SMT. DIPABEN MAULIK KUMAR PATEL,MEHSANA vs. INCOME TAX OFFICER,WARD-1,, MEHSANA

The assessee filed her return of income declaring total income at Rs.3,07,270/- on 31.08.2012 which was proposed u/s 143(1) of the Act. On scrutiny notice u/s 143(2) of the Act dated 06.08.2013 followed by a further notice dated 01.09.2014 u/s 143(2) and 142(1) due to change of incumbent was served upon the assessee. During the course of assessment proceeding it appears from the balance sheet that the assessee has invested Rs.72,61,924/- at the beginning of the year and Rs.72,82,147/- at the end of the year. The

We find that the disallowance made by the authorities is much more than the dividend income earned by the assessee which is not in terms of the ratio laid down by the judgment passed in the matter of CIT-vs-Corrtech Energy Pvt. Ltd. reported [2014] 45 taxmann.com 116. We, therefore, restrict such disallowance to the dividend income to the tune of Rs.1,30,595/-. In the result, this ground of appeal is partly allowed.

The assessee has claimed expenses of Rs. 8,18,241/- u/s 57 of the Act against interest income of Rs. 37,852/- on the investment of Rs. 3,45,656/-. In fact it appears from the records that the interest expenses was incidental to the loan of an amount of Rs. 92,51,122/- which was taken for miscellaneous purposes. The assessee submitted before the Learned AO that borrowed fund has been invested by the assessee in shares and properties from where the assessee has earned rental income of Rs. 12,59,509/- and further invested in

At the time of hearing of the instant appeal the Learned Advocate appearing for the assessee submitted before us that the issue is squarely covered by the Learned Tribunal in the assessee’s own case for A.Y. 2013-14 a copy whereof was also handed over to us. He, therefore, prayed for the same relief. On the contrary, the Learned DR relied upon the order passed by the authorities below.

Heard the respective parties, perused the relevant materials available on record. We have further considered carefully the order passed by the Co- ordinate Bench in ITA No. 1936/Ahd/2016 for A.Y. 2013-14 dealing the identical issue. The relevant portion whereof is as follows: “9. As regards this grievance, I have noted that the deduction has been declined on the ground that interest earnings are much less and only such expenses can be allowed as deduction as are incurred "wholly and exclusively" to earn such an income. That approach is flawed. As long as interest expenses are incurred in the course of the activity which relates to the earning of that income, deduction under section 57(iii) has to be allowed. The activity is to be considered on a holistic basis. However, while dealing with the immediately preceding ground, the matter has been remitted to the file of the Assessing Officer for examining deducibility of interest under section 24(b) which appears to be overlapping, in all fairness, this ground of appeal

Having heard the parties, having perused the order passed by the Co- ordinate Bench, we are of the view to remit the issue to the file of the Learned AO for fresh adjudication of the same on merit in the light of the observation made by the Co-ordinate Bench in assessee’s own case for A.Y. 2013-14. Hence, the ground is allowed for statistical purposes.

In the result, appeal of the assessee is partly allowed.