ASHITA KISHOR JANANI,MUMBAI vs. ITO - 19(1)(2), MUMBAI

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ITA 1842/MUM/2020Status: DisposedITAT Mumbai28 March 2022AY 2012-136 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal found that the assessee had utilized the borrowed funds for trading in shares and investments, which generated taxable income. The revenue failed to provide evidence of diversion of funds for other purposes.

What were the facts?

The assessee, a doctor, claimed interest expenses on loans taken from NBFCs and banks. The Assessing Officer disallowed the interest, stating the borrowed funds were not used for business purposes. The CIT(A) confirmed this disallowance.

What were the issues?

Whether the interest on borrowed funds is disallowable if the funds are used for business purposes like share trading, even if other income sources exist.

Which sections of the Income-tax Act were involved?

Section 36(1)(iii)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI

Before: SHRI PRASHANT MAHARISHI & SHRI PAVAN KUMAR GADALE

For Respondent: Mr. Rajesh Kumar Yadav.DR
Hearing: 23.03.2022Pronounced: 28.03.2022

O R D E R

PER PAVAN KUMAR GADALE JM:

1.

The assessee has filed the appeal against the order of the Commissioner of Income Tax (Appeals)-52, Mumbai passed 143(3) and 250 of the Act. The assessee has raised the following grounds of appeal:

1. On the facts and circumstances of the case and in law, Ld. CIT(A) erred in confirming the AOs action of disallowing interest of Rs. 8,56,125/- by invoking the provisions of Sec. 36(1)(iii) of the Act.

Ashita Kishor Janani, Mumbai. - 2 -

2.

The appellant craves leave to add to alter, amend and /or any of the foregoing grounds of appeal

2. The brief facts of the case are that, the assessee is a doctor by profession and specializing in the field of radiologist and has a private clinic. The assessee has filed the return of income electronically on 27.09.2012 for the A.Y 2012-13 declaring a total income of Rs.10,72,530/- and the return of income was processed u/s 143(1) of the Act. Subsequently, the case was selected for scrutiny and notice u/s 143(2) and 142(1) of the Act are issued. In compliance, the Ld. AR of the assessee appeared from time to time and filed the details and the case was discussed. The Assessing Officer (A.O.) on perusal of the profit and loss account found that the assessee has disclosed the income, consisting of dividend income, sale of shares, profession income, bank interest and interest from other sources. Further the assessee has borrowed loans from various NBFC and Banks. The A.O is of the opinion that the barrowed funds are not utilized for the purpose of profession/business and the interest claim of Rs.8,56,125 should be disallowed. The Ld. AR has Ashita Kishor Janani, Mumbai. - 3 - filed the explanations in letter dated 2-2-2015 referred at Para 4 of the assessment order. Further the Ld. AR has filed the written submissions vide letter dated 10.03.2015 mentioning the utilization of funds effectively for the business purpose. Whereas the A.O was not satisfied with the explanations and observed that there is no nexus of borrowed funds utilized for the purpose of earning taxable income and made a disallowance of claim u/s 36(1)(iii) of the Act of Rs. 8,56,125/- and assessed the total income of Rs. 19,28,660/- and passed the order u/s 143(3) of the Act dated 03.03.2015.

3.

Aggrieved by the order, the assessee has filed an appeal before the CIT(A).Whereas in respect of interest claim u/s 36(1)(iii) of the Act, the CIT(A) has confirmed the action of the A.O and dismissed the ground of appeal and in other grounds of appeal with respect to TDS, the CIT(A) has granted partial relief and partly allowed the appeal. Aggrieved by the CIT(A) order, the assessee has filed an appeal before the Hon’ble Tribunal.

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4.

At the time of hearing, the Ld.AR submitted that the CIT(A) has erred in confirming the action of the A.O. irrespective of the fact that the assessee has utilized the barrowed funds for earning income and referred in the financial statements and prayed for allowing the appeal. Contra, the Ld. DR supported the order of the CIT(A).

5.

We heard the rival submissions and perused the material available on record. Prima-facie the assessee is doctor by profession and has disclosed income from profession along with income from sale of shares, income from House Property and income from other Sources. The assessee was engaged in trading in equity shares and investments and the income has been offered to tax, which is not disputed. On perusal of the facts of Loans, referred at page 2 of the assessment order, the loan amounts pertains to NBFC and national banks. The contention of the assessee before the lower authorities that the funds have been utilized for the purpose of trading in shares and the assessee has received the dividend income and also earned profit on share transactions which was offered to tax and was disclosed in the income tax return.

Ashita Kishor Janani, Mumbai. - 5 - Prima facie the assessee has utilized this funds for the purpose of business and the revenue could not make out a case supporting with any evidence that the barrowed funds have been diverted for other purposes. We considering the facts, circumstances, and the income offered by the assessee are of the opinion that the disallowance cannot be sustained and accordingly we set aside the order of the CIT(A) and direct the A.O to delete the addition and allow the grounds of appeal of the assesee.

6.

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

Order pronounced in the open court on 28.03.2022. Sd/- Sd/- (PRASHANT MAHARISHI) (PAVAN KUMAR GADALE) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai, Dated 28.03.2022 KRK, PS आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent. 3. संबं�धत आयकर आयु�त / The CIT(A) 4. आयकर आयु�त(अपील) / Concerned CIT

Ashita Kishor Janani, Mumbai. - 6 -

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