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Before: SHRI MAHAVIR PRASAD & SHRI AMARJIT SINGH
आदेश / O R D E R
PER MAHAVIR PRASAD, JUDICIAL MEMBER :
This is an appeal by the assessee against the order of the Commissioner of Income Tax(Appeals)-13, Ahmedabad, dated 31/03/2015 for the Assessment Year (AY) 2011-12, on the following Grounds: The ld. CIT(A)-13, Ahmedabad has erred in law and on facts of the case by confirming the disallowance of interest expenditure of Rs.10,28,717/- made by the AO after holding that the interest expenditure is not in relation to the interest income.
ITA No.1776/Ahd/2015 Shri Alpesh D. Patel vs. DCIT Asst.Year –2011-12 - 2 - 2. The relevant facts as culled out from the materials on record are as under:- During the course of assessment proceedings, the Assessing Officer has noticed that assessee has claimed interest expenditure of Rs.8,10,864/- to State Bank of India and other part of interest of Rs.2,17,853/- to the other persons. On verification of Balance Sheet of the assessee, the AO has observed that the assessee has not shown any loan liability in the Balance Sheet. On the basis of which, interest were paid during the year under consideration. In this connection, the AO has further observed that the assessee was having saving bank interest of Rs.4,00,051/- and credit balance of Rs.79,56,144/- with State Bank of India, which demonstrate that there was no requirement of borrowing loan for the assessee. He further noted that assessee has advanced interest free loan of Rs.5,57,50,000/- to his family members & friends, on which no income was generated. Subsequently, the Assessing Officer has disallowed the interest expenditure claim of assessee totaling to Rs.10,28,717/-.
Against the said order assessee preferred appeal before the ld. CIT(A), who confirmed the disallowance of interest expenditure of Rs.10,28,717/-.
During the course of appellate proceedings before us, the ld. Counsel has submitted the Paper Book pertaining information relating to filing of return of income, Ledger Account of SBI Loan, SBI Loan
ITA No.1776/Ahd/2015 Shri Alpesh D. Patel vs. DCIT Asst.Year –2011-12 - 3 - Interest and Ledger Account of Loan and interest payment to other persons. The ld. Counsel has contended that assessee has obtained secured loan from State Bank of India and unsecured loan from other person, which were paid during the year under consideration because of which these items were not appearing in the balance sheet for the year under consideration. He further contended that assessee was having sufficient interest free fund and as per the decision of CIT vs. Gujarat Narmada Valley Fertilizers Co. Ltd. (2014) 221 Taxman 479 (Guj H.C.) where “no disallowance can be made when interest free funds available with the assessee are much higher than investments made to earn exempt income.”
On the other hand, the ld. DR supported the order of CIT(A) and we heard both the sides and perused the material on record. We have noticed that as per Page No.9 of the Paper Book, the assessee has Ledger Account of SBI Loan for the period of 01.04.2010 to 31.03.2011. Similarly, on Page No. 15 of Paper Book, detail of interest payment to the other persons on the unsecured loan was reflected. The assessee has claimed that both these loans were repaid during the year so the same are not reflected in the Balance Sheet for the year under consideration. We have further noticed from Page No.16 of the Paper Book containing Balance Sheet of the assessee as on 31st March, 2010, in which on the liability side, the total available fund of the assessee was Rs.10,10,31,728/-, whereas, we have seen that on the other side, the assessee has made loan and advances of Rs.10,59,12,908/-. Further on
ITA No.1776/Ahd/2015 Shri Alpesh D. Patel vs. DCIT Asst.Year –2011-12 - 4 - the liability side, assessee has shown secured loan from bank of Rs.91,29,946/- and unsecured loan of Rs.82,10,807/-. After perusal of the above information, we find that assessee has made more loan and advances then the interest free fund available with the assessee. We have further observed that the assessee has claimed payment of interest on unsecured loan to the amount of Rs.21,17,853/-. On the other hand, no interest was charged on the loan and advances, which was not made out of interest free fund.
After considered the above facts, we allow the payment of interest to the assessee in respect of secured loan taken from State Bank of India, on which interest of Rs.8,10,864/- was paid. However, we disallowed the claim of interest of Rs.2,17,853/- on other unsecured loan taken by the assessee on the ground that assessee has not charged any interest on the loan and advances, which was not advanced out of interest borrowing fund as elaborated above in this order.
In the result, appeal filed by the assessee is partly allowed. This Order pronounced in Open Court on 16/11/2017
Sd/- Sd/- vejthr flag vejthr flag vejthr flag महावीर �साद vejthr flag (लेखा सद�य) (�या�यक सद�य) ( MAHAVIR PRASAD ) ( AMARJIT SINGH ) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated 16/11/2017 Priti Yadav, Sr. PS
ITA No.1776/Ahd/2015 Shri Alpesh D. Patel vs. DCIT Asst.Year –2011-12 - 5 -
आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent. 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त(अपील) / The CIT(A)-13, Ahmedabad. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 5. 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER, स�या�पत ��त //True Copy//
उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील�य अ�धकरण, अहमदाबाद / ITAT, Ahmedabad True Copy 1. Date of dictation .01/11/2017 (dictation-pad 3 pages attached at the end of this appeal-file) 2. Date on which the typed draft is placed before the Dictating Member …03/11/2017 3. Other Member… 4. Date on which the approved draft comes to the Sr.P.S./P.S…………….. 5. Date on which the fair order is placed before the Dictating Member for pronouncement…… 6. Date on which the fair order comes back to the Sr.P.S./P.S……. 7. Date on which the file goes to the Bench Clerk………………… 8. Date on which the file goes to the Head Clerk…………………………………... 9. The date on which the file goes to the Assistant Registrar for signature on the order…………………….. 10. Date of Despatch of the Order………………