M/S. TAMBRAPARANI CONTAINERS P. LTD.,CHENNAI vs. ACIT, CHENNAI
What did the Tribunal hold?
The Tribunal held that since the assessee could not furnish details of borrowed funds and interest paid, the claim for expenditure to earn interest income cannot be allowed. No purpose would be served by remitting the matter back as the assessee stated they had no information.
What were the facts?
The assessee claimed expenditure for earning interest income. The Assessing Officer disallowed the claim due to lack of records, and the CIT(Appeals) confirmed this. The assessee had borrowed money and lent it, earning interest, but could not provide details of the borrowed funds or interest paid.
What were the issues?
Whether expenditure claimed for earning interest income is allowable when the assessee fails to provide details of borrowed funds and interest paid.
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Income Tax Appellate Tribunal, ‘A’ BENCH, CHENNAI
Before: SHRI N.R.S. GANESAN & SHRI D.S. SUNDER SINGH
आयकर अपीलीय अिधकरण, ‘ए’ �यायपीठ, चे�ई IN THE INCOME TAX APPELLATE TRIBUNAL ‘A’ BENCH, CHENNAI �ी एन.आर.एस. गणेशन, �याियक सद�य एवं �ी िड.एस. सु�दर �सह, लेखा सद�य केसम� BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI D.S. SUNDER SINGH, ACCOUNTANT MEMBER आयकर अपील सं./ITA No. 231/Mds/2014 िनधा�रण वष� / Assessment Year : 1996-97 M/s. Tambraparani Containers P Ltd, The Asst. Commissioner of Income 25, Mahalakshmi, v. Tax, Kasturirangan Road, Company Circle III (1), Chennai – 600 018. Chennai - 600 034. PAN : AAACT2856Q (अपीलाथ�/Appellant) (��यथ�/Respondent) अपीलाथ� क� ओर से/Appellant by : Shri S. Sridhar, Advocate ��यथ� क� ओर से/Respondent by : Shri V. Nandakumar, JCIT सुनवाई क� तारीख/Date of Hearing : 27.12.2016 घोषणा क� तारीख/Date of Pronouncement : 31.01.2017 आदेश /O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER:
This appeal of the assessee is directed against the order of Commissioner of Income Tax (Appeals)-III, Chennai dated 17.10.2013 and pertains to the assessment year 1996-97 .
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.
Order pronounced on 31st January 2017at Chennai.
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