Income Tax Appellate Tribunal - Chandigarh
Sh.Surinder Kumar Singal, Chandigarh vs Dy.Commissioner Of Income Tax, ... on 3 July, 2018
IN THE INCOME TAX APPELLATE TRIBUNAL
CHANDIGARH BENCHES, 'B' CHANDIGARH
BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER &
Ms. ANNAPURNA GUPTA, ACCOUNTANT MEMBER
ITA No. 1224/Chd/2016
Assessment Year: 2012-13
Sh. Surinder Kumar Singal Vs. DCIT
SCO 15, Sector 20, Circle 5 (1)
Chandigarh Chandigarh
PAN No. ADYPS5462P
(Appellant) (Respondent)
Appellant By : Shri Vinit Krishan
Respondent By : Shri Manjit Singh,
Date of hearing : 19.06.2018
Date of Pronouncement : 03.07.2018
ORDER
Per Sanjay Garg, Judicial Member:
The captioned appeal has been preferred by the assessee against the order dated 08.09.2016 of the Commissioner of Income Tax (Appeal)-2, Chandigarh [hereinafter referred to as 'CIT(A)]. The assessee in this appeal has taken the following grounds:-
"1) That the order passed under section 250(6) of the I n c o me T ax Act, 1961 by the learned Commissioner of I n c o me T ax (Appeals)-2, Chandigarh in Appeal No. 54/2/2015-16 dated 08.09.2016 is contrary to law and f acts of the case.ITA No. 1224/Chd/2016-
Sh. Surinder Kumar Singal, Chandigarh 2
2. T h a t i n t h e f a c t s a n d c i r c u ms t a n c e s o f t h e c a s e , t h e L d . C o m m i s s i o n e r o f I n c o me T ax ( A p p e a l s ) - 2 , C h a n d i g a r h gravelly erred in sustaining addition of Rs. 4,27,894/- out of total addition of Rs. 11,49,279/- made by Ld. Assessing Off icer under section 36(I)(iii) on account of interest f ree advances given by appellant.
3 a) T h a t i n t h e f a c t s a n d c i r c u ms t a n c e s o f t h e c a s e , the Ld. Commissioner of I n c o me T ax (Appeals)-2, Chandigarh gravelly erred in not considering the submissions and evidences f iled by the appellant in r e s p o n s e t o r e m a n d r e p o r t o f t h e L d . A s s e s s i n g O f f ic e r wi t h respect disallowance of interest expenditure of Rs. 7 2 , 2 4 , 5 3 4 / - c l a i m e d u n d e r s e c t i o n 5 7 ( i i i ) o f I n c o me T ax Act.
b) T h a t i n t h a t f a c t s a n d c i r c u ms t a n c e s o f t h e c a s e , t h e L d . C o m m i s s i o n e r o f I n c o me T ax ( A p p e a l s ) - 2 , C h a n d i g a r h gravelly erred in upholding the d i s a l l o wa n c e of Rs. 72,24,534/- made by the Ld. Assessing Off icer of interest expenditure claimed by appellant under section 57.
c) T h a t wi t h o u t p r e j u d i c e t o g r o u n d n u mb e r 3 ( b ) o f t h e d i s a l l o wa n c e of Rs. 72,24,534/- under section 57 (iii) u p h e l d b y t h e L d . C IT ( A ) , C h a n d i g a r h i s h i g h l y e x c e s s i v e .
4. T h a t t h e a p p e l l a n t c r a v e s t o a d d , a me n d o r a l t e r a n y g r o u n d o f a p p e a l b e f o r e o r a t t h e t i me o f h e a r i n g o f a p p e a l , w i t h t h e p e r m i s s i o n o f t h e H o n ' b l e I n c o me T a x A p p e l l a t e Tribunal, Chandigarh."
ITA No. 1224/Chd/2016-
Sh. Surinder Kumar Singal, Chandigarh 3
2. The assessee in the above grounds of appeal has raised two effective issues. The first issue is relating to disallowance o f i n t e r e s t u / s 3 6 ( 1 ) ( i i i ) o f t h e I n c o m e T a x A c t . A t t h e outset, Ld. Counsel for the assessee has submitted that though the Assessing Officer had made disallowance on this issue of Rs. 11,49,279/-, however, the Ld. CIT(A) has restricted the same to Rs. 4,27,894/-, observing that the assessee had advanced. Interest free advance/loans of Rs. 35,65,780/- and not of Rs. 95,77,326/- as taken by the Assessing Officer. Now, the learned counsel for the assessee has submitted that even the assessee was having its own interest funds free funds out of which the investments were made by the assessee. He has further submitted that the assessee may be given opportunity to prove the nexus between the own money / interest free fund with the investments/interest free advances given by the assessee.
3. The Ld. DR, on the other hand, has relied on the findings of the lower authorities. However, he could not rebut averments of the Ld. Counsel for the assessee that if the assessee would be able to prove the nexus between the own funds and the interest free advances, then no disallowance u/s 36(I)(iii) should be attracted.
4. In the view of the issue is restored to the file of the Assessing Officer to examine it afresh. If the assessee will be able to prove the nexus between the own funds/interest free funds available with the assessee and the interest free advances ITA No. 1224/Chd/2016- Sh. Surinder Kumar Singal, Chandigarh 4 given to third parties, no disallowance on this issue will be attracted.
5. The next issue raised by the assessee is against the disallowance of interest expenditure of Rs. 72,24,534/- u/s 57(iii) of the Act. A t t h e outset, Ld. Counsel for the assessee has submitted that there was a direct nexus between the interest income earned and expenditure claimed. That the assessee had received loan amount from the bank which was further disbursed as loan to other parties from whom the interest income was earned. That the assessee was entitled to set off the interest expenditure against interest income as there was a direct nexus between the two.
6. The Ld. DR, on the other hand, has submitted that the assessee could not prove with satisfactory evidence the direct nexus between interest income earned and the interest expenditure incurred by the assessee.
7. We have considered the rival contentions. If the averments of the assessee are taken as correct, the assessee, in our view, will be entitled to claim deduction of the expenditure out of the interest income offered by the assessee. We therefore set aside the impugned order on this issue and restore the issue to the file of the Assessing Officer to examine it afresh and decide the same in the light of the above observations made after giving proper opportunity to the assessee to present his case. ITA No. 1224/Chd/2016-
Sh. Surinder Kumar Singal, Chandigarh 5 In the result, the appeal of the assessee is treated as allowed for statistical purposes.
O r d e r p r on o u n c ed i n t h e O p e n Cou r t
Sd/- Sd/-
(ANNAPURNA GUPTA) (SANJAY GARG)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated : 03.07.2018
Ganesh Kumar
Copy to:
1. The Appell ant
2. The Respondent
3. The CIT
4. The CIT(A)
5. The DR