2015 (10) TMI 1405 - AT - Income Tax

Addition on account of Interest paid to Bank - Held that - It emerges from the record that the assessee provided breakup of overdraft interest utilization before lower authorities. Without rebutting the same, it has been held that the assessee has not established the nexus. Thus, this finding of the lower authorities is not borne out from record. On merits also the assessee is eligible for overdraft interest qua the interest earned, availability of assessee s surplus funds is also not disputed. Looking into the entirety of the facts and circumstances of the case and the ITAT s judgment in assessee s brother s case, the interest paid by the assessee on overdraft facility is allowable as expenditure. - Decided in favour of assessee.

Summary

Issues:
Appeal against addition of interest paid to bank without proper consideration of submissions and evidences.

Analysis:
The appeal was filed against an order by CIT(A) confirming the addition of interest paid to the bank. The appellant contended that detailed information regarding the utilization of the overdraft facility was provided to the Assessing Officer. The appellant had an overdraft of Rs. 21 lacs, with yearly interest paid at Rs. 96,830. The appellant also presented a breakdown of overdraft utilization, including interest payment, short-term capital gain income, interest from parties, and investments in IPOs and shares. The appellant argued that the interest attributable to the purchase of IPO shares should be considered part of the cost of such shares due to the income offered as short-term capital gains.

The CIT(A) did not counter the breakdown of overdraft interest utilization provided by the appellant but held that the nexus was not proven. The CIT(A) referred to a similar case involving the appellant's brother, where the ITAT had deleted a similar addition based on specific observations. The ITAT in the brother's case emphasized the utilization of own funds and income earned, leading to the deletion of the addition. The DR supported the lower authorities' orders, but the JM, after considering the submissions and evidence, found that the appellant had established the nexus between the interest paid and the utilization of funds. The JM also noted the availability of surplus funds and relied on the ITAT's judgment in the brother's case to allow the appeal, concluding that the interest paid on the overdraft facility was an allowable expenditure.

In conclusion, the ITAT Jaipur allowed the appeal, emphasizing the importance of establishing a nexus between interest paid and fund utilization. The judgment highlighted the significance of providing detailed information and evidence to support claims, referencing relevant precedents to support the decision. The decision underscored the need for a thorough analysis of facts and circumstances to determine the allowability of expenses, ultimately ruling in favor of the appellant based on the presented information and legal considerations.