Income Tax Appellate Tribunal - Jodhpur
Assistant Commissioner Of Income Tax vs Bhagwati Chandani on 5 October, 2004
Equivalent citations: (2006)99TTJ(JODH)1342
ORDER
Hari Om Maratha, J.M.
1. This appeal by the Revenue pertains to asst. yr. 1997-98 and has been directed against the CIT(A)'s order dt. 14th March, 2001.
2. The first issue pertains to disallowance of Rs. 66,917 made out of publicity expenses.
3. We have heard the rival submissions and have perused the evidence on record.
4. The assessee derives income from film distribution as a proprietor and share of profit from the firm. For the assessment year under consideration, the assessee filed return of income declaring loss of Rs. 2,33,783. The AO computed the income at Rs. 1,53,914 by making addition after disallowing publicity expenses, disallowances of interest to firm M/s Lakpat Film Exchange, disallowance of interest paid to creditors.
5. Feeling aggrieved, the assessee raised these issues before CIT(A). The CIT(A) deleted the disallowance of Rs. 66,917 and an amount of Rs. 2,82,848 on account of interest payable. The Department is aggrieved.
6. With regard to the first issue, the AO made this addition on the ground that there was a similar addition in the earlier years. The CIT(A) deleted the addition because in earlier year, the CIT(A) had already deleted this addition. For earlier years, namely, 1994-95 and 1995-96, the Tribunal has restored this to the file of the AO. A copy of the order is placed for our perusal.
7. We have gone through this order. So, respectfully following the decision of the Tribunal, we also set aside this issue to the file of the AO for fresh adjudication as per rules.
8. The next issue pertains to the interest payable to the firm in which the assessee is a partner.
9. The learned Authorised Representative has submitted that the assessee had borrowed funds from the firm which were invested in his own business. The assessee is partner in the firm known as Lakpat Film Exchange (cinema a/c) and also doing proprietorship business in the name and style of Lakpat Film Exchange Distribution. The assessee is having income from distributorship, so he used the borrowed funds in this business and as such, the interest is allowable.
10. After careful consideration, we conclude that there is no evidence on record which can point out that the assessee did not use this borrowed fund for the purpose of his business. It is neither the case of the AO that this amount was not used for the business purposes. The Department has mainly relied on the case of Jaswant Rai P. Mehta v. CIT delivered by the Hon'ble Gujarat High Court.
11. But the facts of the Gujarat High Court are different from the facts of the case in hand. In this case, the assessee had debit balance in the firm (cinema a/c) because of withdrawals and losses incurred in the firm. These withdrawals were invested in distribution business. The profit from the firm is not taxable under Section 10(2A). The debit balance in the firm is appearing as a credit balance in the individual business and as such, the ratio of the decision of Hon'ble Gujarat High Court is not applicable to the facts of this ground. As a result, this ground of appeal is dismissed.
12. In the result, the appeal of the Department is partly allowed.