Ramesh Kumar Khurana, Gurgaon V. ITO WARD - 50(1), New Delhi

ITA 9737/DEL/2019

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 2591 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 9 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-10-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 10-07-2022
• Assessment Year: 2014-2015
• Appeal Filed On: 25-12-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: RAKESH GUPTA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI BENCH: ‘SMC’ NEW DELHI SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA No.9737/Del/2019 Assessment Year: 2014-15 Ramesh Kumar Khurana, H.No.973, Sec.-4, Gurgaon (Haryana) PIN:122001 Vs. ITO- Ward 50(1), New Delhi PAN :ABDPK4055B (Appellant) (Respondent) ORDER This is an appeal by the assessee against order dated 11.11.2019 of learned Commissioner of Income-Tax (Appeals)-42, Delhi pertaining to assessment year 2014-15. 2. The dispute in the present appeal is confined to addition of an amount of Rs.21,98,234 representing payment of interest. 3. Briefly, the facts are, the assessee is a resident individual engaged in the business of retail and wholesale trade of liquor. For the Appellant by Dr. Rakesh Gupta, Adv. & Shri Somil Aggarwal, CA Respondent by Shri Om Parkash, Sr. DR Date of hearing 11.07.2022 Date of pronouncement 04.10.2022 2 ITA No.9737/Del/2019 AY: 2014-15 assessment year under dispute, the assessee filed its return of income on 12.01.2016 declaring an income of Rs.13,04,280. Assessee’s case was selected for scrutiny to examine large deduction claimed under Section 57 of the Income-Tax Act,1961. 4. In course of assessment proceedings, the assessing officer called upon the assessee to furnish evidence to demonstrate that the interest expenditure of Rs.79,75,027 was for the purpose of business. In response, it was submitted by assessee that the interest expenditure was incurred for the purpose of earning interest income. The assessing officer, however, was not convinced with the explanation of the assessee. He observed, assessee had paid interest of Rs.45,63,305 to bank for overdraft facility obtained by it for advancing loan to M/s. Sky Highlights Pvt. Ltd., wherein, he is director. Further, he found that on the amount advanced to M/s. Sky Highlights Pvt. Ltd., assessee had earned interest income of Rs.57,55,096. Thus, he held that the interest expenditure of Rs.45,63,305 has a direct link with the interest income earned. As regards remaining interest expenditure, the assessing officer observed for earning balance interest income of Rs.1,62,361, the assessee could not have incurred interest expenditure 3 ITA No.9737/Del/2019 AY: 2014-15 of Rs.34,11,722. Thus, allowing further credit for interest expenditure to the extent of interest income of Rs.1,62,361, the assessing officer made a net addition of Rs.32,49,361. While deciding assessee’s appeal on the issue, learned Commissioner (Appeals) granted partial relief by restricting the disallowance to Rs.21,98,232. 5. I have considered rival submissions and perused the material on record. 6. The contentions of the assessee before me are (i) the first appellate authority has committed a factual error in assuming that the cash in hand of Rs.1.50 crores available with the assessee was for the entire year, whereas, the amount was available with assessee on 31.03.2014; (ii) the borrowed funds were from earlier years and have been utilized for investment on which the assessee has earned interest income. He submitted, such interest income has also been offered to tax in the preceding assessment years; and (iii) similar expenditure incurred in earlier assessment years have been allowed. 7. Learned Departmental Representative strongly relied upon the observations of the assessing officer and learned Commissioner (Appeals). 4 ITA No.9737/Del/2019 AY: 2014-15 8. As could be seen from the observations of learned Commissioner (Appeals), he has sustained part of the disallowance on the reasoning that when the cash in hand of Rs.1.50 crores was available with the assessee, the assessee could have utilized such funds for advances. However, on perusal of ledger account, a copy of which is placed at page 3 of the paper book, it is observed, substantial increase to cash in hands was in the last month of the financial year. Therefore, the observation of learned Commissioner (Appeals) that cash in hands of Rs.1.50 crores was available throughout the year is factually incorrect. 9. I further find, assessee’s contention that the borrowed funds are continuing from earlier years and have been utilized for investment purposes has not been controverted by the departmental authorities. It is also relevant to observe, on perusal of the assessment orders relating to preceding assessment years kept in the paper book, it is observed that no such disallowance has been made in the preceding assessment years. 10. In view of the aforesaid, I hold that the impugned disallowance is unsustainable. Accordingly, I delete the disallowance. 5 ITA No.9737/Del/2019 AY: 2014-15 11. In the result, the appeal is allowed. Order pronounced in the open court on 4 th October, 2022. Sd/- (SAKTIJIT DEY) JUDICIAL MEMBER Dated: 4 th October, 2022. Mohan Lal Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, New Delhi