MADHULATA KANKANI,KOLKATA vs. ITO, WARD - 12(1), KOLKATA , KOLKATA

The assessee’s instant appeal suffers from 37 days delay in filing. She has filed her condonation petition stating reasons thereof as communication gap with her auditors. Learned Departmental Representative is very fair in not disputing Madhulata Kankani Vs. ITO Wd-12(1), Kol. Page 2 correctness thereof. I condone the impugned delay in 37 days keeping in mind the above solemn averments.

I find at the outset that CIT(A)’s detailed discussion comprises of assessment findings and assessee’s submissions as follows:- “3.1 The AO has stated the following in support of the disallowance: ‘The loan from the ICICI bank was taken by the assessee as Loan Against Property”. This property at 79, Vivekananda Road was purchased by the assessee for Rs.5,80,000/- in 1991. The assessee had taken a loan of Rs.62 lakhs from the ICICI bank by pledging this property on 10.06.2008. As per the Balance Sheet as 31.03.2012, the loan was mainly utilized for Investment, in PPF, ICICI prudential Life Insurance, Shares and interest free loans to group concern M/ kankani Estates Pvt Ltd. Rs.19.50 lakhs, M/s Kankari Construction Pvt Ltd. Rs.15.78 lakhs etc. During the year the assessee paid Rs.9,544,912/- as interest on loans taken by it. As the loan taken by the assessee was not utilized for any of the incomes from other sources, she was asked to show cause as to why the bank charges paid by it should not be allowed as expenses from other sources, as claimed by her in the return of income as well computation of total income filed during the assessment proceedings. (Vide noting dated 18.07.2014) in the order sheet).However, the assessee nor her authorized representative filed any explanation. As the loan was interest free advances/loans to the group companies of the assessee, and it was not at all utilized for earning other income viz. commission, commodity profit and professional charges, the same is disallowed. Thus the sum of rs.9,44,912/- is added to its income from other sources.” 3.2 The AR has re-emphasized the facts stated in Statement of Fact which is reproduce below: ‘The appellant an individual who disclosed income from salary, property and other sources submitted her return in Form No. ITR 2. However, the activities carried on by the appellant emanates from business and for that purpose, he had secured loan from Bank and accordingly, she was liable to submit her return in ITR 4. The Ld. Income Tax Officer, Ward 12(1), Kolkata (hereinafter referred to as the ld.ao for the sake of brevity) however framed the assessment order determining the total income at Rs.16,66,770/- by disallowing the interest of R.9,44,912/- being paid to bank an loan taken. The crux of the contention of the Ld. Assessing Officer the income disclosed under the head “Other Sources” amounted to Rs.14,06,823/- but the funds obtained by way of bank loan were not fully utilized for earning such income. It was emphatically pointed out that it is not a condition in law that the funds borrowed must Madhulata Kankani Vs. ITO Wd-12(1), Kol. Page 3 be immediately utilized in income earning activities. In fact, the ld. Assessing Officer ought to have assessed the income from such activities under the head Business. Further, the Ld. Assessing Officer was not satisfied with such immaculate exposition and being dissatisfied therewith proceeded to make the addition. It is axiomatic that the appellant is the sole arbiter of the manner of conduct of her business and her absolute liberty in this respect cannot be interfered with. The manner of utilization of borrowed funds is the sole prerogative of the appellant and her liability in this matter is absolute. It is utterly specious to think that there must be proximate nexus between the loan taken and income earned from borrowings. Being aggrieved with such misinterpretation of facts as conceived by the ld. Assessing Officer and infraction of law, the appellant has preferred this appeal, inter alia, on the following.’ 3.3 FINDING OF CIT(A): I have perused the Assessment Order and the Submissions of the Assessee. The Assessee is showing income mainly inform of salary from Associate concern, commissions income and commodity profit. In the immediately preceding year the Assessee is showing income from Salary from associate concerns and income from designing fees mainly. In the immediately succeeding year i.e. Assessment Year 2013-14 the Assessee is showing other income of Rs.5.84 lakhs (credited to profit and loss account) and salary of Rs.5.06 lakhs. Thus, analysis of facts in the case of assessee reveal the assessee is carrying hardly any business activity as claimed by the Assessee in the return filed, granting of loan to associate concern on interest free basis could hardly be qualified as a business venture. Therefore, the AO has rightly disallowed the interest on borrowed funds which has been used mainly to advance interest free loan to associate concerns. Therefore, the treatment given by the AO in the Assessment seems to be quite judicious, therefore, the grounds raised

4. I have heard rival submissions. It is sufficiently clear from the CIT(A)’s findings under challenge in para 3.3 that the assessee has not carried out any business activity and therefore both the lower authorities reject her loan to associate concerns without charging any interest could to be not qualified as a business venture. I find no merit in this sole reason. It emerges from the case file that two related entities in issue M/s Kankania Estates Pvt. Ltd. and M/s Kankari Construction Pvt. Ltd. have duly carried out their business as per their respective muster data. Learned Departmental Representative fails to dispute the said clinching facts. I conclude in this factual backdrop that it is not necessary for the assessee herself to carry out any business activity since she has already proved that her two related entities have been carrying