SEHGAL ART PRESS,DELHI vs. ACIT, CIRCLE-50(1), DELHI

The dispute in the present appeal is confined to disallowance of an amount of Rs.6,68,316 out of interest expenses.

Briefly, the facts are, the assessee is a resident partnership firm.

In course of assessment proceedings, the assessing officer wanted to verify the deduction claimed by the assessee under Section 57(iii) of the Act in respect of interest expenditure. To justify its claim, assessee furnished the details of interest income and interest expenditure for the year under appeal. On verifying the details, the assessing officer noticed that on 13.10.2014, assessee had received loan of Rs.1,98,29,874 from Religare Finvest Ltd. However, out of the said loan availed, assessee utilized an amount of Rs.95,08,517 towards repayment of loan taken from Sehgal Packaging Pvt. Ltd. Holding that part of the loan availed was not utilized for earning interest income, the assessing officer disallowed interest expenses of Rs.6,68,316 out of the total interest expenditure claimed by the assessee. Though, assessee contested the aforesaid disallowance before learned Commissioner (Appeals), however, it was unsuccessful.

Before me, learned counsel appearing for the assessee submitted that, though, initially out of the loan availed from Religare Finvest Ltd., a part was utilized for repayment of loan to M/s.Sehgal Packaging Pvt. Ltd., however, subsequently, the assessee received the entire loan amount from Sehgal Packaging Pvt. Ltd. and invested/advanced the amount to various other parties and earned interest. He submitted, during the year under consideration, the assessee had earned interest income of Rs.68,10,580, whereas, it has incurred interest expenditure of Rs.66,00,707. To demonstrate that the loan availed from M/s. Religare Finvest Ltd. was utilized for earning interest income, learned counsel for the assessee drew my attention to the documents placed in the paper book.

The learned Departmental Representative strongly relied upon the observations of assessing officer and learned Commissioner (Appeals).

I have considered rival submissions and perused the material available on record.

Undisputedly, a part of the deduction claimed by the assessee under Section 57(iii) of the Act on account of interest expenses was disallowed by the assessing officer on the ground that the corresponding loan amount was not utilized for earning interest income. However, on perusal of material placed on record, it is observed that the assessee on 13.10.2014 received loan of Rs.1,98,29,874 from M/s. Religare Finvest Ltd. Though, initially out of the loan availed, an amount of Rs.95,85,517 was given to M/s.