SHRI DHARMESHKUMAR V. PATEL,,AHMEDABAD vs. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-2(2),, AHMEDABAD

This appeal filed by the Assessee is directed against the order of the Ld. CIT(A)-10, Ahmedabad dated 15.03.2017 pertaining to A.Y. 2013-14 and following grounds have been taken:

In this case, the assessee is a proprietor of Aval construction co. on going through the Profit & Loss Account of Aval construction co. it has come to notice that during the year the assessee had not carried out any business activities since no income or receipts is declared in the Profit & Loss Account of Aval construction co. However, indirect incomes such as dividend (7440) and Interest Income of Rs.l1,35,702/-has been found to be credited to the Profit & Loss Account. In other words, as per the Profit & Loss Account only income under the head 'Income from other sources' has been declared. On the other hand, the assessee had debited various expenditures in the Profit & Loss Account to the tune of Rs. 18,46,978/- which are not allowable under the provisions of section 57 of the I.T. Act. It is to mention here that the income declared by the assessee is covered by provisions of section 56 of the I.T. Act i.e. "Income from other sources".

In view of the above observation a show-cause notice was issued to the assessee vide this office letter No. DCIT/Circle.2(2)/SC/F.No.53/2015-1 6 dtd.30.11.2015. The relevant portion of the show case notice is reproduced hereunder:-

The above expenditures are not allowable as deduction against the interest income as per the provision of u/s 57 of the I.T. Act and all expenses except interest expenses of Rs. 4,83,531/- is disallowed and addition of Rs. 13,63,446/- is made in the hands of the assessee.

We have gone through the relevant record and impugned order. In this case, appellant is carrying on business of finance in his proprietary concern namely M/s Aval Construction Co. Appellant is also partner in various firms and earning profit, remuneration and interest income. The appellant has submitted profit and loss account and balance sheet of his proprietary concern namely M/s Aval construction Co. and other details called for by the lower authorities. During the year under reference, appellant has also earned interest and other income of Rs. 11,42,762/- in his proprietary concern. Appellant has also paid interest of Rs. 4,83,531/-. The out of total expenses, assessee has himself disallowed depreciation of Rs. 7,48,094/- in his return of income. And for remaining amount of Rs. 6,15,353/- was made for business purpose by the assessee but appellant has not shown any business activities appears to have carried out as per Profit and Loss account and no income under the business and professional has been declared by him. But in the interest of justice, we allow Rs. 3 lacs expenses out of Rs. 6,15,353 and direct the A.O. to make addition of Rs. 3,15,353/-.

In the result, appeal filed by the Assessee is allowed.