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Income Tax Appellate Tribunal, MUMBAI BENCHES “SMC”, MUMBAI
Before: Shri Joginder Singh,
आदेश / O R D E R
The assessee is aggrieved by the impugned order dated 24/11/2014 of the Ld. First Appellate Authority, Mumbai, though the assessee has raised many grounds but during hearing, the ld. counsel for the assessee, Ms. Ekta Joshi, pressed/argued ground no.2 & 3 only which is with respect to addition of Rs.4,30,844/- under the business income on which interest expenses were disallowed.
The crux of argument advanced by Ms. Ekta Joshi is identical to the ground raised by contending that the assessee paid and received interest. My attention was invited to the running account of the assessee by contending that at best Rs.85,500/- under income from other sources could have disallowed. On the other hand, Shri A.K. Dhondial, ld. DR, defended the conclusion arrived at in the impugned order.
2.1. I have considered the rival submissions and perused the material available on record. The facts, in brief, are that the assessee declared taxable income of Rs.8,40,565/- in his return. The assessee paid Rs.10,77,210/- on account of interest on loan taken from one Shri Anil Kejriwal. The assessee vide letter dated 31/11/2013 furnished the details of loans taken from Shri Kejriwal and its utilization along with calculation of interest earned from M/s Goeal Petrochem Pvt. Ltd. and Pravin Plastics. The Assessing Officer disallowed the interest expenses of Rs.85,500/- out of Rs.6,46,326/- which was claimed against interest income considering Rs.5 lakh paid to Manohar Bidaye, Rs.4 lakh paid to Shri Sukesh Goel(HUF) and Rs.50 lakh cash withdrawal. The assessee utilized the funds for business purposes. The assessee before the Assessing Officer could not established the direct link during assessment proceeding, therefore, the Assessing Officer added Rs.4,30,884/-, interest, which was claimed against business income. It was explained by the ld. counsel that the assessee is acting as a sub-broker of Bonanza portfolio from which he earned commission income of Rs.27,022/-. Bonanza portfolio does not offer credit facility to the clients of the assessee, whereas, the clients of the assessee offers credit facility in relation to share purchase transaction which took place on behalf of customers of the assessee. To make such payment on behalf of the customer, loan was taken from market i.e. Shri Anil Kejriwal at rate of 9%. It is noted that the assessee paid interest of Rs.10,77,210/- during the year out of which 40% of such interest i.e. Rs.4,30,884/- was claimed against commission income. It is noted that the Assessing Officer, during assessment proceedings, called information u/s 133(6) of the Act from M/s Bonanza Portfolio Ltd, wherein, the commission payment to the assessee was denied. However, the assessee submitted the details vide letter dated 12/11/2013. However, the ld. Assessing Officer made the addition on the plea that the assessee did not establish the nexus of interest expenditure to the business income, therefore, he disallowed Rs.4,30,884/- and Rs.85,500/- under the head business income and income from other sources respectively. It is noted that the ld. Assessing Officer ignored the fact that he himself accepted in the assessment order (point no. 6.5.2) that only Rs.9,50,000 was not used for earning income and remaining was used for giving loan to Geol Petrochem Pvt. Ltd and Pravin Plastics from whom the assessee earned interest income. He also ignored the fact that if Rs.9,50,000 only was not used for earning income the how he can disallow interest income of Rs.4,30,884/-. The assessee has duly established the nexus as the assessee has received and paid interest for earning business income, thus ground no 2 is allowed.
2.2. So far as, ground no. 3 is concerned, at best, the ld. Assessing Officer under the facts available on record was justified to add Rs.85,500/-, under the head income from other sources by disallowing interest expenses at the rate of 9% of the amount Rs.9,50,000/-, thus, the ld. Assessing Officer was right in adding/disallowing Rs.85,500/-, consequently, this ground of the assessee is dismissed.
Finally, the appeal of the assessee is partly allowed.
This order was pronounced in the open Court in the presence of ld. representative of both sides at the conclusion of the hearing on 06/01/2016.