PANKAJ SHUKLA,VARANASI V. ITO WARD 3, GURGAON

ITA 1818/DEL/2024

AI Insights

The case revolves around the disallowance of interest expenditure by the Income Tax Officer (ITO) and the subsequent confirmation of this disallowance by the Commissioner of Income Tax (Appeals) - CIT(A). The assessee, Pankaj Shukla, engaged in the business of manufacturing, trading, and exporting woolen carpets, contested the disallowance of Rs.3,11,520 in interest expenditure related to investments in properties. The Tribunal examined whether the interest expenditures claimed were for business purposes and whether the investments in properties were charged to the P&L account.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 398035 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-06-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2016-2017
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: OM PRAKASH
• Assessee Lawyers: NAVIN C. AGRAWAL; CHARTERED ACCOUNTANT
• Keywords: Set aside
• Section: 143(3)

Judgement Text

"आयकर अपीलीय अिधकरण िदʟी पीठ “एस एम सी”, िदʟी ŵी िवकास अव̾थी, Ɋाियक सद˟ IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “SMC”, DELHI BEFORE SHRI VIKAS AWASTHY, JUDICIAL MEMBER आअसं.1818/िदʟी/2024 (िन.व. 2016-17) ITA No.1818/DEL/2024 (A.Y.2016-17) Pankaj Shukla, Kachwa Road Crossing, Thatra, Uttar Pradesh 221301 PAN: AQKPS-0678-Q ...... अपीलाथᱮ/Appellant बनाम Vs. Income Tax Officer, Ward-3, Shankar Chowk Road, Phase V, Udyog Vihar, Sector-19, Gurugram, Haryana 122016 ..... ᮧितवादी/Respondent अपीलाथŎ Ȫारा/ Appellant by : Shri Navin C. Agrawal, Chartered Accountant ŮितवादीȪारा/Respondent by : Shri Om Prakash, Sr. DR सुनवाई कᳱ ितिथ/ Date of hearing : 07/03/2025 घोषणा कᳱ ितिथ/ Date of pronouncement : : 06/06/2025 आदेश/ORDER PER VIKAS AWASTHY, JM: This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeal)-2, Gurgaon (hereinafter referred to as 'the CIT(A)') dated 30.10.2019, for assessment year 2016-17. 2. Shri Navin C. Agrawal, appearing on behalf of the assessee submits that the solitary issue raised by the assessee in appeal is with regard to disallowance of interest expenditure Rs.3,11,520/-. 2.1. Narrating facts of the case, he submitted that the assessee is engaged in the business of manufacturing, trading and export of woolen carpets. The assessee 2 ITA No.1818/Del/2024 (AY 2016-17) enjoys credit limit from the bank and paid interest on credit against the limits. During the period relevant to assessment year under appeal, the assessee made investments for acquiring following properties:- (i) Payment for purchase of flat to Lilac Infracon P. Ltd.; & (ii) Payment of advance for booking flat with Panorma. The ld. Counsel submitted that, as regards payment to Lilac Infracon Pvt. Ltd. Home Loan Rs. 1,14,51,369.40 was obtained by the assessee from ICICI Bank and payment of Rs. 83,65,852,00 was made out of the ICICI Loan Account. Interest accrued on Home Loan amounting to Rs.85,517.40 was also debited to party account. Thus, the interest on Home Loan account was not debited to Interest Account claimed in Profit and Loss Account. Besides Rs. 30,00,000.00 were paid out of own funds. With respect to payment to Panorama, Mumbai he stated that Rs. 27,36,000.00 was paid as booking advance for a flat at Mumbai. Money was paid out of own fund. 2.2. The AO has erred in holding held that interest expenditure of Rs.3,11,520/- debited to P&L account is not allowable expenditure as the investments are for non business purposes. Aggrieved by the assessment order dated 21.11.2018 passed u/s. 143(3) of the Income Tax Act, 1961(hereinafter referred to as ‘the Act’), the assessee filed appeal before the CIT(A). The CIT(A) without appreciating facts of the case confirmed the disallowance. He contended that the assessee had paid Rs.27,36,00,000/- as booking advance for Panorma flat at Mumbai. The money was paid through Bank of Baroda out of own funds. Likewise, investment in Lilac Infracon P. Ltd. Rs.1,14,51,369.40/- was made from the following sources:- 3 ITA No.1818/Del/2024 (AY 2016-17) (i) Own funds from Bank of Baroda 30,00,0000.00 (ii) Housing loan from ICICI Bank 83,65,852.00 (iii) Interest charged by ICICI Bank on the loan 85,517.40____ 1,14,51,369.40 The interest on above housing loan has not been charged to P&L account. This fact was repeatedly brought to the notice of AO during assessment proceedings on 01.03.2018, 16.07.2018 and 12.10.2018. However, the AO erred in disallowing interest expenditure on the premise that the assessee has debited interest expenditure in respect of above mentioned properties in the P&L account. The bank interest charged to P&L account Rs.1,04,33,985.96/- is with respect to credit facilities utilized wholly and exclusively for the business purposes. He referred to Schedule ‘O’ of Bank Interest and Charges reflected at page 17 of the paper book and the Ledger Account at page 18 of the paper book. Both the authorities below have failed to record the facts correctly. He thus prayed for deleting disallowance made on account of interest expenditure. 3. Shri Om Prakash, representing the department vehemently defended the impugned order and prayed for dismissing appeal of the assessee. The ld. DR submits that the interest expenditure disallowed by the AO and confirmed by the CIT(A) is unrelated to the business of the assessee, hence, the same was disallowed. 4. Both sides heard, orders of the authorities below examined. The short issue for consideration before the Tribunal is with regard to disallowance of expenditure Rs.3,11,520/-. The AO has disallowed aforesaid interest expenditure holding that the assessee has diverted funds for non business purposes. 4 ITA No.1818/Del/2024 (AY 2016-17) 5. The stand of assessee is that the interest expenditure claimed in P&L account is exclusively for the purpose of business. In so far as interest expenditure towards investment in Panorama and Lilac Infracon P. Ltd. the same are not debited to P&L account. In support of his submissions the assessee has also referred to bank interest ledger account at page 18 to 20 of the paper book. A perusal of ledger account reveals that the interest expenditure of Rs.1,04,33,985/- as claimed in the P&L account is also reflected in the ledger account. The interest expenditure reflected in the ledger is in respect of three accounts as under:- Bank of Baroda CC A/c No. 26300500000022 = Rs.1,03,50,166/- Bank of Baroda A/c No. 43600600000011 = Rs.51,983/- Bank of Baroda A/c No. 26300600001024 = __Rs.35,569/- Rs.1,04,37,718/- Whereas, the assessee has taken Home Loan for purchase of flats at Panorama and Lilac Infracon P. Ltd. from ICICI Bank Ltd. 6. It is not emanating from the accounts furnished by the assessee that the interest expenditure claimed in P&L account includes interest paid to ICICI Bank Ltd. I find merit in the submissions of the assessee, hence, disallowance of interest expenditure Rs.3,11,520/- is deleted. 7. In the result, impugned order is set aside and appeal of the assessee is allowed. Order pronounced in the open court on Friday the 06th day June, 2025. Sd/- Sd/- (VIKAS AWASTHY) ᭠याियक सद᭭य/JUDICIAL MEMBER िदʟी/Delhi, ᳰदनांक/Dated 06.06.2025 5 ITA No.1818/Del/2024 (AY 2016-17) NV/- ᮧितिलिप अᮕेिषत/Copy of the Order forwarded to : 1. अपीलाथᱮ/The Appellant , 2. ᮧितवादी/ The Respondent. 3. The PCIT/CIT(A) 4. िवभागीय ᮧितिनिध, आय.अपी.अिध., िदʟी /DR, ITAT, िदʟी 5. गाडᭅ फाइल/Guard file. BY ORDER, //True Copy// (Dy./Asstt. Registrar) ITAT, DELHI "