VIMESH N. ZAVERI HUF, MUMBAI V. ITO 17(3)(5), MUMBAI

MA 62/MUM/2020

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 3589 (ITAT-MUMBAI)
• Duration Of Justice: 8 month(s) 19 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 29-10-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Appeal Filed On: 10-02-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V VINOD KUMAR

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI SHRI SHAMIM YAHYA (AM) M.A. NO. 62/MUM/2020 IN I.T.A. NO. 5742/MUM/2018 (ASSESSMENT YEAR 2013-14 ) SHRI VIMESH N. ZAVERI HUF 114, SUN FLOWER APARTMENTS 99, CUFFE PARADE MUMBAI-400 005. PAN : A AFHV6406A VS . ITO-17(3)(5) MUMBAI (APPELLANT) (RESPONDENT) ASSESSEE BY MS. KIRAN MEHTA DEPARTMENT BY SHRI V. VINODKUMAR DATE OF HEARING 23 . 10 . 20 20 DATE OF PRONOUNCEMENT 29.10.2020 O R D E R BY WAY OF THIS MISCELLANEOUS APPLICATION ASSESSEE S UBMITS THE FOLLOWING WITH RESPECT TO ITAT ORDER IN ITA NO. 5742/MUM/2018 VIDE ORDER DATED 9.12.2019 MAY BE RECALLED:- 1. THIS MISCELLANEOUS APPLICATION (MA) ARISES FROM ITAT NO.: 5742/M/2018 FOR ASSESSMENT YEAR: 2014-15. 2. THE RELEVANT FACTS LEADING TO THIS MA MAY BE BRIEFL Y STATED AS UNDER: A. FOR THE ASSESSMENT YEAR IN REFERENCE THE APPLICANT HAD FILED AN APPEAL WITH THE HON. ITAT. THE APPEAL FILED BEFORE THE HON. ITAT WAS A QUANTUM APPEAL WHICH INTER-ALIA, RAISED GROUNDS IN RELATION TO (A) DISALLOWANCE OF INTEREST PAID RS. 28,16,418 AND (B) EVEN ASSUMING TH E AFORESAID INTEREST PAID RS. 28,16,418 WAS INDEED DISALLOWABLE THE INCOME UNDER THE HEAD INCOME FROM OTHER SOURCES WAS ERRONEOUSLYCOMPUTED SO THAT THERE WAS DOUBLE DISALLOWANCE OR DOUBLE ADDITION OF THE SAME A MOUNT. B. IN THE YEAR IN REFERENCE, THE APPLICANT HAD RECEIV ED INTEREST INCOME OF RS. 4,02,077 WHICH INCLUDED INTEREST FROM RSA EXIM PVT LTD . OF RS. 316,302. THE APPLICANT HAD PAID INTEREST OF RS. 31,32,720 AND HE HAD CLAIMED NET LOSS OF RS. 27,30,643 UNDER THE HEAD 'INCOME FROM OTHER SOU RCES' AS UNDER: INTEREST PAID RS. 31,32,720 LESS: INTEREST EARNED RS. 402,077 LOSS UNDER THE HEAD IFOS RS. 27,30,643 SHRI VIMESH N. ZAVERI HUF 2 C. THE LEARNED AO HELD THAT THE APPLICANT WAS ENTITLED TO CLAIM DEDUCTION/SET OFF TO THE EXTENT OF RS. 316,302 BEING I NTEREST EARNED FROM RSA EXIM PVT LTD. HE THUS, ALLOWED DEDUCTION TO THE EXTENT O F RS. 316.302 FROM THE INTEREST PAID AND DISALLOWED RS. 28,16,418 (I.E RS. 31,32,720- RS. 316,302) OUT OF INTEREST PAID. D. HOWEVER, WHILE COMPUTING THE INCOME THE LEARNED AO STRAIGHT AWAY ADDED RS. 28,16,418 TO THE COMPUTATION OF INCOME RATHER THAN R EDUCING THE SAID DISALLOWANCE FROM THE LOSS OF RS. 27,30,643 CLAIMED UNDER THE HEAD INCOME FROM OTHER SOURCES BY THE APPLICANT. E. YOUR HONOUR MAY READILY APPRECIATE THAT THE APPLIC ANT HAD CLAIMED A LOSS OF RS. 27,30,643 UNDER THE HEAD INCOME FROM OTHER SO URCES ON ACCOUNT OF EXCESS INTEREST PAID AS EXPLAINED ABOVE. THUS, IF OU T OF THE SAID LOSS ARISING FROM EXCESS INTEREST PAID, INTEREST OF RS. 28,16,418 HAD TO BE DISALLOWED THEN THE CORRECT COMPUTATION SHOULD HAVE BEEN HIM, AS UNDER : LOSS UNDER THE HEAD INCOME FROM OTHER SOURCES RS. (27,30,643) ADD: DISALLOWANCE OF INTEREST RS. 28,16,418 INCOME UNDER THE HEAD 'OTHER SOURCES' RS. 8 5,775 F. THUS, EVEN IF THE INTEREST DISALLOWANCE MADE BY THE EARNED AO WERE TO BE CONFIRMED, THE APPLICANT WOULD BE ASSESSED ON INCOME OF RS. 85,775 UNDER THE HEAD 'INCOME FROM OTHER SOURCES' AND NOT ON INCOME OF RS. 28,16,418 AS ASSESSED BY THE LEARNED AO. G. IN THE FIRST APPEAL FILED, BOTH THESE ISSUES WERE RAISED. HOWEVER, THE LEARNED CIT (A) REJECTED THE APPEAL OF THE APPLICANT O N SEVERAL IRRELEVANT GROUNDS. H. IN THE APPEAL FILED BEFORE YOUR HONOURS, YOUR HON OURS CONFIRMED THE DISALLOWANCE OF INTEREST OF RS. 28,16,418 MADE BY TH E LEARNED AO. HOWEVER, IT SEEMS THAT BY AN OVERSIGHT, YOUR HONOURS DID NOT D EAL WITH THE SECOND ISSUE THAT EVEN IF THE DISALLOWANCE OF INTEREST OF RS. 28,16,418 WERE TO BE SUSTAINED, THE COMPUTATION OF INCOME MADE BY THE LEARNE D AO WAS GROSSLY ERRONEOUS AND RESULTED INTO DOUBLE ADDITION. 3. IN THE BACKDROP SET OUT ABOVE, THE APPLICANT HUMBLY PRAYS TO YOUR HONOURS AS UNDER: A. THE GROUND/ISSUE RAISED BY THE APPLICANT THAT EVEN IF THE DISALLOWANCE OF INTEREST IS TO BE SUSTAINED, THE COMPUTATION OF INCOME IS GROSSLY ERRONEOUS, SEEMS TO HAVE BEEN NOT DEALT WITH BY AN OVERSIGHT. B. THIS BEING AN ERROR APPARENT ON RECORD, YOUR HONO URS MAY KINDLY HEAR THE APPLICANT AND THE LEARNED OR ON THIS ISSUE AND PASS A SUITABLE ORDER ON MERITS. 4. WHATEVER THAT IS STATED ABOVE IS TRUE AND CORRECT TO THE BEST OF MY KNOWLEDGE AND INFORMATION. SHRI VIMESH N. ZAVERI HUF 3 2. I HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RE CORDS. I FIND THAT THE MAIN GROUNDS BEFORE THE ITAT IN THIS INCOME TAX APP EAL WERE AS UNDER :- 1. IN THE FACTS AND CICRUMSTANCES OF THE CASE OF TH E APPELLANT, THE LEARNED CIT (A) ERRED IN CONFIRMING THE ADDITION OF RS. 28,16,418 MADE BY THE LEARNED AO ON ACCOUNT OF DISALLOWANCE OF INTEREST TO THE EXTENT OF RS. 28,16 ,418. THE LEARNED CIT (A) GROSSLY ERRED IN NOT ACCEPTING THE APPELLANT'S PLEA THAT EVEN IF THE SAID INTEREST DISALLOWANCE WE RE TO BE CONFIRMED THE APPELLANT COULD AT THE HIGHEST BE ASS ESSED AT INCOME OF RS. 85,775 UNDER THE HEAD 'INCOME FROM OT HER SOURCES'. 2. WITHOUT PREJUDICE TO THE ABOVE, THE LEARNED CIT( A) ERRED IN HOLDING AND CONFIRMING THAT THE APPELLANT WAS SEEKI NG NETTING OFF OF INTEREST PAID AND RECEIVED WHILE PLE ADING THAT AT THE HIGHEST, INCOME OF RS. 85,775 ALONE COULD BE ASSESSED UNDER THE HEAD 'INCOME FROM OTHER SOURCES' EVEN IF TH E ENTIRE INTEREST PAID OF RS. 28,16,418 WERE O BE DIS ALLOWED. 3. WITHOUR PREJUDICE TO THE ABOVE, THE LEARNED CIT( A) ERRED IN NOT CONSIDERING THE SUBMISSIONS OF APPELLANT ON MER ITS WHILE CONFIRMING THE ADDITION MADE BY THE LEARNED AO. 3. THE ITAT VIDE ITS ORDER DATED 9.12.2019 HAS ADJU DICATED AS UNDER :- 2. IN THIS APPEAL, THE ASSESSEE IS BASICALLY AGGRIE VED FOR THE DISALLOWANCE OF INTEREST CLAIMED IN THE P&L ACCOUNT. 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PER USED. DURING THE COURSE OF SCRUTINY ASSESSMENT, ON PERUSAL OF COMPUTATION OF T OTAL INCOME FILED WITH THE RETURN OF INCOME, THE A.O. OBSERVED THAT THE ASSESS EE HAS SHOWN THE AGGREGATE INTEREST INCOME OF RS. 4,02,077/- WHICH IN CLUDES INTEREST FROM M/S RSA EXIM PVT. LTD. OF RS. 3,16,302/-. AGAINST SUCH INCOME, THE ASSESSEE CLAIMED INTEREST EXPENSES OF RS. 31,32,720/- AND HAS CLAIMED LOSS FROM OTHER SOURCES OF RS. 27,30,643/-. IN THIS CONTEXT, IT I S NOTICED FROM THE BALANCE SHEET THAT THE ASSESSEE IS HAVING A NEGATIVE B ALANCE OF CAPITAL AND ALL THE LOAN FUNDS WERE UTILIZED FOR THE PURPOSE OF P ROVIDING LOANS. FROM THE ABOVE, IT IS CLEAR THAT THE INTEREST BEARING FUNDS WERE UTILIZED FOR THE PURPOSE OF PROVIDING INTEREST FREE LOANS. THE INTEREST EXPENS ES ARE ELIGIBLE FOR ONLY AN AMOUNT OF RS. 3,16,302/- AS THE SAME WERE UTILIZED FO R PROVIDING INTEREST BEARING LOANS. CONSIDERING THESE FACTS, THE INTERES T TO THE EXTENT OF RS. 28,16,418/- [RS. 3132720- RS.316302] WAS DISALLOWED AND ADDED BACK TO THE TOTAL INCOME. BY THE IMPUGNED ORDER, THE LD. CIT(A) HAS CONFIRMED THE ACTION OF THE A.O., AGAINST WHICH THE ASSESSEE IS IN FURTHER APPEAL BEFORE THE ITAT. 4. I HAVE CONSIDERED THE RIVAL SUBMISSIONS AND CAREF ULLY GONE THROUGH THE ORDERS OF AUTHORITIES BELOW AND FOUND THAT THE INTERE ST EXPENDITURE CLAIMED SHRI VIMESH N. ZAVERI HUF 4 BY ASSESSEE HAS BEEN DISALLOWED BECAUSE THE FUNDS S O BORROWED ON WHICH THE INTEREST WAS CLAIMED WAS NOT UTILIZED FOR THE PURP OSE OF BUSINESS AND FOR EARNING ANY INTEREST. AFTER GIVING CREDIT OF RS.3,16 ,302/- IN RESPECT OF INTEREST INCOME, THE A.O. HAS DISALLOWED BALANCE INTEREST OF R S.28,16,418/-. I DO NOT FIND ANY INFIRMITY IN DISALLOWANCE OF THE BALANCE IN TEREST SO CLAIMED AS EXPENSES BY THE ASSESSEE. 4. FROM THE ABOVE IT IS EVIDENT THAT ITAT HAS CONFI RMED THE ORDER OF LEARNED CIT(A). BUT THIS ALTERNATIVE GROUND OF THE ASSESSEE THAT EVEN IF THE SAID INTEREST DISALLOWANCE WERE TO BE CONFIRMED THE APPE LLANT COULD AT THE HIGHEST BE ASSESSED AT INCOME OF RS. 85,775/-UNDER THE HEAD INCOME FROM OTHER SOURCES HAS NOT BEEN DEALT WITH IN THE ABOVE ITAT ORDER. HENCE, THE ITAT ORDER IS RECALLED FOR THE LIMITED PURPOSES OF HEARI NG TO ADJUDICATE UPON THE ALTERNATIVE GROUND AS ABOVE. 5. IN THE RESULT, THIS MISCELLANEOUS APPLICATION IS ALLOWED FOR THE LIMITED PURPOSE AS ABOVE. ORDER PRONOUNCED UNDER RULE 34(4) OF THE ITAT RULES BY PLACING THE RESULT ON NOTICE BOARD ON 29.10.2020. SD/- (SHAMIM YAHYA) ACCOUNTANT MEMBER MUMBAI; DATED : 29/10/2020 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// ( ASSISTANT REGISTRAR) PS ITAT, MUMBAI