Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, “B” BENCH, MUMBAI
O R D E R
PER PAVAN KUMAR GADALE JM:
The assessee has filed the appeal against the order of the Commissioner of Income Tax (Appeals) – 30, Mumbai, passed u/s 143(3) and 250 of the Act. The assessee has raised the fallowing grounds of appeal:
1. The learned CIT (A) erred in upholding the order of the learned AO whereby the learned AO erred in disallowing interest of Rs.32,78,831/- without properly appreciating the facts and circumstances of the case.
Shri Bharat K Shah, Mumbai. - 2 -
2. The learned CIT(A) erred in her observation that the appellant had not furnished copies of his capital account in M/s. Ritesh Exports and M/s. Lipsa India and also ledger account of interest paid as these were submitted alongwith written submissions dated 28.01.2019 and again alongwith written submissions on 29.1.2019.
The learned CIT(A) erred in her observation that the appellant had not furnished justification as to why interest expenditure of Rs.32,78,831/- should be allowed in view of interest free loan given to wife of the Appellant as the learned CIT(A) did not called for such explanation from the Appellant.
The learned CIT(A) erred in brushing aside the submissions on the applicability of the provisions of Sec. 14A while disallowing the sum of Rs.32,78,831/-, especially as the Appellant had sufficient interest funds in the form of his Capital.
5. The learned CIT (A) also erred in interpreting the provisions of Sec. 57 (iii) in a narrow and restrictive meaning not warranted by the language of the section.
The Appellant craves leave to add, alter, amend, amplify, modify or withdraw any of the ground of appeal.
The brief facts of the case are that the assessee is partner in the firms M/s Ritesh Exports and M/s Lipsa India and received interest income from the firm and also derives income from capital gains and interest income. The assessee has filed the return of income for the A.Y 2009-10 on 17.09.2009 disclosing
Shri Bharat K Shah, Mumbai. - 3 - a total loss of Rs.66,02,583/- and the return of income processed u/s 143(1) of the Act. Subsequently the case was selected for scrutiny and notice u/s 143(2) and 142(1) of the Act. In response to the notice, the Ld. AR of the assessee appeared from time to time and submitted the details. On perusal of the financial statements, the AO found that the assessee has received interest on capital from M/s Ritesh Exports to the extent of Rs. 59,60,000/- and the assessee has claimed the interest expenses of Rs. 58,51,483/- against the loan taken. The assessee was called to explain the allow ability of expenses and nexus of earning income. The assessee has filed a letter dated 02.12.2011 explaining that an amount of Rs. 25,72,652/- only has nexus with the interest income from the firm in which the assessee is a partner and the A.O. observed that the other interest expenses is not directly related to the business activities, therefore an amount of Rs. 32,78,831/- is disallowed. Further the AO found that the assessee has receive exempt income of Rs. 91,338/- and the assessee has computed the disallowance u/sec94(7) of the Act of Rs.14,387/- and the same was added back
Shri Bharat K Shah, Mumbai. - 4 - and finally assessed the total income of the assessee of Rs. Nil after set off of loss and passed the order u/s 143(3) of the Act dated 20.12.2011.
3. Aggrieved by the order the assessee has filed an appeal before the CIT(A).Whereas the CIT(A) considered the grounds of appeal, submissions of the assessee and findings of the scrutiny assessment and confirmed the action of the AO in respect of disallowance of interest and dismissed the assessee appeal. Aggrieved by the CIT(A)order, the assessee has filed an appeal before the Hon’ble Tribunal.
4. At the time of hearing the Ld. AR submitted that the CIT(A) erred in upholding the action of the AO in confirming the disallowance of interest without considering the fact that there is a nexus of interest expenditure and earning of income. Further the CIT(A) has overlooked the facts that the assessee has obtained loan from LIC for lending purpose and therefore there is a nexus of transactions entered and prayed for allowing the appeal. Contra, the Ld. DR supported the order of the lower authorities.
Shri Bharat K Shah, Mumbai. - 5 -
We heard the rival submissions and perused the material on record. The sole disputed issue envisaged by the Ld.AR that the CIT(A) has erred in not allowing the interest expenditure though the assessee has utilized the loan funds from LIC and as against interest received by the assessee , the interest paid is claimed set off. Further the Ld. AR emphasized that the assessee has utilized the loan funds wholly and exclusively for the purpose of business and the claim has to be allowed. When a query was raised to explain with the details and evidence substantiating the nexus of loan obtained and advances provided, the Ld.AR expressed certain difficulty as the information was not readily available and prayed for an opportunity before the lower authorities to explain with evidences. We considering the facts and circumstances are of the opinion that the matter has to be examined by the assessing officer whether the assessee has obtained the loan from LIC and provided advances to the parties and nexus of business connection. Accordingly, to meet the ends of justice, we restore the disputed issue for limited purpose to the file of the Assessing officer to Shri Bharat K Shah, Mumbai. - 6 - adjudicate afresh on merits within the 90 days from the date of order and the assessee should be provided adequate opportunity of hearing and also should cooperate in submitting the details and we allow the grounds of appeal of the assessee for statistical purposes.
6.In the result, the appeal filed by the assessee is allowed for statistical purposes.