ROHIT NANDLAL TRUST,AHMEDABAD vs. THE INCOME TAX OFFICER, WARD-3(4), AHMEDABAD

ITA 607/AHD/2015Status: DisposedITAT Ahmedabad13 October 2017AY 2011-123 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The tribunal held that a co-ordinate bench in the assessee's own case for preceding years had allowed identical disallowances. The tribunal found no distinction in the facts for the impugned assessment year and directed the deletion of the disallowance.

What were the facts?

The assessee trust paid interest of Rs. 2,89,878/- to its beneficiaries. The Assessing Officer disallowed this interest, holding that the assessee failed to prove unsecured loans from beneficiaries. The CIT(A) upheld this disallowance.

What were the issues?

Whether interest paid by a trust to its beneficiaries on their accumulated undistributed benefits treated as capital can be disallowed if accounts are not perfectly presented.

Which sections of the Income-tax Act were involved?

Section 143(3)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, AHMEDABAD “SMC/B” BENCH AHMEDABAD

Hearing: 04.09.2017Pronounced: 13.10.2017

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “SMC/B” BENCH AHMEDABAD

BEFORE, SHRI S. S. GODARA, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER

ITA No. 607/Ahd/2015 (Assessment Year: 2011-12)

Rohit Nandlal Trust, Prop. Modern Tubes, 12, 2nd Floor, Shanti Sadan Estate, Mirzapur, Ahmedabad 380 001 Appellant Vs. The Income Tax Officer, Ward 3(4), Ahmedabad Pratyaksh Kar Bhavan, Panjarapole, Ambawadi, Ahmedabad 380015 Respondent

PAN: AABTR1227R आवेदक क� ओर से/By Assessee : Urvashi Shodhan, A.R. राज�व क� ओर से/By Revenue : Mahesh Jiwade, CIT D.R. सुनवाई क� तार�ख/Date of Hearing : 04.09.2017 घोषणा क� तार�ख/Date of Pronouncement : 13.10.2017

ORDER PER S. S. GODARA, JUDICIAL MEMBER

This assessee’s appeal for assessment year 2011-12 arises against the CIT(A)-10, Ahmedabad’s order dated 19th January, 2015 in case no. CIT(A)- 10/WD-3(4)/278/14-15, upholding Assessing Officer’s action disallowing interest amount of Rs.2,89,878/- paid to its beneficiaries namely Rohit N. Vora, Hansaben B. Vora, Milan R. Vora and Bipin N. Vora HUF in assessment order dated

ITA No. 607/Ahd/15 [Rohit Nandlal Trust vs. ITO] A.Y. 2011-12 - 2 -

09.01.2014, in proceedings u/s. 143(3) of the Income Tax Act, 1961; in short “the Act”. Heard both parties reiterating their respective stands. Case file perused.

Relevant facts are in a very narrow compass. Both the lower authorities admittedly disallow assessee’s interest paid to its beneficiaries totaling to Rs.2,89,878/- by following their respective orders in preceding assessment year 2010-11. The Assessing Officer particularly held that assessee’s details filed during scrutiny alongwith its books nowhere proved any unsecured loans in the names of its beneficiaries relevant for the impugned interest payments. The CIT(A) follows his reasoning in preceding assessment year to uphold Assessing Officer’s action.

We have given our thoughtful consideration to rival submissions. Case file records that a co-ordinate bench in assessee’s case itself ITA Nos. 476 & 477/Ahd/2014 decided on 09.10.2017 for preceding two assessment years has already deleted identical disallowance as under:

“7. With the assistance of the ld. representatives, we have gone through the record carefully. The assessee has admitted that it has committed an error in the presenting its accounts. It was pointed out that in Annexure-A to the balance sheet, the capital account of Shri Rohit N. Vora Trust is shown separately. With the help of other details the assessee has demonstrated that beneficiaries have opening capital balance as on 1.4.2008 at Rs.72,20,281/-. Closing balance as on 31.3.2009 was Rs.26,99,090/-. Similarly, closing balance as on 31.03.2010 was Rs.46,62,141/-. The opening balance of loan from the beneficiaries was used by the trust for the purpose of business. There is some error in presenting the account, and therefore, the ld.AO instead of strictly going through the entries shown in the books, ought to have verified the contentions of the assessee with other details. In the grounds, the assessee has specifically pointed out as to how the benefit meant for the beneficiaries have been accumulated and not paid to them over a period of time. These undistributed benefits have been treated as capital of the beneficiaries in the trust, which has been used for the purpose of business. There are various other aspects also namely, the ld.DR pointed out that the assessee has been using PAN of a firm, whereas it should have a separate account number. All these aspects have confused the ld.AO. There may be certain short coming in maintaining the accounts or availing PAN but these are not so major which can persuade the AO to disallow the claim. Therefore, taking into consideration other details, we are of the view that the assessee has undistributed benefit of the beneficiaries which has been construed as capital balance, and as per the decision taken by the trust, interest has been provided on such capital balance of the beneficiaries. Therefore, the deduction ought to be allowed to them.”

ITA No. 607/Ahd/15 [Rohit Nandlal Trust vs. ITO] A.Y. 2011-12 - 3 -

Learned Departmental Representative fails to pinpoint any distinction in the impugned assessment year vis-à-vis the relevant facts involved in said earlier assessment years as taken not in the lower appellate order. We therefore direct the Assessing Officer to delete the impugned disallowance.

This assessee’s appeal is allowed.

[Pronounced in the open Court on this the 13th day of October, 2017.]

Sd/- Sd/- (MANISH BORAD) (S. S. GODARA) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad: Dated 13/10/2017

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