RAMOJI RAO (HUF), HYDERABAD,HYDERABAD vs. ACIT, CIRCLE-16(2), HYDERABAD, HYDERABAD

It emerges at the outset that the assessee’s sole substantive grievance herein challenges identical action of the learned lower authorities disallowing interest expenditure of Rs.30,02,657/- in both these assessment years. His lower appellate discussion (AY.2012-13) to this effect reads as follows: “5.3.1 I have carefully considered the facts of the case, the assessment order and the submissions of the appellant. During the course of appellate proceedings the appellant submitted statement showing details of interest paid and interest provided for the financial year 2011-12 along with copy of ledger account, copy of Union Bank of India, Escrow Account as per books of account, etc. On verification of the details and cash flow statement furnished by the appellant it was found that the appellant has not utilized the borrowed funds for the purpose of investments which earn income which does not form part of total income and hence, the applicability of Section 14A does not attract in this case. Hence, the addition made by the Assessing Officer in this regard is deleted. 5.3.2 However, it was noticed that the appellant has claimed interest of Rs.30,02,657/ - in the profit and loss account. Since the appellant is having borrowed funds and the borrowed funds have been utilized for purposes other than business, the interest of Rs.30 lakhs is not allowed as expenditure and therefore, the interest amount was confirmed”. Both the learned representatives reiterated their respective stands against and in support of the lower authorities’ action disallowing the impugned identical interest amount of Rs.30,02,657/-. We notice in this factual backdrop that the Assessing Officer herein had framed his identical Section 143(3) regular assessments on 30-03-2015 & 19-03-2014; respectively invoking Section 14A disallowances. It is further an admitted fact that the assessee preferred appeal(s) wherein the CIT(A) has although deleted the corresponding Section 14A disallowances but has proceeded to disallow the impugned interest figures in the instant twin assessment years.

We have given our thoughtful consideration to assessee’s sole substantive grievance and find merit in the same. This is for the reason that the Assessing Officer had never declined such an interest claim as the same has emanated from Section 14A r.w. Rule 8D disallowance’s computation pertaining to this taxpayer’s alleged exempt income. The question as to whether the CIT(A) enhances assessee’s income by way of making altogether a new disallowance is found to be no more res integra in view of the CIT Vs. Shaporji Pallonji Mistry (1962) [44 ITR 891] (SC), Sait Bansilal and Raggisetti Veeranna (1972) 83 ITR 750 (AP), Gurvinder Mohan Singh Nindrajog (2012) [348 ITR 170] (Del), CIT Vs. Union Tyres 240 ITR 556 (Del) adjudicated the same in assessee’s favour and against the department. Their lordships hold that such an enhancement is restricted only to the additions made in the assessment only. We therefore direct the Assessing Officer to delete the impugned identical interest disallowances in both these assessment years. No other ground has been pressed before us.

Both these assessee’s appeals are allowed in above terms. A copy of this common order be placed in the respective case files.