VIJAY NANALAL SHAH,SURAT vs. DCIT, CIRCLE-1(1)(1), SURAT

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ITA 505/SRT/2026Status: DisposedITAT Surat24 July 2026AY 2013-143 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the interest disallowance was not an excess claim under Section 57 of the Act. It further noted that the interest disallowance should be set off against the proprietary business income of the assessee's concern.

What were the facts?

The assessee, an individual running a business, incurred interest expenses from personal accounts. The Assessing Officer disallowed Rs. 2,31,506/- of this interest, treating it as an excess claim. The CIT(A) upheld this disallowance.

What were the issues?

Whether interest expenditure incurred for investment in income-bearing assets is allowable as a deduction against business income, and if so, to what extent.

Which sections of the Income-tax Act were involved?

Section 57

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “SMC”

Before: Dr. Arjun Lal Saini

For Appellant: Shri Kiran K Shah, AR
For Respondent: Shri Ajay Uke, Ld. Sr. DR
Hearing: 18/05/2026

आयकर अपीलीय अिधकरण, सूरत �यायपीठ, सूरत । In The Income Tax Appellate Tribunal, “SMC” Surat Bench, Surat Before Dr. Arjun Lal Saini, Accountant Member आयकरअपीलसं./ITA No.505/Srt/2026 [ �नधा�रणवष�/Assessment Year: 2013-14 ] Vijay Nanalal Shah, Deputy Commissioner of Income- Vs. 33/A, C/o. Evershine Marbles, tax, Circle-1 (1) (1), Surat, Bhatar Char Rasta, Udhna Income Tax Office, Majura Gate, Magdalla Road, Surat, Surat, Gujarat-395002 Gujarat-395017 �ायीलेखासं./जीआइआरसं./PAN/GIR No.: ALNPS6079D (अपीलाथ�/Assessee) (��यथ�/Respondent) Assessee by : Shri Kiran K Shah, AR Respondent by : Shri Ajay Uke, Ld. Sr. DR Date of Hearing : 18/05/2026 24/07/2026 Date of Pronouncement : :: ORDER :: Per, Dr. Arjun Lal Saini, AM: Captioned appeal filed by the assessee, pertaining to assessment year (AY) 2013-14, is directed against the order passed under section 250 of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) dated 24.02.2026 by the National Faceless Appeal Centre (NFAC), Delhi/Commissioner of Income Tax (Appeals) [in short ‘Ld.CIT(A)’] which in turn arises out of an assessment order passed by the Assessing Officer u/s. 143(3) of the Act dated 21.03.2016.

2.

The grounds of appeal raised by the assessee are as follows: 1. The learned CIT (A) grossly erred in confirming addition of Rs.2,31,506/- on account of disallowance of interest as discussed in para 6 of the appeal order. The assessee reserves right to add, alter and withdraw any grounds of appeal. 2.

ITA No.505/SRT/2026 (AY 2013-14) Vijay N. Shah

3.

Succinctly, the factual panorama of the case is that assessee before us is an Individual. The assessee had filed return of income showing taxable income at Rs.12,09,970/-, on 26.09.2013. The assessee has been doing business in the name of Vidhi Fashion. The assessee also maintains personal set of accounts wherein there are certain unsecured loans as well as loans given and accordingly interest was earned and paid. During the assessment proceedings, the assessing officer disallowed the interest of Rs.2,31,506/- though the interest expenditure was incurred for making investment in income bearing assets. It was also submitted that the assessee has his own capital of Rs.68.48/- lacs, which substantially more than the holding of fixed assets and investments. It was therefore, submitted before the assessing officer that the interest paid was due to investment in Vidhi Fashion and loans and advances given. It was also submitted before the assessing officer that the interest amount ought to be fully allowed against interest received against loans and advances and partly against profit from Vidhi Fashion. The assessing officer was not satisfied with the above explanation of the assessee and made an addition on account of disallowance of interest of Rs.2,31,506/-.

4.

Aggrieved by the order of the Assessing Officer, the assessee carried the matter in appeal before the Ld. CIT(A), who has confirmed the action of the Assessing Officer.

5.

I have heard, both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld CIT(A) and other materials brought on record. I note that the assessee challenges the Assessing Officer's decision to restrict the deduction of interest

ITA No.505/SRT/2026 (AY 2013-14) Vijay N. Shah

expenses to the extent of interest income earned. The assessing officer disallowed Rs.2,31,506/-, treating it as an excess claim under Section 57 of the Act. I note that assessee used to maintain two sets of accounts, one for proprietary concern namely, Vidhi Fashion and other a personal set. The assessee had paid interest from personal set to the extent of Rs.6,17,933/-. The assessee had major investment in income bearing asset like Vidhi Fashion. The assessee urges that there are borrowed funds of Rs. 56,40,332/- and there are income bearing asset of Rs. 56,67,756/- and therefore entire interest ought to be allowed. Therefore, I note that amount of Rs. 2,31,506/-, is not an excess claim under Section 57 of the Act. I also note that interest disallowance ought to be set off against proprietary business income of Vidhi Fashion. Considering these facts and circumstances, I delete the addition, and allow the appeal of assessee.

6.

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

Order is pronounced in the open Court Today on 24/07/2026.

Sd/- [ Dr. Arjun Lal Saini ] Accountant Member //True Copy// सूरत/Surat िदनांक/ Date: 24/07/2026 Copy of the order forwarded to : 1. The assessee 2. The Respondent 3. CIT 4. The CIT(A) By order 5. DR, ITAT, Surat 6. Guard File Sr. Private Secretary ITAT, Surat

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