JITESH BABULAL CHHAJED, MUMBAI V. ACIT 20(1), MUMBAI

ITA 7372/MUM/2016

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 1416 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-11-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: J
• Assessment Year: 2011-2012
• Appeal Filed On: 14-12-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH F, MUMBAI BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NO.7372/M/2016 ASSESSMENT YEAR: 2011-12 MR. JITESH BABULAL CHHAJED, 1601, CAMRON HEIGHTS, SUNDARVAN COMPLEX, NR. SHASTRI NAGAR, ANDHERI WEST, MUMBAI 400 053 PAN: ADCPC 7796G VS. ACIT 20(1), ROOM NO.603, PIRAMAL CHAMBERS, PAREL, MUMBAI 400 012 (APPELLANT) (RE SPONDENT) PRESENT FOR: ASSESSEE BY : SHRI NEHA PARANJPE, A.R. REVENUE BY : SHRI RAJEEV GUBEGOTRA, D.R. DATE OF HEARING : 01.10.2018 DATE OF PRONOUNCEMENT : 14.11.2018 O R D E R PER RAJESH KUMAR, ACCOUNTANT MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSES SEE AGAINST THE ORDER DATED 16.09.2016 OF THE COMMISSIO NER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS TH E CIT(A)] RELEVANT TO ASSESSMENT YEAR 2011-12. 2. THE ONLY ISSUE RAISED BY THE ASSESSEE IS AGAINST THE CONFIRMATION OF ADDITION OF RS.6,99,312/- BY LD. CI T(A) AS MADE BY THE AO ON ACCOUNT OF INTEREST PAID ON THE BASI S OF LACK OF NEXUS BETWEEN EARNING OF INTEREST AND PAYING OF INT EREST WHEREAS THE ASSESSEE HAS ADVANCED MONEY AT HIGH RAT E AND ITA NO.7372/M/2016 MR. JITESH BABULAL CHHAJED 2 HOUSING LOAN WAS TAKEN AT LESSER RATE WITH THE INTE REST TO EARN HIGHER INTEREST. 3. THE FACTS IN BRIEF ARE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS AO OBSERVED THAT ASSESSEE HAS CLAIMED I NTEREST EXPENDITURE OF RS.6,99,312/- UNDER THE HEAD INCOME FROM OTHER SOURCES. ACCORDINGLY, THE ASSESSEE WAS CALLED UPO N TO JUSTIFY THE SAME AS TO HOW THE CLAIM IS ADMISSIBLE UNDER SE CTION 57 OF THE ACT. THE ASSESSEE REPLIED VIDE LETTER DATED 10 .02.2014 WHICH IS REPRODUCED AS UNDER: YOUR GOODSELF HAD ASKED TO EXPLAIN THE NEXUS OF THE FUNDS BORROWED AND LOANS GIVEN ON WHICH INTEREST IS PAID AND EARNED BY THE ASSESSEE. THE EXPLANATION IS GIVEN VIDE OUR LETTER DATED 27.01.2014 COVERS CO MPLETE DETAILS OF THE BORROWED FUNDS AND THE MANNER ON WHICH LOANS GIVEN TO EARN T HE INTEREST INCOME. IT WAS SUBMITTED THAT TOTAL AMOUNT RECEIVED FROM SALE OF R ESIDENTIAL FLAT WAS RS.2,46,83,000/- AND BORROWED FUNDS RS.1,54,15,371/ -. AS AGAINST THIS TOTAL INVESTMENT IN RESIDENTIAL FLAT WAS RS.2,43,17,208/- AND LOANS GIVEN WERE RS.1,81,53,932/- (POSITION AS ON 31.03.2011). IT W AS ALSO SUBMITTED THAT AMOUNT OUT OF SALE PROCEEDS OF FLAT WAS PARTLY USED FOR GI VING LOANS BUT SUBSEQUENTLY AMOUNT WERE BORROWED TO MAKE INVESTMENT IN NEW RESI DENTIAL HOUSE AND IT IS REPLACEMENT OF OWN FUND WITH THE BORROWED FUND. RE PLACEMENT OF FUNDS IN SUCH MANNER MUST BE CONSIDERED AND OVERALL AND ULTIMATE USE OF TOTAL FUNDS MUST BE CONSIDERED ESPECIALLY WHEN IT IS CASE OF MIXED FUND S. ASSESSEE HAS EARNED INTEREST OF RS.11,22,719/- AGAINST WHICH HE HAS PAID INTERES T RS.6,91,313/-. WE REQUEST YOURSELF TO KINDLY CONSIDER THE OVERALL AND END USE OF THE AVAILABLE FUNDS FOR THE PURPOSE OF ALLOWING THE CLAIM OF INTEREST EXPENDITU RE. IT WILL NOT DILUTE THE FACT THAT THE BORROWED FUNDS FULLY SUPPORTED THE ASSESSEE TO HOLD THE BALANCE OF LOANS GIVEN AND ONLY BECAUSE OF THAT HE COULD EARN INTEREST.. THE AO HOWEVER WAS NOT SATISFIED WITH THE CONTENTI ONS AND SUBMISSIONS OF THE ASSESSEE AND ADDED RS.6,99,312/- TO THE INCOME OF THE ASSESSEE BY HOLDING THAT THERE WAS NO NEXUS BETWEEN THE EARNING OF INCOME AND PAYMENT OF INTERE ST. 4. IN THE APPELLATE PROCEEDINGS, THE LD. CIT(A) DIS MISSED THE APPEAL OF THE ASSESSEE AFTER REJECTING THE VARIOUS CONTENTIONS RAISED DURING THE COURSE OF PROCEEDINGS ON THE GROU ND THAT THERE ITA NO.7372/M/2016 MR. JITESH BABULAL CHHAJED 3 WAS NO DIRECT NEXUS BETWEEN THE EARNING OF INTEREST INCOME AND PAYMENT OF INTEREST. 5. THE LD. A.R. VEHEMENTLY SUBMITTED BEFORE THE BEN CH THAT THE ASSESSEE HAS RECEIVED RS.2,46,83,000/- FROM SAL E OF RESIDENTIAL FLAT WHEREAS RAISED RS.1,54,15,371/- BY WAY OF BORROWINGS. OUT OF THE SAID AMOUNT THE ASSESSEE MA DE INVESTMENT IN THE FLAT TO THE TUNE OF RS.2,43,17,20 8/- SIMULTANEOUSLY ADVANCING LOANS TO THE TUNE OF RS.1 ,81,53,932/- DURING THE YEAR WHICH WAS STANDING AT SAME AMOUNT A S ON 31.03.2011. THE ASSESSEE SUBMITTED THAT THE PROPER TY WAS NOT IMMEDIATELY AVAILABLE IN THE MARKET SO ASSESSEE TO BE MORE PRUDENT DECIDED TO ADVANCE MONEY AS LOANS THEREBY EARNED INTEREST ON SUCH LOANS. THE ASSESSEE SUBMITTED THA T THOUGH THE SALE PROCEEDS OF FLAT WERE PARTLY USED FOR GIVING L OANS BUT SUBSEQUENTLY FUNDS WERE BORROWED TO MAKE INVESTMENT S IN THE NEW RESIDENTIAL HOUSE AND THUS IT IS THE REPLACEMEN T OF OWN FUNDS FOR THE BORROWED FUNDS. THE LD. A.R. SUBMITT ED THAT THE ASSESSEE HAS EARNED INTEREST OF RS.11,22,719/- AGAI NST WHICH HE HAS PAID RS.6,91,313/- BY WAY OF INTEREST ON LOAN B ORROWED AND THUS THERE IS NEXUS BETWEEN THE TWO AND THEREFORE T HE INTEREST HAS TO BE ALLOWED TO THE ASSESSEE. 6. THE LD. D.R. RELIED ON THE ORDER OF LD. CIT(A). 7. WE HAVE CONSIDERED THE OVERALL MATRIX OF THE WHO LE ISSUE AND PERUSED THE RELEVANT RECORDS PLACED BEFORE US C ASE. THE UNDISPUTED FACTS ARE THAT SALE PROCEEDS OF THE FLAT WAS RS. 2,46,83,000/- OUT OF WHICH THE ASSESSEE ADVANCED TH E MONEY RS. 1,81,53,932/- ON INTEREST. SUBSEQUENT THE ASSES SEE TOOK HOUSING LOAN FOR THE PURPOSE OF BUYING NEW FLAT. WE FIND THAT THE ITA NO.7372/M/2016 MR. JITESH BABULAL CHHAJED 4 ASSESSEE HAS ADVANCED MONEY ON WHICH IT HAS EARNED INTEREST OF RS.11,22,719/- WHILE IT HAS INCURRED INTEREST OF RS .6,99,312/-. IN OUR OPINION, THERE EXISTED A NEXUS BETWEEN THE A MOUNT OF INTEREST EARNED AND INTEREST PAID BY THE ASSESSEE A S THE FUNDS WHICH WERE NOT IMMEDIATELY REQUIRED IN THE INVESTME NT OF PROPERTY ON ACCOUNT OF NON AVAILABILITY OF PROPERTY WERE GIVEN AS LOANS ON WHICH ASSESSEE EARNED INTEREST AND IT ALS O PAID INTEREST ON THE BORROWING TO THE TUNE OF RS.6,99,31 2/-. THE CASE LAWS RELIED UPON BY THE LD. CIT(A) ARE NOT APPLICAB LE TO THE FACTS OF THE PRESENT CASE AS THE FACTS IN THE CASE LAWS R ELIED UPON BY THE LD. CIT(A) ARE CLEARLY DISTINGUISHABLE AS IN TH E PRESENT CASE THE NEXUS BETWEEN THE FUNDS ADVANCED AND BORROWED EXISTS AND WHOLE EXERCISE WAS DONE TO MAXIMIZE THE INTEREST EA RNING. WE, THEREFORE, NOT IN AGREEMENT WITH THE CONCLUSION DRA WN BY THE LD. CIT(A) ON THE ISSUE AND ACCORDINGLY SET ASIDE T HE ORDER PASSED BY THE LD. CIT(A) AND DIRECT THE AO TO ALLOW THE DEDUCTION OF RS.6,99,313/-. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 14.11.2018. SD/- SD/- (PAWAN SINGH) (RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 14.11.2018. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH ITA NO.7372/M/2016 MR. JITESH BABULAL CHHAJED 5 //TRUE COPY// [ BY ORD ER DY /ASSTT. REGISTRAR, ITAT, MUMBAI.