2011 (4) TMI 1391 - AT - Income Tax

Summary

Issues involved:
The judgment involves the issue of addition of interest payments by the Assessing Officer, the justification of disallowance of interest payments, and the decision of the Commissioner of Income-tax (Appeals) regarding the disallowance.

Details of the Judgment:

1. Issue of Addition of Interest Payments:
The Assessing Officer made an addition of &8377; 10,96,266/- out of the interest payments claimed by the assessee. This was based on the observation that the assessee had availed unsecured loans but had not shown any interest receipts, leading to the disallowance of interest payments. The Commissioner of Income-tax (Appeals) held that the Assessing Officer was not justified in disallowing the interest amount and directed the deletion of the disallowance.

2. Justification of Disallowance of Interest Payments:
The Revenue, through the Departmental Representative, supported the Assessing Officer's decision and argued that the disallowance was justified. It was contended that the Commissioner of Income-tax (Appeals) erred in deleting the disallowance without valid reasons. On the other hand, the Counsel for the assessee supported the Commissioner's decision, stating that the deletion of the disallowance was justified.

3. Decision of the Commissioner of Income-tax (Appeals):
The Commissioner of Income-tax (Appeals) reasoned that the investment made by the appellant in the firm was converted into unsecured loans after retirement, and no interest was received during the relevant period. The Commissioner found that the interest disallowance was not justified as the investment was made with the intention to earn income, even though no interest was received. The Commissioner directed the Assessing Officer to delete the disallowance of &8377; 10,93,754/-. The Appellate Tribunal upheld the Commissioner's decision and dismissed the appeal of the Revenue.

In conclusion, the Appellate Tribunal upheld the decision of the Commissioner of Income-tax (Appeals) to delete the disallowance of interest payments, stating that the disallowance was not justified based on the intention of the investment to earn income, even though no interest was received during the relevant period.