SRIKANT JHUNJHUNWALA,KOLKATA vs. DCIT, CENTRAL CIRCLE 3(2),, KOLKATA

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ITSSA 45/KOL/2026Status: DisposedITAT Kolkata22 July 2026AY 2016-20174 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the assessee borrowed money and utilized it for business purposes, including investments in foreign assets and advancing funds as a measure of commercial expediency to related parties and directors. The Tribunal noted that the assessee had a history of investing in foreign assets since FY 2011-12 using unsecured loans, transferring funds to a Singapore bank account. It was also observed that loans advanced to group companies and directors were for business purposes, citing specific instances like advances to M/s Mani’s Ranisati Finvest Ltd., Samudra Vyapar Pvt. Ltd., and Chowringhe Residency Pvt. Ltd., and the refund of a loan to Tanishque Vinimay Pvt. Ltd. The Tribunal found that the utilization of funds was driven by commercial expediency and business considerations. Relying on the Supreme Court's decision in Sharp Business System vs. CIT, which held that advances to sister concerns and directors are covered by the principle of commercial expediency, the Tribunal disagreed with the CIT(A)'s conclusion. Consequently, the Tribunal set aside the CIT(A)'s order and directed the AO to delete the addition.

What were the facts?

The assessee, Srikant Jhunjhunwala, filed a revised return for AY 2016-17. Following a search operation on the Mani Group, a notice under Section 153A of the Income Tax Act, 1961, was issued. During assessment, the Assessing Officer (AO) disallowed an interest expenditure of Rs. 20,89,549/- claimed on unsecured loans, stating they were not utilized for business purposes. The Commissioner of Income Tax (Appeals) [CIT(A)] confirmed this disallowance, observing that the assessee's funds were used for investments, loans, and advances, and that interest-bearing funds were advanced to related parties without charging interest. The CIT(A) also noted incomplete details of foreign currency investments and confirmed the addition.

What were the issues?

1. Whether the interest expenditure of Rs. 20,89,549/- on unsecured loans is an allowable deduction under Section 36(1)(iii) of the Income Tax Act, 1961, when the loans were utilized for business purposes, including investments in foreign assets and advances to group companies and directors? Assessee's contentions: - The assessee argued that the borrowed money was utilized for business purposes and advanced as per commercial expediency to related and other parties. - The assessee claimed interest on unsecured loans under Section 36(1)(iii) of the Act. - The assessee contended that unsecured loans were used for investment in foreign assets and for making advances to group companies and their directors for business purposes. - Investments in foreign assets were made since FY 2011-12, with funds transferred to a Singapore bank account. - Loans were advanced to group companies and directors as a measure of commercial expediency. - Advances to Shri Sanjay Jhunjhunwala were further advanced to M/s Mani’s Ranisati Finvest Ltd., an NBFC, for business purposes. - Loans to Samudra Vyapar Pvt. Ltd. were further advanced to Chowringhe Residency Pvt. Ltd. for its business purposes. - Loan to Tanishque Vinimay Pvt. Ltd. was refunded. - Relied on the Supreme Court decision in Sharp Business System vs. CIT (2026) 484 ITR 509 (SC). Revenue's contentions: - The AO disallowed the interest, holding that the unsecured loans were not utilized for business purposes. - The CIT(A) confirmed the disallowance, observing that funds were used for investments and advancing loans/advances, and interest-bearing funds were advanced to related parties without charging interest. The CIT(A) also noted incomplete details of foreign currency investments.

Which sections of the Income-tax Act were involved?

Section 36(1)(iii),Section 153A,Section 142(1),Section 143(2),Section 132

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, KOLKATA ‘D’ BENCH, KOLKATA

Before: SHRI RAJESH KUMAR & SHRI PRADIP KUMAR CHOUBEY

For Appellant: Shri S. K. Tulsiyan, Advocate
For Respondent: Shri Sanat Kumar Raha, CIT-DR
Hearing: 02.07.2026Pronounced: 22.07.2026

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA ‘D’ BENCH, KOLKATA BEFORE SHRI RAJESH KUMAR, ACCOUNTANT MEMBER AND SHRI PRADIP KUMAR CHOUBEY, JUDICIAL MEMBER I.T.(SS)A. No.45/KOL/2026 Assessment Year: (2016-17) Srikant Jhunjhunwala, DCIT, 3/1, Queens Park, Ballygunge, Vs. Central Circle – 3(2), Kolkata – 700019, West Bengal Kolkata [PAN: AGRPJ9513C] (Appellant) .. (Respondent) Appellant by : Shri S. K. Tulsiyan, Advocate Respondent by: Shri Sanat Kumar Raha, CIT-DR Date of Hearing 02.07.2026 Date of Pronouncement 22.07.2026

O R D E R PER RAJESH KUMAR, ACCOUNTANT MEMBER:

This appeal preferred by the assessee is against the order of the learned Commissioner of Income Tax (Appeals)-21,Kolkata(hereinafter referred to as the “ld.CIT(A)”], dated 09.02.2026 for the Assessment Year (AY) 2016-17.

2.

The only issue raised by the assessee is against the order of ld. CIT(A) confirming the disallowance of interest expenditure of Rs.20,89,549/- as made by the Assessing Officer (In short, ‘the AO’) in respect of interest paid on unsecured loans.

3.

The facts of the case in brief are that assessee filed the revised return of income on 30.12.2016, declaring total income of Rs.94,26,820/-. A search

IT(SS)A No.45/Kol/2026/AY 2016-17 Srikant Jhunjhunwala vs. DCIT and seizure operation u/s 132 of the Act was conducted in the case of Mani Group on 22.06.2016. Accordingly, notice u/s 153A of the Act was issued, which was complied with by filing return of income on 25.04.2018, showing the same income as shown in the original return of income. Thereafter, notices u/s 142(1) and 143(2) of the Income-tax Act, 1961 (In short, ‘the Act’) were issued along with questionnaire which attended by assessee from time to time. The AO during the course of assessment proceedings, noted that the assessee has claimed an amount of Rs.20,89,549/- as interest on unsecured loans. According to the AO , the interest on unsecured loan was not allowable deduction as not unsecured loans were not utilized for business purposes. Accordingly, the same was added to the income of the assessee. The assessment framed u/s 143(3)/153A of the Act, dated 28.12.2018. 4. In the appellate proceedings, the ld. CIT(A) also dismissed the appeal of the assessee by observing that source of fund of assessee comprising share capital and unsecured loans were utilized for investments and for advancing loans & advances and other current assets. The ld. CIT(A) noted that the assessee has shown gain from investment in foreign currencies of Rs.1,07,88,688.02 and long-term capital gain (LTCG) on sale of shares of Rs.35,64,012.37. The ld. CIT(A) noted that assessee also received interest income of Rs.2,63,427.00. The ld. CIT(A) noted that interest bearing fund have also been advanced as loans to related persons without charging any interest. The ld. CIT(A) also noted that the assessee has furnished incomplete details of investment in foreign currencies. Therefore, the ld. CIT(A) confirmed the order.

IT(SS)A No.45/Kol/2026/AY 2016-17 Srikant Jhunjhunwala vs. DCIT 5. After hearing the rival submissions and perusing the materials available on record, we find that assessee has borrowed money and utilized the same for the purpose of business and also advancing the same as a measure of commercial expediencies to the related and other parties. The assessee paid interest on borrowed and claimed the same u/s 36(1)(iii) of the Act. However, the AO proceeded with the hypothesis that the interest-bearing loan funds were not utilized for investments in foreign assets/currencies which was the main line of business of the assessee. The unsecured loans taken by the assessee on which interest was paid, was utilized towards investment in foreign assets partly and partly for making advances to group companies and its directors for business purposes. We note that the assessee has invested in foreign assets since F.Y. 2011-12 by taking unsecured loans from various parties. The said loans taken were transferred to LGT Bank, Singapore account for investment in foreign assets. We also note that loans were given to various group companies and its directors from time to time as measure of commercial expediency.

6.

We also note that amount of loans advanced by the assessee to Shri Sanjay Jhunjhunwala was further advanced by him to the company M/s Mani’s Ranisati Finvest Ltd., in which both Shri Sanjay Jhunjhunwala and Shri Shrikant Jhunjhunwala are directors. The said company is a NBFC company and thus, the said funds given to Shri Sanjay Jhunjhunwala were also further utilized towards business purposes and not for any personal benefit. We also note that unsecured loans were given to Samudra Vyapar Pvt. Ltd. by the assessee, which is a group company, which later got merged with Mani Square Ltd. We note that loan advanced by the assessee to Samudra Vyapar Pvt. Ltd. was further advanced by it to another company M/s Chowringhe Residency Pvt. Ltd. for its business purposes in which Shri Shrikant 3

IT(SS)A No.45/Kol/2026/AY 2016-17 Srikant Jhunjhunwala vs. DCIT Jhunjhunwala is a director. Similarly, in the case of Tanishque Vinimay Pvt. Ltd., we note that the loan given has already been refunded to the assessee. Therefore, on the basis of facts available before us, we are of the view that the money has been utilized out of commercial expediency and business consideration. The case of the assessee is squarely covered by the decision of Hon'ble Apex Court in the case of Sharp Business System vs. CIT (2026) 484 ITR 509 (SC) wherein it has been held that where the assessee has made advances to sister concerns and its directors, such advances are covered by the principle of commercial expediency. Considering these facts, we are not in agreement with the conclusion drawn by the ld. CIT(A) holding that interest is not allowable, Consequently, we set aside the order passed by ld. CIT(A) and direct the AO to delete the addition.

7.

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

The order is pronounced in the open Court on 22/07/2026.

Sd/- Sd/- (Pradip Kumar Choubey) (Rajesh Kumar) JUDICIAL MEMBER ACCOUTANT MEMBER Kolkata, Dated: 22/07/2026 SAMANTA आदेश �ȧ ĤǓ�ͧ �ͪ �\ Ē ȯͪ��/Copy of the Order forwarded to: 1. \ �Ȣ�ȡ�ȸ/ The Appellant 2. Ĥ×��ȸ/ The Respondent. 3. Ȳ�Ȳͬ��आयकर] �ǕÈ�/ Concerned CIT 4. आयकर] �ǕÈ�(अपील) / The CIT(A) 5. ��ȡ�Ȣ�ĤǓ�Ǔ�ͬ �, आयकर\ �Ȣ�ȣ�\ͬ ����,/ DR, ITAT, Kolkata 6. �ȡ�[ फाईल/ Guard file.

BY ORDER, // TRUE COPY //

Asstt.Registrar, ITAT, Kolkata 4

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