DCIT 5(3)(2), MUMBAI vs. STAR GOLD P.LTD, MUMBAI

(i) Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in appreciating the fact that the property which has yielded renal income during A.Y. 2011-12 is the same property which was let out during A.Y. 2008-09 and as per the Balance Sheet for year ended 31.03.2008, the assessee has not shown any secured or unsecured loan to have been taken for purchase of the property and hence, it cannot be said or presumed that borrowed funds have been utilized for the purchase of the said property.

Brief facts of the case are that the assessee-company is engaged in the business of Providing Business Facilities & Infrastructure for business, filed its return of income for relevant Assessment Year on 16.08.2011 declaring total income of Rs. 89,14,061/-. Subsequently, the assessee filed revised return dated 21.01.2012 declaring income at Rs. 1,59,63,771/- The assessment was completed under section 143(3) on 31.10.2013. The Assessing Officer while passing the assessment order disallowed interest on borrowed fund taken for purchase of property. On appeal before the ld. CIT(A), the assessee was allowed interest expenses. Therefore, aggrieved by the order of ld. CIT(A), the Revenue has filed the present appeal before us.

We have heard the ld. DR for the Revenue and ld. AR of the assessee and perused the order of authorities below. The ld. DR for the Revenue supported the order of Assessing Officer and submits that assessee has not proved the nexus of loan, if the same was utilized for re-payment of capital borrowed initially for the purpose of purchase of property. On the other hand, the ld. AR of the assessee supported the order of ld. CIT(A). The ld. AR of the assessee further submits that the similar interest expenditure was allowed to the assessee in Assessment Year 2009-10 & 2010-11. The facts of the case are similar to the earlier Assessment Year. The ld. CIT (A) allowed the relief to the assessee by considering the material that there was not diversion of borrowed fund and borrowed fund was used for acquisition of property. In support of his 2 M/s Star Gold Pvt. Ltd. submission, the ld. AR of the assessee filed balance-sheet/Profit & Loss Account as on 31.03.2008 along with Auditor’s report, balance-sheet as on 31.03.2009 and the assessment order passed under section 143(3) for Assessment Years 2009-10 & 2010-11. The ld AR also shown us as to how the borrowed funds are matching in the balance sheets of two earlier assessment years.

We have considered the rival submission of the parties and have gone through the orders of authorises below. The assessing officer disallowed the claim of interest expanses holding that in absence of documentary evidences it is not proved that if the loan has been utilised for repayment of loan availed for the purpose of property. The ld CIT(A) allowed the relief to the assessee on the basis of interest allowed for assessment years 2009-10 and 2010-11. The assessee has filed the copies of assessment orders for assessment years 2009- 10 and 2010-11, wherein the similar interest expenses is allowed to the assessee. The ld. DR for the revenue failed to bring any material in our notice to take the contrary view. Thus, we do not find any merit in the grounds of appeal