2018 (11) TMI 586 - AT - Income Tax

Disallowance of interest paid on unsecured loan - Held that - As during the course of appellate proceedings before the CIT(A), he has again stated that the assessee could not substantiate his argument that interest was paid in respect of loan utilized for making investment in the partnership firm and no fund flow statement was filed which shows interest bearing fund, if any were utilized for making investment in the partnership firm. In absence of any nexus being established by the assessee in support of his contention that the borrowed funds have been utilized for making investment in the partnership fund, we accordingly do not see any infirmity in the order of the lower authorities. Further, we have gone through the decisions relied upon by the AR and find that the same does not support the case of the assessee as the same were rendered in their peculiar facts and circumstances of the case. - decided against assessee. Disallowance of commission paid to the assessee s son - Held that - In absence of demonstrating through verifiable evidence that Shri Ashish Mantri has rendered the service in connection with earning of the commission income by the assessee and in absence of the necessary nexus between the earning of income and rendering of services, no infirmity in disallowance of the commission payment to Mr Ashish Mantri and confirm the findings of the authorities below which remain uncontroverted before us. - decided against assessee.

Summary

Issues:
1. Disallowance of interest paid on unsecured loans.
2. Disallowance of commission paid to the appellant's son.

Analysis:
1. Interest on Unsecured Loans:
The assessee appealed against the order of the CIT(A) confirming the addition of interest paid on unsecured loans. The AR contended that the loan was utilized for investment in a partnership firm, resulting in remuneration and interest income. However, the AO observed a lack of evidence establishing the nexus between the loan and investments in the partnership firm, leading to disallowance. The AR cited precedents, but the Tribunal found them inapplicable to the present case. As the assessee failed to substantiate the utilization of borrowed funds for partnership investments, the Tribunal upheld the disallowance.

2. Commission Paid to Son:
Regarding the disallowance of commission paid to the appellant's son, the AR argued that the commission was incurred in the course of business, supported by documents like account confirmations and financial statements. However, discrepancies arose regarding the nature of services rendered by the son and the purpose of his visit to China. Despite the appellant's submissions, including evidence of the son's income tax returns, the authorities found a lack of verifiable evidence demonstrating the son's actual contribution to earning the commission income. As the necessary nexus between the services rendered and income earned was not established, the disallowance of the commission payment was upheld.

In conclusion, the Tribunal dismissed the appeal filed by the assessee, upholding the disallowances of interest on unsecured loans and commission paid to the appellant's son. The decision was pronounced in open court on 01/10/2018.