Income Tax Appellate Tribunal - Pune
M/S. Abn Associates,, Pune vs Income-Tax Officer, Ward - 9(1),, Pune on 20 February, 2019
IN THE INCOME TAX APPELLATE TRIBUNAL
PUNE BENCH "SMC", PUNE
BEFORE SHRI R.S. SYAL, VICE PRESIDENT
आयकर अपील सं. / ITA No.401/PUN/2018
िनधा रण वष / Assessment Year : 2012-13
M/s. ABN Associates, Vs. ITO, Ward -9(1),
Jai Ganesh Vision, Pune
D-Wing, Ist Floor,
Akurdi, Pune - 411035
PAN : AAMFA7702M
(Appellant) (Respondent)
Appellant by Shri Kishor Phadke
Respondent by Shri Rajesh Gawli
Date of hearing 19-02-2019
Date of pronouncement 20-02-2019
आदेश / ORDER
PER R.S.SYAL, VP :
This appeal by the assessee arises out of the order passed by the CIT(A)-6, Pune on 02-11-2017 in relation to the assessment year 2012-13.
2. The only issue raised in this appeal is against the confirmation of addition of Rs.26,34,632/- made by the Assessing Officer (AO) on account of disallowance of interest paid on loan.
2ITA No.401/PUN/2018
M/s. ABN Associates
3. Briefly stated, the facts of the case are that the assessee is engaged in the business of carrying out interior work on contract basis. On verification of the Profit and loss account, it was observed that a sum of Rs.27,58,091/- was debited under the head "Interest on SCB loan". On perusal of the assessee's Balance sheet, it was seen that there was no outstanding liability in respect of such loan. On further verification, it transpired that the assessee credited a sum of Rs.18,58,420/- on 17-06-2011 and further sum of Rs.26,34,632/- on 31-03-2012 to the account of partner, Mr. Bhagirath Sain. On being called upon to explain the nature of interest transaction, the assessee submitted that the SCB loan was originally taken by Mr. Bhagirath Sain for the business premises used by the assessee firm. It was further explained that Mr. Bhagirath Sain availed fresh loan against the said property in his name and adjusted the existing loan of SCB from such fresh loan. Mr. Bhagirath Sain, who is the legal owner of the premises in which business of the assessee firm is run, passed over 50% of interest on such new loan to the assessee-firm. It is this 50% of interest paid by Mr. Bhagirath Sain, amounting to Rs.26,34,632/-, which was debited in the 3 ITA No.401/PUN/2018 M/s. ABN Associates books of the assessee firm as "Interest" and became the subject matter of disallowance. The AO denied such deduction on the ground that the loan was availed by the partner of the assessee firm and not the assessee firm. The ld. CIT(A) confirmed the addition.
4. Having heard both the sides and perused the relevant material on record, it is observed as an admitted position that Mr. Bhagirath Sain earlier availed some loan for the purpose of purchasing property in his name, which was partly used by the assessee firm as its business place. The balance outstanding in such loan at Rs.18,58,420/- was squared up by Mr. Bhagirath Sain from the fresh loan obtained by him. Mr. Bhagirath Sain paid interest on such fresh loan and transferred 50% of such interest liability to the assessee firm. It is not understandable, neither could the ld. AR explain the reasons behind transferring 50% of the loan to the assessee firm. The ld. AR candidly admitted that 50% of interest allocated to the assessee firm was not based on any reasonable calculation and has been done in an ad hoc manner. It is not denied that the assessee firm was using the premises standing in the name of 4 ITA No.401/PUN/2018 M/s. ABN Associates the partner for its business purpose without paying any rent. The ld. AR submitted that similar position was prevailing for the immediately succeeding assessment year, namely, 2013-14 and the AO while finalizing the assessment order for such year on 18-03-2016, a copy placed on record, has devised a formula for bifurcation of total interest between the assessee firm and Mr. Bhagirath Sain and allowed interest accordingly. Since the premises, in the name of Mr. Bhagirath Sain, against which some loan was taken, was being used by the assessee firm for its business purposes, it is obvious that same sort of compensation is required to be given to the partner. In the given facts and circumstances, I am of the considered opinion that the ends of justice would meet adequately if the impugned order, disallowing entire interest on loan, is set-aside and the matter is restored to the file of AO. I order accordingly and direct him to decide this issue afresh as per law after allowing reasonable opportunity of hearing to the assessee. Needless to say, the AO will take into consideration the view formed by him in finalizing the assessment for the A.Y. 2013-14. 5 ITA No.401/PUN/2018
M/s. ABN Associates
5. In the result, the appeal is allowed for statistical purposes.
Order pronounced in the Open Court on 20th February, 2019.
Sd/-
(R.S.SYAL) उपा य VICE PRESIDENT उपा य / पुणे Pune; दनांक Dated : 20th February, 2019 सतीश आदेश क ितिलिप अ िे षत / Copy of the Order is forwarded to :
1. अपीलाथ / The Appellant;
2. यथ / The Respondent;
3. आयकर आयु (अपील) / The CIT (Appeals)-6, Pune
4. The Pr. CIT-5, Pune
5. िवभागीय ितिनिध, आयकर अपीलीय अिधकरण, पुणे "SMC" / DR 'SMC', ITAT, Pune;
6. गाड फाईल / Guard file.
// True copy // आदेशानुसार/ ार BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune 6 ITA No.401/PUN/2018 M/s. ABN Associates Date
1. Draft dictated on 19-02-2019 Sr.PS
2. Draft placed before 20-02-2019 Sr.PS author
3. Draft proposed & JM placed before the second member
4. Draft JM discussed/approved by Second Member.
5. Approved Draft comes Sr.PS to the Sr.PS/PS
6. Kept for pronouncement Sr.PS on
7. Date of uploading order Sr.PS
8. File sent to the Bench Sr.PS Clerk
9. Date on which file goes to the Head Clerk
10. Date on which file goes to the A.R.
11. Date of dispatch of Order.
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