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Income Tax Appellate Tribunal, AHMEDABAD BENCHES (SMC
Before: SHRI KUL BHARAT
आदेश / O R D E R PER KUL BHARAT, J.M: This appeal by the assessee is directed against order of the Ld. CIT(A), Gandhinagar dated 9.11.2016 pertaining to the assessment year 2013-14. The assessee has raised following grounds of appeal:
Smt. Pinalben Manankumar Patel
On facts as well as in the circumstances of the case of the appellant, the Ld. CIT(A) has grossly erred in confirming addition of Rs.25,05,190/- out of interest expenses claimed u/s 57 of the Act, when he ought to have deleted it in entirety.
Without prejudice to the above, on facts as well as in the circumstances of the case, the Ld. CIT(A) has grossly erred in not appreciating the merits of the case with reference to factual submission of the appellant and has further erred in sustaining the addition, simply following his own order for the preceding assessment year, when the case of the appellant is much more stronger on merits in the year under consideration. The order being perverse to the above extent, and not based on a proper appreciation of facts, the same deserves to be reversed. 2. At the outset, the respective representatives of the parties submitted that the facts are identical as were in the ITA No.2658/Ahd/2015. The only issue to be decided is related to allowance of the interest expenditure u/s 57 of the Income Tax Act, 1961 (hereinafter called as ‘the Act’) amounting to Rs.25,05,190/-. The respective representatives of the parties have adopted the same argument as were in in which we have followed the decision of the coordinate bench and directed the A.O. to delete addition by observing as under:
Smt. Pinalben Manankumar Patel “6. We have heard the rival submissions, perused the materials available on record and gone through the orders of the authorities below. The Ld. D.R. could not controvert the fact that in the past revenue has allowed such expenditure. Further, the coordinate bench in after thoroughly examining the facts, the Tribunal in para-13 of its order decided the issue by observing as under: 13. The assessee has commission income also which is a positive figure of Rs. 18,33,271/-. This income was also offered as “income from other sources”. The assessment order for Assessment Year 2009-10 was passed u/s. 143(3) on 30th December, 2011. The assessee has filed his return on 2nd November, 2010 declaring a loss of Rs. 23,69,658/-. The Assessing Officer has made an addition of Rs. 3,44,417/-. This addition was made with regard to the sale of land where assessee has received some cash component in his share, except Rs. 3,44,417/- Assessing Officer has accepted the loss at Rs. 20,25,241/-. Apart from these three assessment years and computation of income, assessee has placed on record, the copies of the assessment orders starting form Assessment Year 2001-02 up to 2012-13. We have perused Assessment Year 2004-05 and 2005-06 also. We find that as far as persons namely; Nanibhai V. Patel HUF Mehsana Urban Bank Ltd. Mehsana Urban Bank Ltd Co-op Bank of Mehsana Maniben Manilal Patel Kailashben Manibhai Patel Maulik Manibhai Patel are concerned, they are the persons who have advanced the money to the assessee and to whom interest was paid. To these very persons, interests have also been paid in the present year. Thus, the loan was taken from these persons long back and every year assessse has been paying at the same rate of interest. In spite of the search neither in the earlier year nor in the subsequent years, claim of the assessee was disputed that the money taken from them was not used by the assessee for earing income which is to be assessed as “income from other source”. In the present year, Ld. First Appellate Authority has allowed the deduction to the extent, he assumed that assessee must have incurred interest expenditure up to 95% of the interest income earned by him. In other words, Ld. First Appellate Authority has assumed that assessee has shown interest income of Rs. 50,27,815/-. He must have incurred 95% of this income as expenditure on interest and, therefore, only to that extent, interest expenditure is to be allowed. But that is not the requirement in law, the requirement is that expenditure must be laid down by the assessee wholly and exclusively for earning of income. The expression wholly refers to quantum of expenditure and exclusively refers to the object and purpose of expenditure. Though these expressions are not used in section 57 but the overall meaning of section 57 is also to the same effect that, the expenditure ought to be incurred for earning income Smt. Pinalben Manankumar Patel which is assessable under the head “income from other sources”. If the logic of ld. Commissioner of Income Tax (Appeals) is accepted, then, in each and every case, expenditure would be allowed only, when there is resultant income. In other words, there cannot be any loss in any activity which results “income from other sources”. All the details were before the ld. Commissioner of Income Tax (Appeals) but instead of pin pointing any concrete diversion of interest bearing funds; ld. Commissioner of Income Tax (Appeals) only assumed that some funds might have been used by the assessee for some other purposes. The department has been consistently accepting the claim in earlier years and in subsequent years. It appears that in the beginning, assessee has more income under the head “income from other sources” as than the interest expenditure, but in Assessment Year 2006-07, 2007-08 and 2009-10, the interest expenditure was more than income, in spite of that loss under the head “income from other source” was allowed by the ld. Assessing Officer in scrutiny assessment. Thus considering the past history and stand of the revenue itself, we are of the view that ld. Assessing Officer has erred in making the disallowance. Ld. Commissioner of Income Tax (Appeals) also failed to appreciate that total expenditure is to be allowed which is incurred wholly and exclusively for earning income. It cannot be restricted in proportion of income. We allow the ground of appeal raised by assessee and consequently reject the ground raised by the revenue. The assessee is entitled to expenditure of Rs. 1,09,29,139/- claimed by him.
7. The revenue has not brought any contrary decision to our notice. The revenue could not revert the submission that in earlier year such expenditure was allowed. Therefore, we have no reason to take a different view as adopted by the coordinate bench in the case of Shri Manibhai V. Patel Vs. ACIT in and also the decision of the coordinate bench in the case of Narendra A. Patel Vs. ITO in ITA No.2657/Ahd/2015. Hence, we hereby direct the A.O. to delete the disallowance. This ground of appeal is allowed.”
3. Taking a consistent view, I therefore direct the A.O. to delete the addition.
Smt. Pinalben Manankumar Patel 4. In the result, the appeal filed by the assessee is allowed.
Order was pronounced in the open court on 18.09.2019.