JACKIE MAHESH VORA,MUMBAI vs. ACIT CIRCLE 19(2), MUMBAI

This appeal by the assessee is preferred against the order of the ld. CIT(A)/Addl./JCIT(A)-3, Bengaluru [hereinafter “the ld. CIT(A)”] dt. 14/10/2024 pertaining to AY 2017-18.

The sum and substance of the grievance of the assessee is that the ld. CIT(A) erred in confirming the addition of ₹ 28,05,940/-made by the AO by disallowance of the same u/s 57(iii) of the Act. 3. Representatives were heard at length. Case records carefully perused and the relevant documentary evidences brought on record duly considered in the light of Rule 18(6) of the ITAT Rules, 1963. Judicial decisions relied upon duly considered. 4. Briefly stated the facts are that the assessee filed his return of income on 19/02/2018 declaring total income at ₹ 35,12,031/-. The 2 return was selected for scrutiny assessment and accordingly statutory notices were issued and served upon the assessee. 4.1. While scrutinising the return of income the AO noticed that the assessee has earned interest income of Rs. 1,04,82,353/- against which he claimed deduction of Rs. 1,32,88,293/- on account of payment of loan interest at Rs.1,32,14,955/- and management fees of Rs.73,338/- which resulted in a loss of Rs. 28,05,940/-. The AO asked the assessee to justify its claim of interest expenditure. The assessee filed a detailed reply which did not find any favour with the AO. The AO was of the opinion that the assessee has lent money to family concerns at lower rate of interest which resulted into loss. The AO restricted the amount of interest paid to the amount of interest received and made the addition of Rs. 28,05,940/-. 5. Before us, the ld. Counsel for the assessee vehemently stated that the AO cannot question the reasonableness of the interest paid qua the interest received. It is the say of the ld. Counsel for the assessee that, there is no bar in claiming interest u/s 57(iii) of the Act. Strong reliance was placed on the decision of the Hon’ble Supreme Court in the case of CIT vs. Rajendra Prasad Moody [1979] 1 SCC 250 and of the Co-ordinate Bench in the case of Akash Goyal vs. ACIT [2020] 113 taxmann.com 10 (Agra-Trib.).

Details of loans and advances and the interest charged is as under: – P.T.O.