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Income Tax Appellate Tribunal, DELHI BENCH: ‘SMC’ NEW DELHI
IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI BENCH: ‘SMC’ NEW DELHI
SHRI SAKTIJIT DEY, JUDICIAL MEMBER
ITA No.8594/Del/2019 Assessment Year: 2015-16
Sehgal Art Press, Vs. ACIT, Circle 50(1), A-44 Naraina Indl. Area, Ward-53(2), Phase-2, New Delhi New Delhi PIN: 1100 28 PAN :AABFS6701P (Appellant) (Respondent)
Appellant by Shri N. S. Bhatnagar, Adv. Respondent by Shri Om Parkash, Sr. DR
Date of hearing 25.08.2022 Date of pronouncement 16.11.2022
ORDER This is an appeal by the assessee against the order dated
05.08.2019 of learned Commissioner of Income-Tax (Appeals)-17,
New Delhi for the assessment year 2015-16.
The dispute in the present appeal is confined to disallowance of
an amount of Rs.6,68,316 out of interest expenses.
2 ITA No. 8594/Del./2019
Briefly, the facts are, the assessee is a resident partnership firm.
For the assessment year under dispute, assessee filed its return of
income on 28.09.2015 declaring income of Rs.20,01,019. As observed
by the assessing officer, in the year under consideration, assessee did
not have any manufacturing/business activities. The only source of
income was from rent and interest received.
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
3 ITA No. 8594/Del./2019
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.
4 ITA No. 8594/Del./2019
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.
Sehgal Packaging Pvt. Ltd. for repayment of loan, however,
subsequently, the assessee received back the amount from M/s. Sehgal
Packaging Pvt. Ltd. On perusal of statement of accounts of loan
placed in the paper book, it is evident that the entire loan amount of
Rs.1,98,29,874 was advanced/lent by the assessee to various parties
and interest income was earned. Further, the entire interest
expenditure incurred by the assessee is on account of loan availed
from Religare Finvest Pvt. Ltd. Therefore, there is a direct nexus
between the interest income earned during the year and the interest
expenditure incurred. That being the factual position established on
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record, the entire interest expenditure claimed by the assessee has to
be allowed. Accordingly, I delete the addition of Rs.6,68,316.
In the result, the appeal is allowed. Order pronounced in the open court on 16th November, 2022. Sd/- (SAKTIJIT DEY) JUDICIAL MEMBER Dated: 16th November, 2022. Mohan Lal