M/S. TAMBRAPARANI CONTAINERS P. LTD.,CHENNAI vs. ACIT, CHENNAI

Shri S. Sridhar, the Ld. counsel for the assessee submitted that the only issues for consideration is expenditure claimed by the assessee for earning interest. The Ld. counsel for the assessee submitted that in the first round of litigation, this Tribunal by an order dated 11.01.2008 in Assessing Officer to ascertain the actual expenditure incurred by the assessee. Consequent to the direction of this Tribunal, the Assessing Officer found that interest income of ₹18,20,406/- pertains to the assessment year 1996-97 on account of surplus money borrowed by the assessee and lended to M/s. Tambraparani Diamond Dies and Tools Ltd., was not credited to the profit & loss account. According to the Ld. counsel, the assessee has claimed expenditure for earning the interest income. The Assessing Officer disallowed the claim of the assessee stating that no records were furnished before him. The CIT (Appeals) also confirmed the order of the Assessing Officer on the ground that no material was filed before him to substantiate the claim of actual expenditure. According to the Ld. counsel, a reasonable expenditure may be allowed for earning interest income on estimate basis.

We heard Shri V. Nandakumar, the Ld. Departmental Representative also.

From the material available on record, it appears that the assessee had borrowed money and lended to M/s. Tambraparani Diamond Dies and Tools Ltd. In fact the assessee credited ₹18,20,406/- as interest from M/s. Tambraparani Diamond Dies and Tools Ltd. The assessee claims the expenditure for earning the interest income. If the assessee borrowed money and paid interest, the interest paid on the borrowed money has to be allowed while computing interest income on deposit of such borrowed funds. In fact, this Tribunal in the earlier round of litigation restored back the file to the Assessing Officer to find out the actual expenditure. The assessee could not file any details of money borrowable and rate of interest paid by the assessee. Therefore, the Assessing Officer could not allow any expenditure. On further appeal before the CIT (Appeals), the LD. counsel very clearly submitted before the CIT (Appeals) that due to efflux of time they are neither able to get any factual information nor furnish evidence to substantiate the claim of actual expenditure. When the assessee claims the expenditure for earning the interest income, it is for the assessee to furnish the details of the loan borrower and the payment of interest. In the absence of any details of payment of interest, this Tribunal is of the considered opinion that the claim of interest payment on the borrowed funds cannot be allowed. In the normal circumstances, this Tribunal would have remitted back the file to the Assessing Officer for reconsideration. However, we are not doing so, since the assessee explained before the CIT (Appeals), its inability to furnish any further information or to file the details of the actual expenditure. Moreover, by remitting back the matter to the Assessing Officer, no purpose would be served, when the assessee claims that there is no information or material available with them. In the absence of any details of borrowed funds and payment of interest, this Tribunal is of the considered opinion, the claim of expenditure for earning the interest income cannot be allowed. Therefore, this Tribunal did not find any reason to interfere with the orders of the lower authorities.

In the result, the appeal of the assessee stand dismissed.