SMT. POOJA GUPTA,NEW DELHI vs. DCIT, NEW DELHI

O R D E R PER PRASHANT MAHARISHI, A. M. 1. This is an appeal filed by the assessee against the order of the ld CIT(A)- XXXIII, New Delhi dated 28.10.2014 for the Assessment Year 2011-12. 2. The assessee has raised the following grounds of appeal:- “1. That on the facts and circumstances of the case the ld CIT(A) has erred in confirming the addition of Rs. 454540/- made on account of disallowance of interest.

2. That on the facts and circumstances of the case the ld CIT(A) has erred in confirming the addition of Rs. 507826/- on account of difference in the valuation of jewellery which is illegal. Therefore, the same is liable to be deleted.”

3. The brief facts of the case is that the assessee filed her return of income on 30.09.2011 declaring Nil income. Search u/s 132 was carried out on 21.01.2011 in DS group cases. The assessee is one of the family members of that group. The assessment u/s 143(3) read with Section 153 was passed on 18.03.2013 at Rs. 2119511/-. The assessee preferred an appeal before the ld CIT(A) who partly allowed the appeal of the assessee. On the addition sustained the assessee is in appeal before us.

Pooja Gupta Vs DCIT, (Assessment Year: 2011-12) 4. The first ground of appeal is with respect to the addition of Rs. 454540/- for disallowance of interest. During the year the assessee has claimed payment of interest of Rs. 514197/- on various loans. It has also paid interest of Rs. 404540/- to a partnership firm where the assessee is a partner. As the interest paid to partnership firm is not related to earning of any income the ld AO disallowed the same. Further, with respect to the balance expenditure of interest of Rs. 109657/- the ld AO held that the assessee did not gave the complete utilization of the loan and therefore, he estimated the expenditure of Rs. 50000/- disallowable. Consequently, Rs. 454540/- was disallowed. On appeal before the ld CIT(A) the above disallowance was confirmed.

5. The ld AR submitted that as the assessee has paid interest to the partnership firm in which the assessee is a partner, the interest is allowable. He further referred to the provision of section 28(v) of the Act wherein, such income is chargeable to tax as business income. He therefore, submitted that if interest is paid same is also a business loss/ expenditure incurred during the year, hence, it should be allowed.

6. The ld DR relied upon the orders of the lower authorities.

7. We have carefully considered the rival contention and find that the assessee has paid interest of Rs. 404540/- to the various partnership firm where the assessee is a partner. The income from sum received by the assessee as interest is chargeable to tax under the head business income u/s 28(v) of the Act. Therefore, even if any negative income i.e. expenditure is incurred by the assessee same should also be computed under the head profit and gains of the business or profession. It is not the case of the ld AO that the provision of section 14A are applied to it. It is also not the case of the ld AO that money is not borrowed for the purpose of the business. He merely held that payment of interest to firm is not related to earning of any income which is chargeable to tax. Even otherwise on looking at the assessment order we do not find that the assessee has any exempt income. Therefore, provision of section 14A