SMT. SUSHMA MUNDHRA ,KOLKATA vs. ITO, WARD - 32(4) , KOLKATA

The assessee in the present case is an individual, who is engaged in trading business under the name and style of a proprietary concern M/s. Akash Chemicals and Polymers. The return of income for the year under consideration was filed by her on 20.09.2015 declaring total income of Rs.18,44,470/-. During the course of assessment proceedings, her claim for deduction on account of Bank interest and Bank charges was justified by the assessee by submitting that the said expenses were incurred in 1 Assessment Year: 2015-2016 Smt. Sushma Mundhra relation to unsecured loan of Rs.42,05,000/- borrowed and utilized for the purpose of her business. The Assessing Officer, however, noted that the said loan of Rs.42,05,000/- was reflected in the Balance-sheet of the assessee and not in the Balance-sheet of her proprietary concern M/s. Akash Chemicals and Polymers. He, therefore, disallowed the claim of the assessee for deduction on account of Bank interest and Bank charges amounting to Rs.3,61,254/-. On appeal, the ld. CIT(Appeals) confirmed the said disallowance.

I have heard the arguments of both the sides and also perused the relevant material available on record. The ld. Counsel for the assessee has invited my attention to the personal Balance-sheet of the assessee placed at page no. 17 of the paper book to point out that the unsecured loan of Rs.42,05,000/- was appearing on the Liability Side, while the investment made by the assessee in the capital of M/s. Akash Chemicals and Polymers amounting to Rs.1,12,61,700/- was appearing on the Assets Side. He has also invited my attention to the relevant balance-sheet of M/s. Akash Chemicals and Polymers, the proprietary concern of the assessee placed at page no. 19 of the paper book to show that the capital invested by the assessee in the said concern was utilized for the purpose of business in the form of closing stock, sundry debtors, etc. Keeping in view these documentary evidences placed on record by the ld. Counsel for the assessee, I find that the unsecured loan of Rs.42,05,000/- was entirely used by the assessee for the purpose of the business carried on in the name and style of her proprietary concern and there was no case of diversion of the said loan for any non-business purpose. I am, therefore, of the view that the interest expenditure and Bank charges incurred by the assessee in respect of the loan of Rs.42,05,000/- was rightly claimed by the assessee as business expenditure and the ld. CIT(Appeals) was not justified in confirming the disallowance of the same as made by the Assessing Officer. I, therefore, delete the disallowance made by the Assessment Year: 2015-2016 Smt. Sushma Mundhra Assessing Officer and confirmed by the ld. CIT(Appeals) on this issue and allow this appeal of the assessee.

In the result, the appeal of the assessee is allowed. Order pronounced in the open Court on October 18, 2019.