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Income Tax Appellate Tribunal, JAIPUR BENCH ’SMC’, JAIPUR
Before: SHRI SHRI VIJAY PAL RAOvk;dj vihy la-@ITA No. 922/JP/2017
PER VIJAY PAL RAO, JM : This appeal by the assessee is directed against the order dated 27th September, 2017 of ld. CIT (A), Ajmer for the assessment year 2014-15. The assessee has raised the following grounds of appeal :-
“ 1. The assessment order passed u/s 143(3) is bad in law as well as on facts and hence, the same may please be quashed.
Rs. 1,15,425/-. The ld. AO erred in law as well as on the facts of the present case in disallowing payment of interest on housing loan and the ld. CIT (A) erred in sustaining the same.
3. Rs. 1,36,197/-. The ld. AO erred in law as well as on the facts of the present case in disallowing payment of interest on loan taken merely on presumption and the ld. CIT (A) erred in sustaining the same.
4. The appellant prays your Honor’s indulgence to add, amend, modify or delete all or any ground of appeal.”
2. At the time of hearing, the ld. A/R of the assessee has stated at Bar that the assessee does not press ground nos. 1 & 2 of the appeal and the same may be dismissed as not pressed. The ld. D/R has raised no objection if the ground nos. 1 & 2 of the assessee’s appeal are dismissed as not pressed. Accordingly, ground nos. 1 & 2 of the assessee’s appeal are dismissed being not pressed.
Ground No. 3 is regarding disallowance of interest of Rs. 1,36,197/-.
The A.O. has noted that the assessee has taken a loan of Rs. 40,00,000/- against FDR from Baroda Rajasthan Khetriya Gramin Bank. The said loan amount was not utilized for the purpose of business but the assessee has used the same for interest free advances to certain parties. Further, the AO noted that the assessee has also taken a loan of Rs. 5,00,000/- from one Shri Kumar Agneet and the said amount was given to Smt. Pushpa Tejwani. The assessee has paid interest on the loan of Rs. 60,000/- as against the interest received of Rs. 45,000/-. Therefore, the AO made the disallowance of Rs. 1,21,197/- in respect of the loan taken against FDR and given to various parties as interest free advances and Rs. 15,000/- being the difference of interest paid by the assessee in respect of the loan taken from Shri Kumar Agneet and interest received by the assessee from Smt. Pushpa Tejwani total amounting to Rs. 1,36,197/-. The assessee challenged the action of the AO before the ld. CIT (A) but could not succeed.
Before the Tribunal, the ld. A/R of the assessee has referred to the computation of income and submitted that the assessee has claimed only Rs. 45,000/- as interest in respect of the loan of Rs. 5,00,000/- and further the assessee has claimed only Rs. 1,21,197/- in respect of the loan taken against FDR whereas the interest of Rs. 1,28,211/- was received by the assessee from the FDR.
Therefore, the expenditure of payment of interest in respect of the loan taken against FDR is to save and earning interest on the FDR. The assessee preserved the said income by taking the loan and not withdrawing the FDR prematurely. Similarly the interest of Rs. 45,000/- was claimed against the interest from other parties of Rs. 45,158/-. Thus the assessee has offered net interest income, therefore, no further addition or disallowance is called for. The AO has made an addition of Rs. 15,000/- being the interest of Rs. 60,000/- and Rs. 45,000/- received by the assessee whereas the assessee has claimed only Rs. 45,000/- against the receipt of Rs. 45,158/-. Hence the ld. A/R has submitted that the disallowance made by the AO is not justified and the same be deleted.
On the other hand, the ld. D/R has relied upon the orders of the authorities below.
I have considered the rival submissions as well as the relevant material on record. The AO has made total disallowance of Rs. 1,36,197/- towards the interest paid of Rs. 1,21,197/- on loan taken by the assessee against FDR and further a difference of Rs. 15,000/- being the interest income and interest paid in respect of the loan of Rs. 5,00,000/- taken by the assessee from one Shri Kumar Agneet and loan was given to Smt. Pushpa Tejwani. From the computation of income, it is clear that the business income of the assessee was accepted by the AO as exempt under section 10(12A). Therefore, it is not a case of any interest expenditure claimed against the business income. Further the assessee has claimed only Rs. 45,000/- as interest against the interest income of Rs. 45,158/-. Hence the actual payment of interest by the assessee of Rs. 60,000/- is irrelevant when the assessee herself has not claimed the said amount and restricted the claim only to Rs. 45,000/-.
Therefore, the disallowance of Rs. 15,000/- made by the AO is uncalled for.
Similarly, the assessee has earned interest of Rs. 1,28,211/- on FDR and has claimed the interest of Rs. 1,21,197/- being the payment of interest on the loan taken against FDR. Therefore, it is a clear case of incurring the expenditure of interest to preserve the income from the FDR. These facts are clear from the computation and not in dispute, therefore, in view of the facts and circumstances of the case, the disallowance made by the AO is not justified and the same is deleted.
In the result, the appeal of the assessee is partly allowed. Order is pronounced in the open court on 24/09/2019.