2017 (10) TMI 479 - AT - Income Tax

Disallowance of interest expenditure - Held that - It is admitted position that the partner s capital during the year in appeal are not interest-free funds at the disposal of the partnership-firm. The profit belongs to partner and gets added to the capital on which interest is payable by the firm. On these facts, we do not see any purpose of sending the issue back to the file of CIT(A). The assessee has not been able to justify before us as to what facts required to be re-examined by the Revenue. It is the assessee which has failed to discharge the onus in spite of specific opportunities in this regard. We are of the view that assessee has not been able to make out any demonstrable case to show the availability of interest-free funds at its disposal to support its claim for remitting the matter back to the file of the CIT(A).

Summary

Issues:
1. Disallowance of interest expenditure by the Assessee.
2. Reversal of disallowance made by the Assessing Officer under s.40(a)(ia) of the Act for non-deduction of tax at source.

Analysis:
1. The Assessee objected to the disallowance of interest expenditure of ?3,65,752. The Assessing Officer found that interest-free loans were given to two parties, and the Assessee failed to prove that the interest expenditure was for business purposes. The CIT(A) upheld the disallowance, leading to the Assessee's appeal before the Tribunal. The Assessee argued that the advances were funded from running account profits and referred to previous years' advances. However, the Tribunal found no concrete evidence supporting the Assessee's claim, denying the appeal and upholding the CIT(A)'s decision.

2. The Revenue appealed against the CIT(A)'s reversal of disallowance under s.40(a)(ia) for non-deduction of tax at source. The CIT(A) based its decision on precedents from previous years, which were upheld by the Tribunal. The Revenue's appeal lacked merit as the facts and circumstances remained unchanged, leading to the dismissal of the appeal. The Tribunal affirmed the CIT(A)'s decision, resulting in the dismissal of both the Assessee's and Revenue's appeals.

This detailed analysis of the judgment outlines the issues, arguments presented by both parties, and the Tribunal's reasoning for dismissing the appeals. The decision was based on the lack of concrete evidence supporting the Assessee's claims and the consistency of precedents in similar cases.