K.Deva Kumari, CHENNAI V. ACIT, CHENNAI

ITA 789/CHNY/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 4023 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 3 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-07-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 03-04-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 30-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B SAHADEVAN IRS
• Assessee Lawyers: A S SRIRAMAN

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B (SMC) BENCH : CHENNAI . , [BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT M EMBER ] ./I.T.A. NO.789/MDS/2016 / ASSESSMENT YEAR : 2010-2011. SMT. K. DEVA KUMARI, NO.48, VENKATA MAISTRY STREET, MANNADY, CHENNAI 600 001. [PAN AAGPD 0150L] VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, BUSINESS CIRCLE VIII, CHENNAI. ( !' / APPELLANT) ( #$!' /RESPONDENT) / APPELLANT BY : SHRI. A.S. SRIRAMAN, ADVOCATE /RESPONDENT BY : SHRI. B. SAHADEVAN, IRS, JCIT. /DATE OF HEARING : 03-04-2017 !' /DATE OF PRONOUNCEMENT : 12-04-2017 % / O R D E R ASSESSEE IN THIS APPEAL ASSAILS A DISALLOWANCE OF B8,14,351/- CLAIMED AS INTEREST PAID TO M/S.KARNATAKA BANK LIMI TED FOR THE PURPOSE OF ITS BUSINESS. 2. FACTS APROPOS ARE THAT ASSESSEE A MANUFACTURER OF AAAC/ AAC & ACSR CONDUCTOR & GALVANISHING OF M.S. WIRES A ND WIRE ITA NO. 789/MDS/2016 :- 2 -: PRODUCTS, HAD FILED HER RETURN OF INCOME FOR THE IM PUGNED ASSESSMENT YEAR DECLARING INCOME OF B9,16,940/- WHICH WAS LATE R REVISED TO B21,16,940/-. DURING THE COURSE OF ASSESSMENT PROC EEDINGS, LD. ASSESSING OFFICER NOTED THAT ASSESSEE HAD CONSTRUCT ED A HOUSE IN GOPALAPURAM FOR HER OWN USE. AS PER LD. ASSESSING OFFICER A SUM OF B1,28,32,350/- WAS UTILIZED FOR THE CONSTRUCTION OF RESIDENCE AND THE FUNDS CAME FROM A CASH CREDIT ACCOUNT WITH M/S. KA RNATAKA BANK LIMITED. LD. ASSESSING OFFICER NOTED THAT INTEREST PAID ON THE ABOVE ACCOUNT WAS CHARGED TO THE PROFIT AND LOSS ACCOUNT OF THE BUSINESS. LD. ASSESSING OFFICER WAS OF THE OPINION THAT ASSET ACQUIRED OUT OF THE LOAN WAS A PERSONAL ONE, AND INTEREST CLAIMED AS B USINESS EXPENDITURE COULD NOT BE ALLOWED. SUBMISSION OF THE ASSESSEE ON THIS WAS THAT SHE HAD ABUNDANT CAPITAL AVAILABLE IN THE BUSINESS AND THE DRAWINGS OF THE MONEY FROM THE BUSINESS NEVER EXCEEDED SUCH CAPITAL . THUS, ACCORDING TO HER, THE PRESUMPTION TAKEN REGARDING B ORROWED CAPITAL BEING USED FOR THE PURPOSE OF MEETING CONSTRUCTION COST WAS INCORRECT. HOWEVER, THE ABOVE EXPLANATION WAS NOT ACCEPTED BY THE LD. ASSESSING OFFICER. HE MADE A DISALLOWANCE OF B8,14,351/- BEI NG INTEREST CHARGED ON THE LOAN BY M/S. KARNATAKA BANK LIMITED. 3. ASSESSEES APPEAL BEFORE LD. COMMISSIONER OF INCOM E TAX (APPEALS) WAS NOT SUCCESSFUL. ACCORDING TO HIM, TH ERE WAS A DIRECT NEXUS BETWEEN BORROWED FUND AND INVESTMENT MADE IN RESIDENTIAL ITA NO. 789/MDS/2016 :- 3 -: HOUSE. THUS, AS PER LD. COMMISSIONER OF INCOME TAX (APPEALS) INTEREST ON SUCH BORROWED FUND WAS RIGHTLY DISALLOWED. 4. NOW BEFORE ME, LD. AUTHORISED REPRESENTATIVE STRONG LY ASSAILING THE ORDER OF THE LD. COMMISSIONER OF INCO ME TAX (APPEALS) REITERATED THE CONTENTIONS MADE BEFORE LOWER AUTHO RITIES AND ALSO SUBMITTED THAT CAPITAL IN HER PROPRIETORSHIP OF THE ASSESSEE EXCEEDED RUPEES FOUR CRORE. AS PER THE LD. AUTHORISED REPRES ENTATIVE DRAWINGS WERE MUCH LOWER THAN THAT. RELIANCE WAS ALSO PLACE D ON THE JUDGMENT OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. HOTEL SAVERA 239 ITR 0795 . 5. PER CONTRA, LD. DEPARTMENTAL REPRESENTATIVE STRONG LY SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 6. I HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW. DISALLOWANCE WAS MADE FOR A REASON THAT BORROWED LOAN ON WHICH INTEREST OF B8,14,351/- WAS DEBITED TO PROFIT AND LOSS ACCOUNT WAS USED FOR CONSTRUCTING RESIDENC E AND NOT FOR THE PURPOSE OF BUSINESS. HOWEVER, IT IS NOT DISPUTED B Y THE REVENUE THAT ASSESSEE IN HER PROPRIETORSHIP BUSINESS HAD AN OPE NING CAPITAL OF B4,09,72,141/-. CLOSING CAPITAL CAME TO B4,43,10,4 86/-. IN OTHER WORDS, EVEN AFTER DESPITE THE DRAWINGS BY ASSESSEE FROM THE PROPRIETORSHIP CONCERN, HER CLOSING CREDIT BALANC E HAD GONE UP SUBSTANTIALLY. THIS BY ITSELF IN MY OPINION SHOW THAT THERE WAS NO ITA NO. 789/MDS/2016 :- 4 -: DIVERSION OF INTEREST BEARING FUNDS. HONBLE JURIS DICTIONAL HIGH COURT IN THE CASE OF HOTEL SAVERA (SUPRA ) HAS HELD THAT WHEN THERE WERE SUFFICIENT FUNDS WITH AN ASSESSEE TO COVER THE ADVA NCES, EVEN AFTER DEBITING THE DRAWINGS AND THE LOSS, A PRESUMPTION W OULD ARISE THAT THE DRAWINGS WERE OUT OF OWN FUNDS. WHEN THE ASSESSEE HAD MORE THAN RUPEES FOUR CRORES IN CREDIT BALANCE IN HER CAPITAL ACCOUNT WHICH WAS NOT INTEREST BEARING, A PART WITHDRAWAL OF SUCH CAP ITAL, CANNOT BE CONSIDERED AS DRAWINGS MADE OUT OF LOANS TAKEN DUR ING THE RELEVANT PREVIOUS YEAR. AS HELD BY THE LORDSHIP IN THE CASE OF HOTEL SAVERA (SUPRA ) PRINCIPLE OF PROBABILITY IS NOT A UNIVERSAL RULE THAT CAN BE APPLIED BEREFT OF CORROBORATING FACTS. I FIND THAT DISALLOWANCE WAS NOT JUSTIFIED. SUCH DISALLOWANCE STANDS DELETED. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON WEDNESDAY, THE 12TH DAY O F APRIL, 2017, AT CHENNAI. SD/- ( . ) (ABRAHAM P. GEORGE) / ACCOUNTANT MEMBER #$ / CHENNAI %& / DATED: 12 TH APRIL, 2017 KV &' ()*) / COPY TO: 1 . / APPELLANT 3. +,- / CIT(A) 5. )./ 0 / DR 2. / RESPONDENT 4. + / CIT 6. /12 / GF