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Income Tax Appellate Tribunal, KOLKATA BENCH ‘SMC’, KOLKATA
Before: Shri P.M. Jagtap, AM]
order : July 20, 2018 ORDER This appeal filed by the assessee is directed against the order of Ld. CIT (Appeals) – 2, Kolkata dated 17.04.2017.
The assessee in the present case is an individual who filed his return of income for the year under consideration on 29.07.2005 declaring a total income of Rs. 3,15,020/-. The assessee had claimed to have carried on the business of purchase and sale of shares during the year under consideration and loss of Rs. 6,15,748/- from the said business was claimed by the assessee. During the course of assessment proceedings, the A.O. found that there was no opening or closing balance of shares and even there was no trading of shares by the assessee during the year under consideration. He also noticed that interest expenditure of Rs. 8,25,271/- was claimed by the assessee as a result of which there was a loss of Rs. 6,15,748/-. He held that the Assessment Year: 2005-06 Suresh Kumar Agarwal borrowed funds were mainly utilised by the assessee for personal purpose as well as for making investment in shares, the income from which was exempt from tax. He, therefore, disallowed the entire interest expenditure claimed by the assessee partly on account of non utilisation of the borrowed funds for the purpose of business and partly on account of utilisation of borrowed funds for the purpose of making investment in shares, the income of which was exempt from tax by invoking section 14A. On appeal, the Ld. CIT(A) upheld the action of the assessee. Aggrieved by the order of the Ld. CIT(A), the assessee has preferred this appeal before the Tribunal on the following grounds: “
1. That on the fact and circumstances of the case the learned CIT appeal erred in not holding that there was opening stock of shares and trading of shares during the relevant previous year.
2. That on the facts and circumstances of the case the learned CIT appeal erred in confirming the disallowance of interest to the extent of Rs. 8,15,087/- (8,25,271 – 10,184).
3. That on the facts and circumstances of the case the learned CIT appeal erred in confirming the addition of interest amounting to Rs. 3,80,000/- u/s 14A.
4. That on the facts and circumstances of the case the learned CIT appeal erred in not adjudicating the following additional ground filed on 13.01.2010. That the learned A.O. erred in not setting of brought forward business loss against the income from business of Rs. 2,09,523/- for the year appeal.”
3. I have heard the arguments of both the sides and also perused the relevant material available on record. As regards the issue involved in ground no 1, the learned counsel for the assessee has pointed out from the relevant profit and loss account of the assessee placed at page no 7 of the Paper Book that there was opening stock of shares and the same was sold by the assessee during the year under Assessment Year: 2005-06 Suresh Kumar Agarwal consideration. He has also submitted that the business of purchase and sale of shares was carried on by the assessee even in the earlier years and the same was accepted by the A.O. He has contended that there was thus a business of trading in shares carried on by the assessee and a perusal of the assessment order passed by the A.O. also shows that the income of the assessee under the head ‘profits and gains from business or profession’ was computed by the A.O. himself. I, therefore, hold that the business of trading in shares was carried on by the assessee during the year under consideration and allow ground no 1 of the assessee’s appeal.
4. As regards the disallowance of interest made by the A.O. on account of non utilisation of the borrowed funds for the purpose of business and on account of utilisation of the borrowed funds in relation to the earning of exempt income, the limited contention raised by the learned counsel for the assessee is that the said disallowance has been worked out by the A.O. by taking the interest rate of 10% whereas the assessee had paid interest at the average rate of 6% on the borrowed funds. He has contended that the disallowance of interest therefore should be computed @ 6% and submitted that the A.O. may be directed to restrict the disallowance of interest accordingly after necessary verification. Since the learned DR has no objection in this regard, I restore this issue involved in ground no 2 and 3 of the assessee’s appeal to the file of the A.O. for the limited purpose of verifying the exact rate at which interest was paid on borrowed funds and appropriate relief to the assessee. Ground no 2 and 3 of the assessee’s appeal are accordingly treated as partly allowed for statistical purpose.
Assessment Year: 2005-06 Suresh Kumar Agarwal
Ground no 4 raised in the appeal of the assessee is not pressed by the learned counsel for the assessee. The same is accordingly dismissed as not pressed.
In the result, the appeal of the assessee is partly allowed. Order Pronounced in the Open Court on 20th July, 2018.