M/S G.D. TAMBI & SONS,JAIPUR vs. ACIT, CIRCLE-3, JAIPUR, JAIPUR
आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर
IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”A” JAIPUR
Mk0 ,l- lhrky{eh] U;kf;d lnL; ,oa Jh jkBksM deys'k t;UrHkkbZ] ys[kk lnL; ds le{k
BEFORE: DR. S. SEETHALAKSHMI, JM & SHRI RATHOD KAMLESH JAYANTBHAI, vk;dj vihy la-@ITA Nos. 176 & 177/JP/2025
fu/kZkj.k o"kZ@Assessment Years : 2015-16 & 2016-17
G. D. Tambi & Sons
E-103, Road No. 7
Circle-03,
Jaipur
LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AABFG1528L vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Sh. P. C. Parwal, CA jktLo dh vksj ls@ Revenue by : Mrs. Anita Rinesh, JCIT-DR lquokbZ dh rkjh[k@ Date of Hearing
: 09/04/2025
mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 20/05/2025
vkns'k@ ORDER
PER: RATHOD KAMLESH JAYANTBHAI, AM
Vide these two separate appeal filed by the assessee the assessee challenges the order of the learned Commissioner of Income Tax, Appeal,
Addl./JCIT(A)-1, Hyderabad [ for short CIT(A) ] both dated 22.01.2025 for assessment year 2015-16 and 2016-17 in the matter of an assessment framed by the ACIT, Circle-3, Jaipur [ for short AO ] as per provision of M/s. G. D. Tambi & Sons section 143(3) of the Income Tax Act, 1961 [ for short Act ] which were passed on 20.12.2017 & 24.11.2018. 2. Since the issues involved in these appeals in ITA Nos. 176 &
177/JP/2025 for A.Ys 2015-16 & 2016-17 are interrelated, identical on facts and are almost common, except the difference in figure disputed in each appeal, therefore, these appeals were heard together with the agreement of both the parties and are disposed off by this consolidated order.
3. At the outset, the ld. AR has submitted that the matter in ITA No.
176/JP/2025 may be taken as a lead case for discussions as the issues involved in the lead case are common and inextricably interlinked or in fact interwoven and the facts and circumstances of other cases are identical except the difference in in figure disputed in each appeal. The ld. DR did not raise any specific objection against taking that case as a lead case.
Therefore, for the purpose of the present discussions, the case of ITA No.
176/JP/2025 is taken as a lead case.
4. Before moving towards the facts of the case we would like to mention that the assessee has assailed the appeal for assessment year 2015-16 in ITA No. 176/JP/2025 on the following grounds;
M/s. G. D. Tambi & Sons
“1. The Ld. CIT(A) has erred on facts and in law in confirming the disallowance of interest of Rs. 8,41,260/- by not correctly appreciating the facts of the case and by making various incorrect and irrelevant observations.
The appellant craves to alter, amend and modify any ground of appeal. 3. Necessary cost be awarded to the assessee.
Succinctly, the facts as culled out from the records are that the assessee has e-filed his return of income on 28.08.2015 declaring total income of Rs. 73,56,920/-. The case was selected for scrutiny and statutory notices were issued and served upon the assessee. The assessee derives income from rent and interest. After going through the information / details furnished and discussions held with the assessee and conducting the test checking of accounts ld. AO noted that the assessee has earned interest income of Rs 32,21,245/- from parties against which interest paid on borrowed fund amounts to Rs. 40,35,505/- thereby incurring loss of Rs. 8,41,260/- which in turn has been set off against the income from house property. Thus, vide show cause notice dated 08.12.2017, the assessee was asked to show as to why the excess interest payment of Rs. 8,41,260/- should not be disallowed. The assessee filed a detailed reply to that show cause notice vide reply dated 08.12.2017. Ld. AO considered the reply of the assessee carefully but the same was not acceptable. Because he noted that the assessee is engaged in the money lending activity and in such M/s. G. D. Tambi & Sons activity it is beyond one's understanding that how can such a business survive when interest paid is more than interest receipt by defeating the purpose of business. Further, on the assessee's alternate claim that the interest may be allowed u/s 24(b) of the Act, was also not acceptable in the light of Goetze (India) Pvt. Ltd. vs. CIT where honourable Supreme Court stated that any claim for deduction other than by filing a revised return is not acceptable. So the question of allowing deduction of interest u/s 24(b) does not stand. Further, the assessee has failed to establish that the borrowed funds on which interest was paid were used for the purchase of the let out property. No evidence regarding the same was given. As business prudence cannot be established in such excess interest payment for a firm engaged in lending the money on interest, the excess interest to the tune of Rs 8,41,260/ was disallowed and added back to total income of the assessee.
Feeling dissatisfied with that finding of the ld. AO, the assessee preferred an appeal before the ld. CIT(A). Apropos to the grounds so raised the relevant finding of the ld. CIT(A) is reiterated here in below:
3. I have perused the ground of the appellant and submissions made thereof in the light of the observations of the Assessing Officer (AO) and the provisions of M/s. G. D. Tambi & Sons the Act. The argument of the appellant doesn't carry any weight for the reasons given below;
The appellant has failed to establish the nexus between the interest earned and interest paid on the borrowed capital under the head IFOS
The claims that borrowed funds are utilized either to make advances for earning interest or to invest in purchase and construction of warehouse, is too vague to accept. The appellant firm failed to give the breakup of the borrowed which were utilized for advancing loans and for acquisition and construction of property.
The appellant firm failed to realize that the interest on the borrowed funds which were utilized for acquisition/construction of the capital asset, i.e., ware house needs to be capitised. The appellant has clubbed both revenue and capital items and thus incurred loss from the money lending activity. The kind of treatment given by the appellant is not authorized under the IT Act.
The appellant failed to establish that loss of interest in money lending activity is genuine for the reasons given above. Once, the claim is non genuine or not prescribed by the Act, making an alternate claim u/s 24(b) without establishing that the loss under the head IFOS is illogical and sans common sense.
The appellant failed to prove that borrowed funds were utilized for acquisition or construction of House Property so that interest can be claimed u/s 24(b) of the Act.
The case laws relied upon by the appellant are of no use as it has failed to establish loss from one head of income and therefore set off of the same against the other head of income doesn't arise.
Accordingly, this ground of the appellant is rejected.
0. As a result, appeal of the appellant is dismissed.
As the assessee did not find any favour, from the appeal so filed before the ld. CIT(A), the assessee preferred the present appeal before this M/s. G. D. Tambi & Sons
Tribunal challenging the finding of the lower authority on the solitary disallowance of interest claim of the assessee. To support the ground raised by the assessee, ld. AR of the assessee filed the written submissions which reads as follows :
1. The assessee earns income from renting of warehouses and interest income. It filed the return of income on 28.08.2015 declaring total income of Rs.73,56,920/- (PB 7-10).
In the return of income, assessee under the head income from other sources claimed loss of Rs.8,14,260/- by claiming interest payment of Rs.40,35,505/- against interest receipt of Rs.32,21,245/-. The assessee explained that out of the contribution of capital made by the partners, warehouses were constructed in financial year 2012-13 for Rs.48,84,849/-. The interest paid on the partners capital account is Rs.33,97,668/- against which rental income declared is Rs.1,16,73,111/-. Further against interest of Rs.6,38,837/- paid to Sangita Tambi, interest receipt is Rs.32,21,245/-. Therefore, even if the loss claimed under the head income from other sources is disallowed, the same be allowed in computing the income from house property.
The assessing officer held that claim of interest under the head income from house property u/s 24(b) of the Income Tax Act is not acceptable in view of the decision of Hon’ble Supreme Court Goetze India Pvt Ltd vs CIT where it was held that claim for deduction other than by filing a revised return is not acceptable. Further assessee has failed to establish that the borrowed funds on which interest was paid were used for the purchase of let out properties. Accordingly, he disallowed the claim of loss of Rs.8,14,260/- under the head income from other sources.
The Ld. CIT(A) at para 8.3 page 11-12 held that assessee failed to establish nexus between interest earned and interest paid, failed to give breakup of borrowed funds utilized for advancing loans and for acquisition and construction of property, failed to realize that interest on borrowed funds utilized for acquisition/construction of capital assets needs to be capitalized, failed to prove that borrowed funds were utilized for acquisition/construction of property, claim u/s 24(b) without establishing that loss under the head IFOS is illogical and sans common sense and thus cases relied by the assessee are of no use. M/s. G. D. Tambi & Sons
Accordingly, the disallowance of interest to the tune of Rs.8,41,260/- was confirmed.
Submissions:-
1. There is no dispute as to the fact that only source of income of the assessee is rental income and interest income. The assessee has no borrowed fund on which interest is paid except the loan taken from Sangita Tambi. From the Balance Sheet (PB 16) it can be noted that against the partners capital of Rs.3,43,20,763/- and current liability of Rs.98,48,756/- which includes loan of Rs.48,10,758/- taken from Sangita Tambi, the investment in fixed assets is Rs.1,82,27,697/- and the advances given to the parties on which interest is received is Rs.2,26,18,882/-. Thus the total of the partners contribution and the interest free loan liability is Rs.3,93,58,762/- (3,43,20,763+98,48,757-48,10,758) against which investment in fixed asset which yields rental income is only
Rs.1,79,72,237/-. The opening balance of partners capital account is Rs.3,00,91,343/- and the loan taken from Sangita Tambi is Rs.42,79,705/- (PB
18-21). On partners capital account interest is paid to the partners @ 12% p.a. in terms of the partnership deed. (PB 11-30). Thus the entire fund on which interest is paid is either invested in the construction of warehouse in earlier years or is utilized in giving loans or advances on which interest is earned. Hence the interest paid of Rs.40,35,505/- is either allowable under the head income from house property or under the head income from other sources. The assessee in the return has claimed such interest under the head income from other sources against interest receipt of Rs.32,21,245/- and therefore only for this reason the loss of Rs.8,14,260/- claimed under the head income from other sources cannot be disallowed.
The AO has referred to the decision of Hon’ble Supreme Court in case of Goetze India Pvt Ltd vs CIT 284 ITR 323 for not allowing the claim of interest paid u/s 24(b) of the Act. It is submitted that though the Hon’ble Supreme Court in the above case has held that claim for a deduction not made in the return cannot be entertained by AO otherwise than by filing a revised return but at the same time it also held that the issue in this case is limited to the power of the assessing authority and does not impinge on the power of the Tribunal u/s 254 of the IT Act, 1961 to entertain for the first time a point of law provided the facts on the basis of which the issue of law can be raised before the Tribunal are available before it. Thus this decision does not restrict the power of the Appellate Authorities to allow a claim even if it is not made by way of filing the revised return before the AO. Further in the present case assesse has made the claim of interest paid in the return itself but only claims that part of such interest be M/s. G. D. Tambi & Sons allowed under the head income from house property, if it is not allowed under the head income from other sources and therefore this decision is not applicable on the facts of the assessee’s case.
The lower authorities have alleged that assessee failed to establish that the borrowed funds has nexus with advances given or in acquisition or construction of the property which otherwise is to be capitalized. This allegation is factually incorrect. It is submitted that during the year no investment is made in acquisition or construction of the property. The investment was made in earlier years out of the partners fund. After investment whatever interest is paid, the same is to be allowed as revenue deduction and the same cannot be capitalized. The lower authorities have not brought on record any evidence that any other fund was used in acquisition of the construction of the property on which rental income is earned. In all earlier years the claim of interest paid has been allowed as deduction. Hence the disallowance of claim of interest paid to the extent of Rs.8,41,260/- is unjustified and uncalled for.
In view of above the disallowance confirmed by the CIT(A) be directed to be deleted.”
To support the contention so raised in the written submission reliance was also placed on the following evidence / records : S. No. Particulars Pg No. Filed before AO/ CIT(A) 1. Copy of submission dt. 31.01.2021 filed before Ld. CIT(A) 1-6 CIT(A) 2. Copy of acknowledgment of return along with computation of total income 7-10 Both 3. Copy of Partnership Deed dt. 16.03.2004 11-13 Both 4. Copy of reply filed before AO 14-15 Both 5. Copy of Balance Sheet and P&L A/c 16-17 Both 6. Copy of ledger account of Awadh Tambi HUF, Sarika Tambi, Somya Tambi and Sangita Tambi in assessee’s books of accounts 18-21 Both
The ld. AR of the assessee in addition to the above written submission so filed vehemently argued that the assessee out of the total M/s. G. D. Tambi & Sons payment of Rs. 40,35,505/-, Rs. 6,37,837/- was paid to Ms. Sangita Tambi and others amount is the interest paid to partner’s @ 12 % which is allowable. The investment of the partners capital is used to earn the interest income as well as to earn the income under the head income from house property so the interest on the partners’ capital cannot be denied to the assessee. The interest is paid on the balance carried over from the last year and thereby no new borrowings were made by the assessee. The ld. AO relying on the Goetz India’s decision denied the claim of interest to the assessee is not correct.
Per contra, the ld. DR relied on the orders of the ld. CIT(A) and objected to the prayer of the ld. AR of the assessee to allow the interest on the partners capital account in addition to what is received by the assessee to set off against the income from house property. Ld. DR also filed a detailed written submission and case laws in support of her contention to support the orders of the lower authority. The written submission filed by the ld. DR reads as follows: It is most respectfully submitted that the revenue is placing reliance on Judgement of Hon'ble Delhi High Court in the case of Commissioner of Income Tax vs Zoom Communication Pvt Ltd Judgment dated 24.05.2010, ITA 07/2010), wherein it was held that:- M/s. G. D. Tambi & Sons
(Page No. 6 and 7 and Para No. 20 to 23 of ITA No. 176/JP/2024 in the case of Commissioner of Income Tax vs Zoom Communication Pvt Ltd.)
Para No. 20. The Court cannot overlook the fact that only a small percentage of the Income Tax Returns are picked up for scrutiny If the assessee makes a claim which is not only incorrect in law but is also wholly without any basis and the explanation furnished by him for making such a claim is not found to be bonafule, it would be difficult to say that he would still not be liable to penalty under Section 271(1)(c) of the Act If we take the view that a cloim which is wholly untenable in law and has absolutely no foundation on which it could be made, the assessee would not be liable to imposition of penalty even if he was not acting bonafide while making a claim of this nature, that would give a licence to unscrupulous assessees to make wholly untenable and tosustainable claims without there being any basis for making them, in the hope that their return would not be picked up for scrutiny and they would be assessed on the basis of self Assessment under Section 143(1) of the Act and even if their case is selected for scrutiny, they can get away merely by paying the tax, which in any case, was payable by them. The consequence would be that the persons who make claims of this nature, actuated by a malafide intention to evade tax otherwise payable by them would get away without paying the tax legally payable by them, if their cases are not picked up for scrutiny. This would take away the deterrent effect, which these penalty provisions in the Act have Para No. 21 We find that the assessee before us did not explain either to the Income Tax Authorities or to the Income Tax Appellate Tribunal as to in what circumstances and on account of whose mistake, the amounts claimed as deductions in this case were not added, while computing the income of the assessee company. We cannot lose sight of the fact that the assessee is a company which must be having professional assistance in computation of its income, and its accounts are compulsorily subjected to audit. In the absence of any details from the assessee, we fail to appreciate how such deductions could have been left out while computing the income of the assessee company and how it could also have escaped the attention of the auditors of the company
Para No. 22. The explanation offered by the assessee company was not accepted either by the Assessing Officer or by the Commissioner of Income Tax Appeals).
The view of Income Tax Appellate Tribunal regarding admissibility of the deduction on account of written off of certain assets, under Section 32(1)(iii) of the Act is wholly erroneous. The Tribunal has not recorded a finding that the explanation furnished by the assessee in respect of the deduction due to certain assets being written off was a bonafide explanation The Tribunal has nowhere held that it was due to oversight that the amount of this deduction could not be added while computing the income of the assessee company
Para No. 23.As regards deduction on account of income tax paid by the assessee, the Tribunal felt that since no person would claim the same as deduction, to evade payment of tax, the claim made by the assessee was not malafide In the absence
M/s. G. D. Tambi & Sons of the assessee company telling the Assessing Officer as to who committed the oversight resulting in failure to add this amount while computing the income of the assessee, under what circumstances the oversight occurred and why it was not detected by those who checked the Income Tax Return before it was filed and later by the auditors of the assessee company, we cannot accept the general view taken by the Tribunal. In our view, no such view could have reasonably been taken, on the facts and circumstances prevailing in this case and, therefore, the decision of the Tribunal in this regard suffers from the vice of perversity. We cannot accept the general proposition that no person would ever claim the amount of income tax as a deduction with a view to avoid payment of tax. No hard and fast rule in this regard can be laid down and every case will have to be decided considering the facts and circumstances in which such a deduction is claimed, coupled with as to whether the explanation offered by the assessee for making the claim, is shown to be bonafide or not 11. We have heard the rival contentions and perused the material placed on record. The solitary ground raised by the assessee in this appeal is the disallowance of claim of loss under the head income from other sources claimed for an amount of Rs.8,14,260/- by claiming interest payment of Rs.40,35,505/- against interest receipt of Rs.32,21,245/-. The break up of the interest paid by the assessee is as under :
1. Awadh Tambi HUF
Rs.
19,59,485/-
2. Somya Tambi
Rs.
12,11,705/-
3. Sarika Tambi
Rs.
2,26,478/-
4. Sangita Tambi
Rs.
6,37,837/-
The persons mentioned at sr no. 1 to 3 are partners of the assessee firm.
As regards the interest paid to the person mentioned at sr no. 4 the same is paid on the opening balance. Thus, the interest paid to the partner either be M/s. G. D. Tambi & Sons set off against the other source income or that of the income from house property. Ld. AO that of the ld. CIT(A) has not disputed the fact that the interest paid to partners was not in accordance with the law. As the ld. AO made the disallowance of claim of the assessee as per provision of section 57 of the Act it would be appropriate to deal with the provision of the Act which reads as under :
Deductions.
57. The income chargeable under the head "Income from other sources" shall be computed after making the following deductions, namely :—
(i) in the case of dividends, 69[other than that referred in sub-clause (f) of clause (22) of section 2] or interest on securities, any reasonable sum paid by way of commission or remuneration to a banker or any other person for the purpose of realising such dividend or interest on behalf of the assessee ;
(ia) in the case of income of the nature referred to in sub-clause (x) of clause
(24) of section 2 which is chargeable to income-tax under the head "Income from other sources", deductions, so far as may be, in accordance with the provisions of clause (va) of sub-section (1) of section 36;
(ii) in the case of income of the nature referred to in clauses (ii) and (iii) of sub- section (2) of section 56, deductions, so far as may be, in accordance with the provisions of sub-clause (ii) of clause (a) and clause (c) of section 30, section 31 and sub-sections (1) and (2) of section 32 and subject to the provisions of section 38 ;
(iia) in the case of income in the nature of family pension, a deduction of a sum equal to thirty-three and one-third per cent of such income or fifteen thousand rupees, whichever is less:
70[Provided that in a case where income-tax is computed under clause (ii) of sub-section (1A) of section 115BAC, the provisions of this clause shall have effect as if for the words "fifteen thousand rupees", the words "twenty-five thousand rupees" had been substituted.]
Explanation.—For the purposes of this clause, "family pension" means a regular monthly amount payable by the employer to a person belonging to the family of an employee in the event of his death;
(iii) any other expenditure (not being in the nature of capital expenditure) laid out or expended wholly and exclusively for the purpose of making or earning such income;
M/s. G. D. Tambi & Sons
The provision of section 57(iii) does not restrict the claim to the extent of the income only once the ld. AO has considered the claim to the interest expenses to the extent of income of the assessee the balance amount being in the form of partner’s capital interest cannot be disallowed u/s. 57
of the Act once the part is already considered by the ld. AO. Therefore, we see no reason to sustain the disallowance. In terms of this observation the solitary ground no. 1 raised by the assessee is allowed. So far as ground no. 2 & 3 there is no specific arguments or the contention therefore, the same is not decided.
In the results, the appeal of the assessee in ITA no. 176/JP/2025 is allowed.
The facts of the case in ITA No. 177/JP/2025 are similar to the facts of the case in ITA No. 176/JP/2025 and we have heard both the parties and persuaded the materials available on record. The bench has noticed that the issues raised by the assessee in this appeal No. 177/JP/2025 is equally similar on set of facts and grounds. Therefore, it is not imperative to repeat the facts, various grounds and arguments raised by both the parties. Hence, the bench feels that the decision taken by us in ITA No. M/s. G. D. Tambi & Sons
176/JP/2025 shall apply mutatis mutandis in the case of M/s G. D. Tambi &
Sons in ITA No. 177/JP/2025. In terms of these observations, the appeal of the assessee in ITA No.
177/JP/2025 is also allowed.
Order pronounced in the open court on 20/05/2025. ¼ Mk0 ,l- lhrky{eh ½
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(Dr. S. Seethalakshmi)
(Rathod Kamlesh Jayantbhai)
U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member
Tk;iqj@Jaipur fnukad@Dated:- 20/05/2025
*Ganesh Kumar, Sr. PS
आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू
1. The Appellant- M/s G. D. Tambi & Sons, Jaipur
2. izR;FkhZ@ The Respondent- ACIT, Circle-03, Jaipur
3. vk;dj vk;qDr@ The ld CIT
4. vk;dj vk;qDr¼vihy½@The ld CIT(A)
5. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत
6. xkMZ QkbZy@ Guard File (ITA Nos. 176 & 177/JP/2025) vkns'kkuqlkj@ By order,
सहायक पंजीकार@Aेेज. त्महपेजतंत