PABBISETTY RAMACHANDRA GUPTA JYOTHI,HYDERABAD vs. INCOME TAX OFFICER, WARD-6(2), HYDERABAD

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ITA 1468/HYD/2017Status: DisposedITAT Hyderabad09 May 2018AY 2013-143 pages

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

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal upheld the disallowance of interest expenditure, finding no nexus between the borrowed funds and any potential interest income taxable under 'income from other sources'. The assessee failed to establish that the expenditure was incurred for earning taxable income.

What were the facts?

The assessee borrowed Rs. 1 Crore and advanced the entire amount to two private companies on the same day. The assessee did not earn any interest or return on these advances.

What were the issues?

Whether interest paid on borrowed funds is allowable as a deduction when the funds are advanced without earning any income, and whether Section 57 is applicable in such cases.

Which sections of the Income-tax Act were involved?

Section 57,Section 56

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, HYDERABAD BENCHES “B” (SMC

Before: SHRI J. SUDHAKARA REDDY

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES “B” (SMC), HYDERABAD BEFORE SHRI J. SUDHAKARA REDDY, ACCOUNTANT MEMBER I.T.A. No. 1468/HYD/2017 Assessment Year: 2013-14 Pabbisetty Ramachandra Income Tax Officer, Gupta Jyothi, Vs Ward-6(2), HYDERABAD HYDERABAD [PAN: AEZPJ6573N] (Appellant) (Respondent) For Assessee : Shri K.A. Sai Prasad, AR For Revenue : Shri K. Gopala Krishna, DR Date of Hearing : 09-05-2018 Date of Pronouncement : 09-05-2018 O R D E R

This is an appeal filed by the assessee, directed against the order of the Commissioner of Income Tax (Appeals)-6, Hyderabad, dated 11-05-2017, raising the following grounds:

“1. The learned first Appellate Authority confirming the disallowance of interest is not correct either in law or on fact and in both. 2. The learned first Appellate Authority is not justified in confirming the disallowance of interest paid on borrowed loan from State Bank of Hyderabad of Rs. 14,03,466/- u/s. 57 of the I.T. Act. 3. The learned First Appellate Authority failed to appreciate the fact that the provisions of section 57 of the I T Act are not applicable to the facts of the case”. Ground No. 4 is general in nature.

2.

Ld. Counsel for the assessee, Shri K.A. Sai Prasad, vehemently contended that the AO as well as the CIT(A) have erred in disallowing an amount of Rs. 14,03,466/- u/s. 57 of

I.T.A. No. 1468/Hyd/2017 :- 2 -:

the Income Tax Act, 1961 [the Act]. He submitted that this expenditure was incurred for earning interest income and hence the same should have been allowed when the genuineness of the payment is not in doubt.

3.

Ld.DR, relied on the orders of the lower authorities and submitted that the same should be upheld.

4.

After hearing the rival contentions, I find that the Ld.CIT(A) has given a factual finding that the assessee has taken an amount of Rs. 1 Crore as loan from State Bank of Hyderabad and transferred the same directly to M/s. Aroma Biotic Private Ltd., and Karol Distillery & Breweries Pvt. Ltd., on the same day. The assessee has not earned any interest or return on investment on these advances / investments. The assessee could not explain the nexus between any possible interest income, which is taxable u/s. 56 of the Act under the head ‘income from other sources’ and expenditure-in-question. Thus, I uphold the order of the Ld. First Appellate Authority and dismiss the appeal of assessee.

5.

In the result, appeal of assessee is dismissed.

Order pronounced in the open court on 9th May, 2018

Sd/- (J. SUDHAKARA REDDY) ACCOUNTANT MEMBER Hyderabad, Dated 9th May, 2018 TNMM

I.T.A. No. 1468/Hyd/2017 :- 3 -:

Copy to : 1. Pabbisetty Ramachandra Gupta Jyothi, C/o. Ch. Parthasarathy & Co., 1-1-298/2/B/3, 1st Floor, Sowbhagya Avenue, St. No. 1, Ashok Nagar, Hyderabad. 2. Income Tax Officer, Ward-6(2), Hyderabad.

3.

CIT (Appeals)-6, Hyderabad. 4. Pr.CIT-6, Hyderabad.

5.

D.R. ITAT, Hyderabad.

6.

Guard File.

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