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Income Tax Appellate Tribunal, MUMBAI BENCH “SMC” MUMBAI
Before: SHRI SAKTIJIT DEY & SHRI MANISH BORAD
ORDER PER MANISH BORAD, A.M. The present appeal is filed by the assessee against the order of the Commissioner of Income Tax (Appeals)-38, Mumbai [in short ‘CIT(A)’] for the assessment year 2012-13 dated 28.02.2019 and Iftekar Ahmed 2 arises out of assessment completed on 11.03.2015 u/s 143(3) of the Income Tax Act, 1961 (in short the Act).
The grounds of appeal filed by the assessee read as under :
2. Ground relating to order on merits: (a) On the facts and circumstances of the case, the Ld. CIT(A) has erred in disallowance of interest of Rs.1,46,250/- u/s 36(1)(iii) of the Income Tax Act, 1961 incurred on money borrowed & invested for purchase of office premises. (b) That the appellant seeks fro opportunity of being heard for producing additional evidence to prove that the interest is incurred for business purposes.
Brief facts of the case are that the assessee is an individual engaged in the business of false ceiling. The return of income for AY 2012-13 filed on 29.09.2012 declaring total income at Rs.20,29,219/-. The case was selected for scrutiny under CASS and serving notices u/s 143(2) and 142(1) duly served. Various details called for and the submissions were made by the assessee. The Ld. AO completed the assessment after making disallowance of expenses at Rs.58,142/- and disallowance of interest expenditure at Rs.1,46,785/- claimed by the assessee being paid on loan taken from his brother and co-owner Mr. Ashfaque Khan for purchasing a property for business purposes. Income assessed at Rs.22,34,146/-.
Aggrieved the assessee preferred appeal before Ld. CIT(A) and partly succeeded. Now the assessee is in appeal before this Tribunal
Iftekar Ahmed 3 raising sole issue against the findings of Ld. CIT(A) confirming the disallowance of interest expenditure of Rs.1,46,785/- u/s 36(1)(iii) of the Act.
The Ld. counsel for the assessee relied on written submission filed before the lower authorities and also referred to the Paper Book dated 06.08.2021 page (1 to 51). He also submitted that the assessee purchased the immovable property for business purposes. The address of the assessee’s business is of the same property which was purchased during the year. Loan was taken from brother who is also a co-owner of the property to purchase the said property. Books of accounts are duly audited. Interest expenditure has been claimed in profit and loss account. Tax deducted at source on the alleged interest. He thus prayed that the alleged interest expenditure should be allowed as a business expenditure.
Per contra, the Ld. Departmental Representative (DR) vehemently argued supporting the orders of both the lower authorities.
We have heard the rival contentions and perused the material on record. The assessee’s sole grievance is against the disallowance
Iftekar Ahmed 4 of interest expenditure of Rs.1,46,250/- made by the Assessing Officer u/s 36(1)(iii) of the Act and confirmed by the Ld. CIT(A).
We observe that in the audited profit and loss account interest expenditure of Rs.1,46,785/- has been claimed for the loan taken for purchase of Marol Office. Assessee’s brother Mr. Ashfaque Ahmed Khan is co-owner of this property. Assessee has claimed that he has taken loan from his brother and paid interest thereon and since the property has been purchased for business purposes, the same deserves to be allowed as a business expenditure.
We find that Ld. CIT(A) while dealing with this issue has mentioned in the impugned order that the property jointly purchased is a commercial premises located at office No. 805 on the 8th floor of the building known as Jay Antriksh situated at Andheri Kurla Road, Andheri East, Mumbai. The Ld. CIT(A) also observed that the payments were made through banking channel to purchase the property. He however, raised doubt that why the property has been shown under the head ‘Investment and not being shown as a fixed asset. The Ld. CIT(A) also raised concern that why the assessee has not produced any documentary evidence to demonstrate that Iftekar Ahmed 5 Mr. Ashfaque Ahmed Khan is the proprietar of M/s Lucky Enterprises to whom interest has been paid.
We however, find force in the contentions of Ld. counsel for the assessee. We observe that the assessee’s books of accounts are audited. The address of the proprietorship concerns of the assessee namely M/s Lucky False Ceiling Systems is working from the same property referred hereinabove situated at Andheri (East), Mumbai.
The amount invested in the property is shown under the head ‘investment’. It is generally an accepted fact that sometimes advance for purchases of property is given possession is taken but the sale deed is not registered in the same year when the possession is taken. But the facts remain that these transactions of purchases of property is duly accounted in the books of account. It is also an admitted fact that the assessee has deducted tax at source of Rs.14,679/- u/s 194A of the Act on the interest expenditure of Rs.1,46,785/- and the name of the deductee is Mr. Ashfaque Ahmed Khan. This fact is verifiable from page 49 and 50 of the paper book.
The details of the deductee and its PAN No. is reflected therein.
We also find that in the AIR i.e. individual transaction statement issued by the Department which relates to the details of transactions for purchases of immovable property, all the details of the property in question before us along with detail of person who purchased the property are mentioned therein. It clearly shows that the property of Andheri (East) referred above was purchased by two persons i.e. assessee and his brother. The property being commercial is not disputed.
Thus, under the given facts and circumstances of the case we are the considered view that the interest of Rs.1,46,785/- has been rightly claimed as business expenditure as it has been paid on the loan taken to purchase property for business purposes and interest expenditure has been claimed after deducting tax at source and all documentary evidence placed before us asserts this fact. We therefore, set aside the finding of the Ld. CIT(A) and allow the ground no. 2(a) raised by the assessee. As regards the ground No. 2b the same becomes infructuous as we have already deleted the disallowance of interest of Rs.1,46,250/- u/s 36(1)(iii) of the Act.
Other grounds are general in nature.
In the result, the appeal of the assessee is allowed.
Order pronounced in the open Court on 31 /08/2021.