEARNED CIT(APPEALS), RAIPUR DATED 30 - 03 - 2012 AND PERTAINS TO ASSESSMENT YEAR 2009 - 10. THE ISSUE BY THE REVENUE IS THAT WHETHER IN LAW AND ON FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED CIT(APPEALS) HAS ERRED IN RESTRICTI NG THE ADDITION OF RS.27,56,902/ - MADE BY THE AO ON ACCOUNT OF DISALLOWANCE OF CLAIM OF DEDUCTION U/S 57 OF THE I.T. ACT UNDER THE HEAD INCOME FROM OTHER SOURCES TO RS. 1,20,336/ - . 2. IN THIS CASE THE AO OBSERVED THAT THE ASSESSEE DECLARED LOSS UNDER TH E HEAD INCOME FROM OTHER SOURCES AT RS.7,62,493/ - AFTER CLAIMING DEDUCTION OF RS.27,56,902/ - FROM OTHER INCOME SHOWN AT RS.19,94,409/ - . HE HELD THAT SUCH EXPENDITURE IS NOT ALLOWABLE U/S 57 AS IT WAS NOT INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF E ARNING INCOME FROM OTHER SOURCE. 2 ITA NO. 66/ BLPR /201 3. UPON ASSESSEES APPEAL LEARNED CIT(APPEALS) CONSIDERED THE DE T AILS OF INTEREST PAYMENT OF RS.27,56,902/ - AS UNDER : (1) INTEREST ON BANK (OVER - DRAFT) ACCOUNT : RS. 11,78,616/ - (2) INTEREST ON UNSECURED LOANS : RS. 7,53,123/ - (3) INTEREST ON LOAN FROM LIC : RS.1,20,336/ - (4) INTEREST ON LOAN FROM ICICI BANK : RS.6,77,653/ - (5) BANK COMMISSION AND CHARGES : RS. 27,174/ - -------------------- TOTAL: RS. 27,56,902/ - . -- ------------------ 4. CONSIDERING THE ASSESSEES SUBMISSION, LEARNED CIT(APPEALS) HELD AS UNDER : I H AVE GONE THROUGH THE OBSERVATIONS OF THE A O AND SUBMISSION OF THE APPELLANT . THE APPELLANT IS AN INDIVIDUAL HAVING BUSINESS INCOME FROM TWO SOURCES VIZ . CHEMICAL WAX DIVISION AND PETROL PUMP DIVISION . PART OF THE INVESTMENTS MADE IN THESE BUSINESS DIVISIONS RELATE TO LOANS TAKEN FROM UNSECURED C REDITORS, OVERDRAFT AGAINST FDR AND BANK LOAN IN PERSONAL ACCOUNT IN THE PAST. THE APPELLANT FILED COPIES OF BANK STATEMENTS DURING ASSESSMENT PROCEEDINGS FOR PRECEDING ASSESSMENT YEAR AND THESE ARE ON THE A . O ' S RECORDS. THEREFORE , THE CONTENTION OF THE APPELLANT THAT THE INTEREST EXPENDITURE RELATE TO THAT OD, WHICH WAS IN FACT FOUND CRED I TED TO THE CURRENT ACCOUNT FROM WHERE THE FUNDS WERE DISBURSED FOR BUSINESS PURPOSES , IS CORRECT . THIS CANNOT BE DISPUTED THIS YEAR. THE A.O. IS NOT DISPUTING THE G ENU I NENESS OF THE CLAIMS. HENCE, THE A . O . IS NOT CORRECT IN HOLDING THAT THE INTEREST EXPENDITURE OF RS . LL,78,6161 - IS RELATABLE TO PERSONAL EXPENDITURE. IT APPEARS THE APPELLANT WANTED TO REAP THE BENEFITS OF LOWER RATE OF INTEREST ON LOANS TAKEN AGAINST FDR AND THERE IS . NOTHING WRONG IN IT . THE A . O. CANNOT FORCE AN ASSESSEE TO EN - CASH FDRS INSTEAD OF TAKING LOANS THEREON. THE NEXT CLAIM OF INTEREST OF RS.7 , 53,123 / - RELATE TO UNSECURED LOANS TAKEN FOR BUSINESS IN THE EARLIER YEARS AND ALLOWED I N THE PAST , SO I T CANNOT BE DISPUTED NOW WITHOUT ANY CHANGE FACTS . SIMILARLY , THE CLAIM OF INTEREST OF RS.6 , 77,653/ - ON ICICI BANK LOAN TAKEN THIS YEAR ALSO QUALIFIES FOR DEDUCTION. THERE IS NO DISPUTE REGARDING TAKING OF LOAN FROM CENTRAL BANK FOR INVE STMENT IN PETROL PUMP AND ALSO REGARDING CLEARING OF LOAN TAKEN FROM CENTRAL BANK AFTER TAKING LOAN FROM ~ ICICI BANK . IN SUCH CIRCUMSTANCES , THE A.O. IS NOT CORRECT IN HOLDING THAT THE - LOAN A CCOUNTS WERE OPERATED FOR PERSONAL INVESTMENTS ON IMMOVABLE PROPERTIES I \ WITHOUT SUBSTANTIATING ANY NEXUS BETWEEN THE INVESTMENTS AND LOANS . ON THE OTHER J ;:. - ( II HAND THE BANK STATEMENTS REFLECT THAT THE FUNDS TRANSFERRED FROM OD ACCOUNT WERE DISBURSED TO CREDITORS THROUGH CURRENT ACCOUNT . THE CLAIM OF INTEREST OF RS.I,20,336/ - PAID TOWARDS LOANS TAKEN ON LIC POLICY, ADMITTEDLY FOR THE PURPOSE OF PAYMENT OFLIC 3 ITA NO. 66/ BLPR /201 P REMIUMS HAD TO BE HELD AS PERSONAL EXPENDITURE AND THE ACTION OF THE A . O. THIS EXTENT IS PERFECTLY CORRECT HENCE CONFIRMED. HOWEVER , THE CLAIM OF BANK CHARGES MADE AT RS.27,174/ - THOUGH RELATABLE TO THE BANK ACCOUNTS MAINTAINED IN PERSONAL NAME OF THE A PPELLANT IS ALLOWABLE AS EXPENDITURE AS MAJOR PART OF THE TRANSACTIONS RELATE TO BUSINESS. IT APPEARS THAT THE A.O. WAS CARRIED AWAY BY THE FACT THAT DEDUCTION OF THE AGGREGATE AMOUNT OF INTEREST WAS CLAIMED UNDER THE 'HEAD INCOME FROM OTHER SOURCES' WI THOUT GOING INTO THE SUBSTANCE OF THE TRANSACTIONS. IT IS SETTLED PRINCIPLE OF LAW THAT 'SUBSTANCE' ALWAYS PREVAILS OVER 'FORM ' AND THE ADMISSIBILITY OR OTHERWISE OF A CLAIM CANNOT BE DECIDED MERELY ON THE BASIS OF 'FORM' AND MORE PARTICULARLY, WHEN SUCH CLAIMS WERE CONTINUOUSLY ALLOWED IN SCRUTINY ASSESSMENTS IN THE PAST . THE CASE LAWS RELIED UPON BY THE A.O ARE DISTINGUISHABLE ON FACTS. IN VIEW OF THE ABOVE DISCUSSION, THE DISALLOWANCE OF RS.27,56,902/ - MADE BY THE AO IS RESTRICTED TO RS.L,20,336/ - . 5. AGAINST THE ABOVE ORDER, REVENUE IS IN APPEAL BEFORE US. 6. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. WE FIND THAT AFTER EXAMINING THE DETAILS OF THE PAYMENTS MADE, LEARNED CIT(APPEALS) HAS GIVEN A CLEAR FINDING THAT THE INTEREST PAID WAS NOT PERSONAL IN NATURE. THE LOAN TAKEN BY THE ASSESSEE AGAINST OVER - DRAFT WAS UTILISED FOR PAYMENT OF LOANS TAKEN FOR BUSINESS. WE AGREE WITH THE LEARNED CIT(APPEALS) THAT THE AO CANNOT FORCE THE ASSESSEE TO ENCASH THE FDRS. IT IS T HE PREROGATIVE OF THE ASSESSEE TO MANAGE THE BUSINESS AS HE DEEMS APPROPRIATE. SIMILARLY LOANS WERE ALSO FOUND TO HAVE BEEN TAKEN FOR THE BUSINESS OF WAX DIVISION AND PETROL PUMP. HENCE THE PAYMENTS ON ACCOUNT OF INTEREST CANNOT BE SAID TO BE NOT INCURRE D FOR PURPOSES OF BUSINESS OF THE ASSESSEE. ONLY RS.1,20,336/ - IS THE INTEREST PAID AGAINST THE LOAN TAKEN AGAINST LIC POLICY FOR THE PURPOSE OF PAYMENT OF LIC PREMIUM HAVE RIGHTLY BEEN DISALLOWED BY THE LEARNED CIT(APPEALS). HENCE WE FIND THAT THE INTERES T EXPENDITURE CLAIMED BY THE ASSESSEE ARE ALLOWABLE ON THE GROUND THAT THEY CAN BE TREATED AS BUSINESS EXPENDITURE EXCEPT THE EXPENDITURE OF RS.1,20,336/ - . ACCORDINGLY WE UPHOLD THE ORDER OF LEARNED CIT(APPEALS). WE MAY ADD THAT THE INTEREST EXPENDITURE MA Y NOT BE ALLOWABLE STRICTLY SPEAKING AS DEDUCTION U/S 57 BUT THEY ARE ALLOWABLE AS EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS U/S 37 OF THE I.T. ACT. ACCORDINGLY WE UPHOLD THE ALLOWANCE OF THE EXPENDITURE BY THE LEARNED CIT(APP EALS). 4 ITA NO. 66/ BLPR /201 7. IN THE RESULT, THIS APPEAL FILED BY THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 30 TH DAY OF NOV., 2015. SD/ - SD/ - (MUKUL K. SHRAWAT) ( SHAMIM YAH YA) JUDICIAL MEMBER ACCOUNTANT MEMBER. DATED: 30 TH NOV.., 2015. COPY FORWARDED TO : 1. SHRI SANTOSH GOLECHHA, S/O SHRI KEWALCHAND GOLECHHA, 10 HIMALAYA COMPLEX, SUPELA, BHILAI, DIST. DURG. 2. I.T.O. - 4, BHILAI. 3. C.I.T., RAIPUR. 4. CIT(APPEALS), RAIPUR. 5. D.R., ITAT, RAIPUR. 6. GUARD FILE TRUE COPY. BY ORD ER ASSISTANT REGISTRAR, ITAT, NAGPUR WAKODE