NILESH PORWAL,INDORE vs. DCIT-5(1), INDORE
No AI summary yet for this case.
Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Per Vijay Pal Rao, JM :
This appeal by assessee is directed against the order dated 18.05.2023 of the Commissioner of Income Tax (Appeal), National Faceless Appeal Centre, Delhi for A.Y.2016-17.
None has appeared on behalf of the assessee despite the fact that the hearing of the appeal on 14.03.2024 was adjourned at the request of the Ld. AR of the assessee. Accordingly the bench proposes to hear and disposed of this appeal ex-parte. The assessee has raised following grounds of appeal as under:
ITANo.279/Ind/2023 Nilesh Porwal “I Following are the grounds of appeal: -
That, the Learned CIT (A) has erred in confirming in addition of Rs. 23,20,854/- on account of disallowance of interest expenses considering that the amount of unsecured loan on which above interest is paid used for purchase of fixed assets.
That, the Learned AO has disallowed interest expenses in proportion to the total fixed assets held by the assessed which is not justified. The amount of fixed represents the total value of fixed assets held by Assessee as on 31/03/2016 while the interest amount is only for the period under consideration 01/04/2015 to 31/03/2016.
That the learned AO has erred in not considering in interest paid on unsecured loan as business expenditure. As business of real estate required huge amount of funds. Sometimes random transaction needs to be undertaken for which funds available in hand or borrowing from unsecured sources is to be used. So, income earned against interest income earned against interest paid for unsecured loans from which profit can be generated compensate the same. Therefore, the interest paid on unsecured loans used for purpose of business should be considered as business expenditure and is allowable expenses under income tax act, 1961.
That the learned AO has erred in passing the order. Hence, we request your good self to kindly reconsider the same. they Learned CIT (A) has erred in confirming an addition of Rs. 23,20,854/- on account of disallowance of interest expenses considering that the
Page 2 of 8
ITANo.279/Ind/2023 Nilesh Porwal amount of unsecured loan on which above interest is paid used for purchase of fixed assets.”
The solitary issue raised by the assessee in this appeal is
regarding disallowance made by the AO on account of interest
expenses in proportionate to the total value of fixed assets to the
loan amount. Ld. DR has submitted that the assessee has claimed
deduction under section 57 of the Act towards interest expenditure
against the various interest income and further claimed deduction
of interest against various incomes under the head remuneration
and interest. The AO has noted that borrowed fund was not utilized
by the assessee for earning interest income and remuneration but
part of the borrowed fund was utilized for the purpose of acquiring
fixed assets and therefore, the AO has made disallowance of
interest in proportionate to investment in fixed asset which is
capital expenditure. The CIT(A) has upheld the disallowance made
by the AO. Hence, Ld. DR has submitted that when the assessee
has failed to furnish the details to show that the borrowed fund was
utilized for earning income against which the deduction of interest
Page 3 of 8
ITANo.279/Ind/2023 Nilesh Porwal expenditure is claimed then the addition made by the AO is
reasonable and justified.
3.1 The assessee has filed the written submissions along with
ledger account for payment of interest and loan. In the written
submissions the assessee has submitted as under:
Page 4 of 8
ITANo.279/Ind/2023 Nilesh Porwal
Page 5 of 8
ITANo.279/Ind/2023 Nilesh Porwal
3.2 Thus, the assessee has claimed that he spent only
Rs.44,70,619/- towards cost of construction of house out of the
borrowed fund and rest of the amount is claimed as used for
Page 6 of 8
ITANo.279/Ind/2023 Nilesh Porwal earning the interest income. Further the assessee has also given
details of purchase of various plots total amounting to Rs.
2,30,35,500/- and share of the assessee is stated at
Rs.1,30,08,000/-. It is not clear from these details as to whether
these plots are part of the fixed asset and borrowed fund was used
for the purchase of these plots or not. Therefore, in the facts and
circumstances of the case, we are of the considered opinion that
these details furnished by the assessee before us are required to be
properly verified and examined at the level of the AO. Accordingly
we set aside the impugned order of the CIT(A) and remand the
matter to the record of the AO for fresh adjudication after giving one
more opportunity of hearing to the assessee.
In the result, appeal of the assessee is allowed for statistical purposes. Order pronounced in the open court on 23 .04.2024.
Sd/- Sd/- (B.M. BIYANI) (VIJAY PAL RAO) Accountant Member Judicial Member Indore,_ 23 .04.2024 Patel/Sr. PS
Page 7 of 8
ITANo.279/Ind/2023 Nilesh Porwal Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order UE COPY Sr. Private Secretary Income Tax Appellate Tribunal Indore Bench, Indore
Page 8 of 8
