2019 (4) TMI 546 - AT - Income Tax

Deduction u/s 80IC on interest income - interest received from partners - wrong mention of interest from FDRs in place of interest from partners - HELD THAT - It is held that if there is a receipt of interest from the partners as well as payment of interest to the same partners, the assessee is entitled to netting of the same. Therefore, the matter is remanded to the file of the Assessing officer to verify this fact and allow the relief to the assessee accordingly. However, the assessee is not entitled to deduction u/s 80IC of the Act on the aforesaid interest income. Addition of unexplained cash credits u/s 68 - denial of deduction u/s 80IC on the said amount - HELD THAT - Matter needs examination and verification at the hands of the Assessing officer. The assessee will demonstrate before the Assessing officer the source and creditworthiness of the creditor including the source of the deposits in the proprietorship concern. The Assessing officer will examine the same and decide the issue afresh in accordance with law. Since it is a case of capital introduction, the assessee is entitled to any deduction u/s 80IC of the Act on this account. Therefore, the issue raised vide ground No.3 is restored to the file of the Assessing officer, whereas, the issue raised vide ground No.4 is decided against the assessee. Unexplained cash credit u/s 68 for unsecured loan - share of one partner converted in unsecured loan on their retirment from the partnership during the year under consideration - HELD THAT - Since these aspects has not been examined by the Assessing officer and I have also restored the other issues to the file of the Assessing officer, hence, this issue is also restored to the file of the Assessing officer to examine the above contentions of the assessee and decide the issue in accordance with law.

Summary

Issues Involved:
1. Denial of deduction u/s 80IC on interest income
2. Addition of unexplained cash credits and denial of deduction u/s 80IC
3. Addition of alleged unexplained cash credit from a partner
4. Estimation of interest income and denial of deduction u/s 80IC

Issue 1: Denial of deduction u/s 80IC on interest income:
The assessee contested the denial of deduction u/s 80IC on interest income of ?1,36,856, arguing that the interest was received from partners, not fixed deposits. The assessee sought netting of interest paid to partners against interest received. The matter was remanded to the Assessing Officer for verification, with the conclusion that the assessee was not eligible for deduction u/s 80IC on the interest income.

Issue 2: Addition of unexplained cash credits and denial of deduction u/s 80IC:
The assessee challenged the addition of ?15.75 lakhs as unexplained cash credits u/s 68 and the denial of deduction u/s 80IC on this amount. The assessee claimed that the amount was capital introduced by a partner and provided documentation supporting the transfer. The Assessing Officer was directed to verify the source and creditworthiness of the creditor, with the issue of deduction u/s 80IC denied due to capital introduction.

Issue 3: Addition of alleged unexplained cash credit from a partner:
Regarding the addition of ?8.11 lakhs as unexplained cash credit from a retired partner, the assessee argued that it was treated as a loan as per the dissolution deed. The matter was remanded to the Assessing Officer for examination, as the contentions were not previously considered, with no deduction u/s 80IC allowed on this amount.

Issue 4: Estimation of interest income and denial of deduction u/s 80IC:
The assessee contested the estimation of interest income of ?20,000 from a deposit given to sales tax authorities, which was not received during the year. The denial of deduction u/s 80IC on this enhanced income was challenged. The matter was remanded to the Assessing Officer for review, with the denial of deduction u/s 80IC upheld.

The appeal was partly allowed for statistical purposes, with specific issues remanded to the Assessing Officer for further examination and verification in accordance with the law.