JT. COMMISSIONER OF INCOME TAX (OSD), CENTRAL CIRCLE 4(1), MUMBAI, MUMBAI vs. ASHWIN SHANTILAL MEHTA, MUMBAI

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ITA 1957/MUM/2026Status: DisposedITAT Mumbai13 July 2026AY 2014-159 pages
AI SummaryDismissed

What did the Tribunal hold?

The Tribunal upheld the CIT(A)'s decision, finding no infirmity in restricting the interest expenditure to the extent of interest income and household expenses to Rs. 1,50,000. The revenue's reliance on the Best and Co. judgment was deemed misplaced.

What were the facts?

The revenue appealed against the CIT(A)'s order which partly allowed the assessee's appeal. The assessee claimed interest expenditure and also had unexplained household expenses. The CIT(A) granted partial relief on both counts by following coordinate bench decisions.

What were the issues?

Whether interest expenditure is allowable under Section 57 to the extent of interest income, and whether the addition for unexplained household expenses is justified.

Which sections of the Income-tax Act were involved?

Section 57,Section 69C

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, MUMBAI

Before: SHRI ANIKESH BANERJEE & SHRI BIJAYANANDA PRUSETH

INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI BENCH: A BEFORE SHRI ANIKESH BANERJEE, JUDICIAL MEMBER AND SHRI BIJAYANANDA PRUSETH, ACCOUNTANT MEMBER ITA 1957/MUM/2026 िनधा�रणवष�/AssessmentYear:2014-15) JT. COMMISSIONER OF INCOME ASHWIN SHANTILAL MEHTA TAX (OSD), CENTRAL CIRCLE 4(1), 32, Madhuli Apartment, Dr. MUMBAI Annie Besant Road, Worli Room No. 420, 4th Floor, Mumbai-400018, Maharashtra Vs. KautilyaBhawan, Bkc, Bandra East, Mumbai-400051, Maharashtra अपीलाथ� Appellant ��थ� Respondent

Permanent Account Number of Assessee: ABAPM2121M

अपीलाथ��ारा/Appellant represented by: Shri Manoj Kumar (CIT-DR) ��थ��ारा/Respondent represented by: Ms. Aakansha Mhatre, CA सुनवाईकीतारीख/Date of conclusion of hearing: 08-Jul-2026 घोषणाकीतारीख/Date of pronouncement: 13-Jul-2026 आदेश / ORDER

PER: ANIKESH BANERJEE, (JM): The instant appeal of the revenue filed against the order of the Ld. Commissioner of Income Tax (Appeals)-52, Mumbai [for brevity “Ld. CIT(A)”], order passed under Section 250 of the Income Tax Act, 1961 (for brevity ‘the Act’), for Assessment Year 2014-15, date of order 01.12.2025. The impugned order emanated from the order of the Ld. Deputy Commissioner of Income Tax- Cir-4(1), Mumbai (for brevity ‘Ld. AO’), order passed under Section 143(3) of the Act, date of order 15.12.2016.

2.

The revenue has taken the following grounds:

1) Whether on the facts and in the circumstances of the case, the Ld. CIT A is justified in restricting the interest expenditure under section 57 of the Income Tax Act, 1961, to the extent of interest income earned offered without appreciating the facts that burden of proof to substantiate the claim lies with the assessee that the interest expenditure was genuine and for business purpose? 2) Whether the Ld. CIT A misapplied the law by not drawing an adverse inference against the assessee, as permitted by the Hon ble Supreme Court s ruling in CIT vs. BEST Co. Ltd 60 ITR 11, when the assessee failed to produce evidence exclusively in their possession to substantiate the interest expenditure claim? 3) On the facts and in the circumstances of the case and in law, the Ld. CIT A has erred in restricting the addition made under section 69C of the Income-tax Act, 1961 on account of unexplained personal and household expenses from Rs. 12,00,000 to Rs. 1,50,000, without appreciating that the assessee failed to furnish any documentary evidence to substantiate his claim regarding the source and extent of such expenses. 4) On the facts and in the circumstances of the case and in law, the Ld. CIT A erred in accepting the assessee s explanation that his personal and household expenses were borne by relatives, particularly his brother, without any supporting evidence such as confirmations, bank statements, OR proof of actual payment, and without establishing that such expenses were incurred regularly and exclusively for the assessee throughout the year.

5) The appellant craves to leave to add, to amend and/or to alter any of the grounds of appeal.”

3.

The brief facts of the case are that the assessee is a notified person under the Special Court (Trial of Offences relating to transactions in Securities) Act, 1992 and all his assets including bank accounts were attached and vested in the hands of the custodian appointed under the said Act. The assessee has filed the return and subsequently, the case was selected for scrutiny and notice was duly served to the assessee. In pursuance of notice the assessee had submitted the details time to time. In the impugned assessment order the assessee claimed deduction of interest expenditure amounting to Rs.17,39,73,561/- u/sec. 57 of the Act. During the assessment proceeding the assessee was asked to explain the allowability of deduction claimed u/sec. 57 of the Act. In this response the assessee submitted that the assessee is a notified person. The assessee earned interest income from term deposit amounting to Rs.2,96,09,806/-. The assessee has claimed deduction of Rs.17,39,73,561/- u/sec. 57 of the Act. The assessee submitted before the Ld. AO that the assessee had taken loan from brokerage firm for making investment in shares for the purpose the assessee had entered into an oral agreement to pay interest at the rate of 12% per annum. Thereof the assesse having derived the huge benefit out of the above investment is bound to pay interest and securities. Since the interest is in relation to the earning income from investments that shares and term deposits the same was claimed as deduction against the said interest income. But the Ld. AO rejected the assessee’s plea and confirm the addition amounting to Rs.17,39,73,561/- with the total income of the assessee. Further, the Ld. AO determine the personal household expenses of the assessee amount to Rs.12,00,000/- and was added back with the total income of the assessee. The aggrieved assessee filed an appeal before the Ld. CIT(A). The assessee had argued before the Ld. CIT(A) that the assessee’s family members were duly covered by the order of the Coordinate Bench of ITAT Mumbai in identical issue and further, the identical fact was duly considered in the case of Group Entity of the assessee in Cascade Holding Pvt. Ltd. vs. DCIT , ITA No.6965, 6966 and 6968/Mum/2018, dated 16.03.2020. Respectfully relied on the orders of Coordinate Bench of ITAT Mumbai, the Ld. CIT(A) has granted partial relief and the grounds of the appeal are partly allowed. Being aggrieved the revenue filed an appeal before us.

4.

The Ld. DR argued that the Ld. CIT(A) erred in allowing the deduction of interest expenditure under Section 57 of the Act. It was contended that the assessee had merely created a provision for payment of interest in relation to the earning of interest income and, therefore, such a provision could not be allowed as a deductible expenditure. Accordingly, the Ld. DR supported the order of the Ld. AO. However, the Ld. DR was unable to point out any distinguishing facts or legal position to differentiate the decisions of the Coordinate Bench of the Tribunal relied upon by the Ld. AR.

5.

The Ld. DR further placed reliance on the judgment of the Hon'ble Supreme Court in the case of CIT v. Best and Co. (Private) Ltd., reported in [1966] 60 ITR 11 (SC), wherein it was held as follows:

“Section 4 of the Income-tax Act, 1961 (Corresponding to section 3 of the Indian Income-tax Act, 1922) - Income - Chargeable as - Assessment years 1951-52 and 1952-53 - Assessee had taken agency from 'I' Ltd. for marketing and distribution of its products - Said agency was terminated - Assessee received compensation for said termination and also consideration for restrictive covenant not to do business in same line for certain period - Whether since assessee gave up agency without any protest presumably because such termination of agencies was part of normal course of its business, loss of said agency was only a normal trading loss and income received in lieu thereof was to be held to have received as revenue receipt - Held, yes - Whether restrictive covenant was an independent obligation undertaken by assessee not to compete in same field for a specified period, was wholly unconnected with assessee's agency termination and part of compensation attributable to restrictive covenant, was a capital receipt and hence not assessable to tax - Held, yes.”

6.

The Ld. AR filed a paper book comprising pages 1 to 81, which has been taken on record. The Ld. AR submitted that both the issues involved in the present appeal, namely,

(i) the disallowance of interest under Section 57 of the Act, and

(ii) the addition on account of household expenses, have already been adjudicated and decided partly in favour of the assessee in the assessee's own case by the Coordinate Bench of the ITAT, Mumbai 'A' Bench in ITA No. 422/Mum/2016 for A.Y. 2011-12 and ITA Nos. 2734 & 2735/Mum/2017 for A.Ys. 2012-13 and 2013-14, vide order dated 28.10.2022. The Ld. AR further invited our attention to paragraph 11 of the impugned appellate order, wherein the Ld. CIT(A), while granting partial relief to the assessee, recorded his findings with regard to the allowability of interest expenditure under Section 57 of the Act. The relevant observations contained in paragraph 11 are reproduced below:

“11. It is observed that Hon'ble ITAT has allowed the deduction on identical set of facts in case of the appellant's own case for AY 2002-03. Hon'ble Mumbai Tribunal has taken identical view in the case of group entities of Harshad Mehta Group. Following the decision of Hon'ble ITAT dt.27.11.2019 in the case of Pratima Mehta for AY 2014-15 (ITA No. 5839/Mum/2018), my predecessor CIT(A) while deciding the appeal for the A. Y. 2015-16 in the case of Pratima Mehta has allowed the interest expenditure to the extent of interest income stating that deduction can be said to be allowed in respect of income earned wholly and exclusively for earning of income. Further, the Hon'ble Tribunal in the case of Group entity of the appellant i.e. Cascade Holdings Pvt. Ltd. v. DCIT [ITA Nos. 6965, 6966 & 6968/Mum/2018] dated 16.03.2020 has allowed deduction of interest expenditure to the extent of interest income earned. In my view, the maximum amount allowable with respect to interest expenditure u/s 57 of the IT Act would be to the extent of interest earned and or offered. Respectfully following the decisions of Hon'ble ITAT in the appellant own case and Group entities the interest expenditure is to be allowed to the appellant to the extent of interest income earned and or offered. However, from the record it is observed that the appellant has claimed interest expenditure u/s 57 of the Act on the outstanding liabilities of the entities i.e. M/s. Ashwin Mehta and M/s, JH Mehta & M/s Harshad Mehta against the income from other sources head. The appellant has submitted M/s. Harshad Mehta is following cash system of accounting, whereas appellant himself and M/s. Ashwin Mehta and M/s. J H Mehta are following mercantile system of accounting. The Hon'ble ITAT "C" Bench, ITA No. 350/MUM/2013 vide their order dt. 11.5.2015 in the case of Pratima Mehta has set aside the said issue along with direction for taxing of income in the hands of recipient (family members) in accordance with method of accounting followed by them and as per provisions of law. The AO is hereby directed to follow the direction of Hon'ble ITAT and to verify whether the interest expenses paid by the appellant to M/s. Ashwin Mehta and M/s. J H Mehta & M/s Harshad Mehta has been offered for taxation by them as per the method of accounting followed by them. If the said interest income was not offered for taxation by the said recipients, the suitable action may be taken against them as per law. Accordingly, this ground no. 1 of appeal is partly allowed.

12.

Hence, Ground no. 1 of the appellant for AY 2014-15 stands Partly Allowed.” 7. The Ld. AR further placed reliance on the order of the Coordinate Bench of the ITAT, Mumbai, in the assessee's own case, as well as on the findings of the Ld. CIT(A) with regard to the disallowance on account of unexplained personal household expenses amounting to Rs. 12,00,000/- and confirmed amount to Rs. 1,50,000/-. The Ld. CIT(A) granted partial relief related to addition of unexplained personal household expenses. The Ld. AR invited our attention to paragraph 15 of the impugned appellate order, wherein the Ld. CIT(A) recorded his findings on the issue. The relevant observations contained in paragraph 15 are reproduced below:

“15. Ground No. 2- This ground is related to disallowance of personal household expenses amounting to Rs. 12,00,000/-.

15.1. During the course of assessment proceedings, the AO asked the assessee to give the details about personal and other expenses during the year under consideration. The assessee has filed reply. However, in the absence of satisfactory explanation, the AO estimated an amount of Rs 1,00,000/- per month as personal expenses. Accordingly, an amount of Rs. 12,00,000/- was added to the total income of the assessee u/s 69C of the Act. 15.2. During the course of appellate proceedings, the appellant has submitted that the appellant has not spent any income on account of personal expenses, which are otherwise very meagre and nominal. The livelihood of the appellant is being taken care of by the relatives, friends and other family members. Since no expenditure is incurred by the appellant, the addition made by the Ld. A.O. is unjustified and liable to be deleted. The household expenses and electricity, etc. are paid by the younger brother, Dr. Hitesh S. Mehta who has independent source of income from the medical profession and duly offered by him in the return of income regularly. The appellant has relied on judicial precedents stating that the AO has made addition merely on presumptions and conjectures or surmises, which is not permissible in the eyes of law. 15.3.I have perused the details submitted by the appellant. The Hon'ble ITATMumbai in the case of appellant (Ashwin Mehta) for the AY 2011-12 to AY 2013-14 vide ITA No.422/Mum/2016 and ITA No.2734 & 2735/Mum/2017 has restricted the house hold expenses to the tune of Rs. 1,50,000/- per annum. The Hon'ble ITAT with respect to the above issue has observed that the Ld. AO during the course of assessment proceedings has disallowed Rs. 12,00,000/- on account of house hold expenses in the case of family members of the group, the Id. CIT(A) has reduced the disallowances to tune of Rs. 3,00,000/- in the various cases of family members of Harshad Mehta Group. Accordingly, the Hon'ble ITAT, following the decisions of coordinate bench of ITAT in group cases of the appellant, sustained the addition to the extent of Rs. 1,50,000/-. 15.4.Since, the issue is exactly similar and the facts are also identical, respectfully following the decision of Hon'ble ITAT in the Group cases of Harshad Mehta's family members, I hereby direct the AO to restrict the House hold expenses to the tune of Rs. 1,50,000/-. Accordingly, the remaining addition is hereby deleted. Thus, Ground No.2, raised by the appellant stands Partly Allowed.” 8. We have heard the rival submissions and perused the material available on record. The revenue has challenged the order of the Ld. CIT(A) on two issues, namely, (i) the restriction of disallowance of interest expenditure under Section 57 of the Act to the extent of the interest income earned, and (ii) the restriction of the addition on account of unexplained household expenses from Rs. 12,00,000/- to Rs. 1,50,000/-. So far as the first issue is concerned, we find that the Ld. CIT(A) has granted partial relief by following the binding decisions of the Coordinate Bench of the Tribunal rendered in the assessee's own case as well as in the cases of other group entities on identical facts. The revenue has not been able to point out any distinguishing feature in the facts of the present case or demonstrate that the said decisions have been reversed or modified by any higher judicial forum. The reliance placed by the Ld. DR on the judgment of the Hon'ble Supreme Court in Best and Co. (Private) Ltd. is misplaced, as the said decision deals with the characterization of compensation received on termination of an agency and a restrictive covenant as revenue or capital receipt. The ratio laid down therein has no application to the controversy involved in the present appeal concerning the allowability of interest expenditure under Section 57 of the Act. Therefore, the reliance placed on the said judgment does not advance the case of the revenue.

9.

With regard to the second issue relating to household expenses, we find that the Ld. CIT(A) has merely followed the decision of the Coordinate Bench in the assessee's own case for the earlier assessment years and restricted the addition to Rs. 1,50,000/- on identical facts. The revenue has not brought any material on record to establish that the factual position during the year under consideration is different from that considered by the Tribunal in the earlier years. In the absence of any distinguishing facts, judicial discipline requires us to follow the earlier orders of the Coordinate Bench. Accordingly, respectfully following the decisions of the Coordinate Bench in the assessee's own case, we find no infirmity in the order of the Ld. CIT(A). The grounds raised by the revenue are devoid of merit and are, therefore, dismissed.

10.

In the result, the appeal of the revenue bearing ITA No.1957/Mum/2026 is dismissed.

Order pronounced in the open court on 13TH day of July 2026. Sd/- Sd/- (BIJAYANANDA PRUSETH) (ANIKESH BANERJEE) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai,िदनांक/Dated: 13/07/2026 SAUMYA Sr.PS Copy of the Order forwarded to: 1. अपीलाथ�/The Appellant , 2. �ितवादी/ The Respondent. 3. आयकरआयु� CIT 4. िवभागीय�ितिनिध, आय.अपी.अिध., मुंबई/DR, ITAT, Mumbai 5. गाड�फाइल/Guard file. BY ORDER, //True Copy// (Asstt. Registrar), ITAT, MUMBAI

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