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TMI Blog2011 (9) TMI 101X X X X Extracts X X X X X X X X Extracts X X X X ..... for various loans taken by him for running the businesses for the relevant assessment year. AO directed to allow entire amount of interest paid by the assessee to his creditors as business expenditure and to treat the amount of interest received by the assessee from his debtors as his income from money lending business subject to the provisions of Section 14A. - I.T.A. No.260 of 2003 - - - Dated:- 29-9-2011 - Mr. Justice Bhaskar Bhattacharya, Mr. Justice Sambuddha Chakrabarti, JJ. For the Appellants: Mr. J. P. Khaitan, Mr. Agnibesh Sengupta, Mr. Bhoopesh Sharma. For the Respondent: Mr. Siddhartha Chatterjee, Ms. Asha Gourisaria Gutgutia. Bhaskar Bhattacharya, J.: This appeal under Section 260A of the Income-tax Act, 1961 ( Act ) is at the instance of the assessee and is directed against an order dated May 29, 2003 passed by the Income-tax Appellate Tribunal, C Bench, Kolkata, in ITA No.459 (Kol) of 2002 for the Assessment Year 1998-99 by which the Tribunal allowed the appeal preferred by the Revenue and set aside the order of the CIT (Appeals). Being dissatisfied, the executors to the estate of the assessee have come up with the present appeal. The facts giv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the above two figures, was claimed as business expenditure. The return filed by the assessee for the Assessment Year 1996-97 relevant to the Financial Year ending on March 31, 1996 was assessed under Section 143(1) of the Act by accepting the assessee s claim for deduction of net interest as business expenditure. e) During the financial year ending on March 1997, the capital of the assessee as also the amount of loan given by him remained more or less at the same figures as on March 31, 1997. However, the amount of loan taken went up from Rs.53.12 lakh to Rs.98.38 lakh, investments went up to Rs.55.71 lakh to Rs.66.79 lakh and stock-intrade from Rs.18.34 lakh to Rs.50.10 lakh. The funds borrowed during the previous year ending on March 31, 1997 were utilised in the business as a result of which there was substantial increase in the stock-in-trade of the business. For the financial year ending on March 31, 1997, the assessee paid interest of Rs.15.83 lakh and received interest of Rs.3.06 lakh and the net amount of Rs.12.76 lakh was claimed by him as business expenditure. The return filed by the assessee for the Assessment Year 1997-98 relevant to the previous year ending on March ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al formulated the following substantial questions of law for determination: (a) Whether the Tribunal was justified in law in restoring the disallowance of interest expenditure of Rs.6,03,930/- incurred by the assessee for the purpose of his business which was deleted by the Commissioner of Income Tax (Appeals) and its purported findings in that behalf are arbitrary, unreasonable and perverse. (b) Whether the Tribunal was justified in law in ignoring the assessee s profit and loss accounts, balance sheet, computations, details etc. for the assessment years 1995-96 to 1998-99 and the assessments/intimations for the assessment years 1995-96 to 1997- 98 based on which the Commissioner of Income Tax (Appeals) had granted relief to the assessee and which are all before the Tribunal. After going through the materials on record, we find that the Assessing Officer has refused the claim of payment of interest as business expenditure by making following observations: 2. In the Profit Loss A/c, the assessee debited a sum of Rs.6,20,767/- as interest paid. Obviously interest was paid on loan taken by the assessee. It is required, therefore, to be examined whether the loan fund was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7.9.96 7. Rajendra K. Debriwala Sons, HUF 28.8.96 5.3.97 Rs.3,75,000/- M/s. Ashok Kumar Co. Others. 375000/- 28.8.96 5.3.97 8. Sarla Baid. 27.9.97 Rs.9,00,000/- M/s. Naresh Pachisia 900000/- 3.10.96 9. Sampat Bardia 10.5.96 Rs.10,00,000/- Shares purchased 10,00,000/- 11.5.96 10. S.N.M. Estates (P) Ltd. 5.12.96 7.3.96 18,00,000/- M/s. Primo Impex Ltd. M/s. Ashok Kumar Co. 1800000/- 9.12.96 10.3.97 11. S.N.M. Estates (P) Ltd. 9.12.96 12,00,000/- Intt. paid against Loan, M/s. Ashok Kr. Co. Share purchased. 12,00,000 14.12 16.12.96 12. Tirupati Dankuni Real Estate. - Rs.13,260/- Intt. against loans Due for payment. 13. Vasaullok Properties (P) Ltd. 27.9.96 Rs.2,50,000/- M/s. Ashok Kumar Co. Share purchased 2,50,000 3.10.96 28.9.96 Rs.98,88,315/- 3. The above chart clearly sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant it is clear that the loan taken by the appellant remains utilised in stock of shares meant for trading purpose only and not for investment in shares as mentioned by the AO in his order. The AO s conclusion that loans were not given for the sake of business transactions but simply the loans taken were transferred to the parties by way of a loan is not correct. His conclusion that the appellant acted as conduit of such transactions is also not without any base. There was transfer of loans from one party to another party and it remained for the purpose of business. The AO has not understood the two separate business of the appellant in which as per the balance sheet the investment in shares and the other business, trading stock in shares are shown separately from year to year. The interest was claimed only for business purpose and not for investment in shares. Therefore, the net interest claimed as expenditure at Rs.6,03,930/= disallowed by the AO is allowable expenditure and is, thus, allowed. (Emphasis supplied by us). On an appeal by the Revenue, the Tribunal below, however, set aside the order of the CIT (Appeals) and restored the one passed by the Assessing Office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same time, substantial amount of loan was given to different parties and according to the Assessing Officer, loans were not given for the sake of business transactions but simply the loans taken were transferred to the parties by way of loan and the assessee acted as conduit of such loan transactions . In making such observations, the Assessing Officer totally overlooked the fact that the assessee being also a money lender is entitled to receive interest from the loan advanced by him as his profit and at the same time, is at liberty to take loan for running the money lending business. There is no prohibition of taking loan for running a money lending business and an assessee is lawfully entitled to deduct the interest paid on such loan as business expenditure as provided in the Act. It is not the law that money lending business must be run out of one s own money without taking loan from others or that interest paid on loan for running such business is not allowable as business expenditure. Even the interest received by the assessee for the last three years has not been treated as income from other source but has been included within the business income of the assessee. Thus, th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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