Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, ‘D’ (SMC
Before: SHRI ABRAHAM P. GEORGE]
आदेश / O R D E R
Assessee in this appeal assails an order dated 30.10.2017 of ld. Commissioner of Income Tax (Appeals)-12, Chennai for the impugned assessment year.
Ld. Counsel for the assessee submitted that he had raised 2. number of issues through its ground 1 to 3, effectively assessee was aggrieved on disallowance of interest of �7,22,871/- paid to bank, interest of �1,66,166/- paid on recurring deposit (RD in short) loan and salary of �2,62,000/- paid to the driver. Ld. Counsel for the assessee submitted that assessee had filed her return for the impugned assessment year disclosing income of �6,99,610/-. According to the ld. Authorised Representative, assessee was doing finance business and had received interest on loans given to her son Shri. Subramanian and her daughter Ms. Kalpagam. Contention of the ld. Authorised Representative was that against interest of �5,05,000/- received from the above parties and interest of �3,54,031/- from recurring deposits, assessee had paid interest of �7,22,871/- on bank loans and interest of �1,66,166/- on RD loans. As per the ld. Authorised Representative, ld. Assessing Officer took a view that assessee did not avail the bank loans for the purpose of lending, since the loans given by the assessee were only to her son and daughter. As per the ld. Authorised Representative, even if it was presumed that interest was received only from assessee’s children, there was direct nexus between loans given to them and loans raised from bank. According to him, irrespective of the head under which income was considered, expenditure incurred for earning income had to be allowed.
Viz-a-viz, salary expenditure, ld. Authorised Representative submitted that if the assessee’s income was considered under the head ‘’income from business’’ then salary paid to the driver had to be allowed. As per the ld. Authorised Representative, ld. Commissioner of Income Tax (Appeals) had taken a view that assessee was not doing any finance business and had confirmed the order of the ld. Assessing Officer.
Per contra, ld. Departmental Representative submitted that assessee was unable to show direct nexus between loans taken by it and credits given to her son and daughter. Therefore as per the ld. Departmental Representative, claims of the assessee were rightly disallowed.
I have considered the rival contentions and perused the orders of the authorities below. First issue is whether income of the assessee can be considered under the head income from business or income from other sources. Ld. Commissioner of Income Tax (Appeals) has clearly noted at para 8 of his order that assessee had intimated her intention of not doing any finance business. Thus, assessee having agreed that she was not dong any finance business, lower authorities were justified in treating the income earned by the assessee, which predominately consisted of saving bank account interest, interest on loans from son Shri. Subramanian and Daughter Ms. Kalpagam and recurring deposit interest, under the ‘’head income from other sources’’.
Coming to the disallowance of salary paid to driver �2,62,000/-. Assessee was unable to show any nexus between such expenditure and earning of the interest income. Accordingly, disallowance of the salary of �2,62,000/- was in my opinion was rightly made by the ld. Assessing Officer and confirmed by the ld. Commissioner of Income Tax (Appeals).
Coming to the disallowance of interest of �7,22,871/- on 7. bank loan and interest of �1,66,166/- on RD loans, claim of the assessee is that there was direct nexus between loans taken and the loans given to her children Shri. Subramanian and Ms. Kalpagam. In my opinion, the lower authorities did not make a careful verification of the nexus if any, interest income earned by the assessee had with the interest outgo. Ld. Commissioner of Income Tax (Appeals) had taken a view that assessee could not establish the loan amount to have been utilized for the purpose of earning interest income, but no reasons were given by him for taking his view.
As per Section 57(iii) of the Income Tax Act, 1961 (in short 8.
‘’the Act’’) any expenditure laid out or expended wholly and exclusively for the purpose of making or earning an income considered under the head income from other sources, has to be necessarily allowed. In the fitness of the things, I am of the opinion whether bank interest of �7,22,871/- and recurring deposit loan of �1,66,166/- had direct nexus with interest earned by the assessee for allowing a claim u/s.57(iii) of the Act requires a fresh look by the ld. Assessing Officer. I set aside the orders of the lower authorities on these two items and remit it back to the file of the ld. Assessing Officer for consideration afresh in accordance with law.
In the result, appeal of the assessee is partly allowed for 9. statistical purpose.
Order pronounced on Monday, the 2nd day of July, 2018, at Chennai.