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TMI Blog2015 (8) TMI 1041X X X X Extracts X X X X X X X X Extracts X X X X ..... . Ld. Commissioner of Income Tax (Appeals) also failed to appreciate that total expenditure is to be allowed which is incurred wholly and exclusively for earning income. It cannot be restricted in proportion of income. We allow the ground of appeal raised by assessee and consequently reject the ground raised by the revenue. The assessee is entitled to expenditure of ₹ 1,09,29,139/- claimed by him. - Decided in favour of assessee. Addition on account of long term capital gain - CIT(A)deleted addition - Held that:- Section 48 of the income tax act, 1961 provides that income chargeable under the head ‘capital gains, shall be computed by deducting from the full value of consideration received or accrued as a result of the transfer of the capital asset, the amounts namely (a) expenditure incurred wholly and exclusively in connection with such transfer (b) the cost of acquisition of the asset and the cost of any improvement thereof. The assessee while offering capital gain on sale of a plot of land had claimed cost of improvement for ₹ 10,84, 275/-. The Assessing Officer rejected the additional cost to the extent of ₹ 6 lacs. On appeal, ld. Commissioner of Income Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not filed within time, therefore, assessee cannot file revised return. 4. On scrutiny of the accounts, it revealed to the Assessing Officer that assessee has claimed interest expenses of ₹ 1,09,29,139/- as against interest income of ₹ 50,27,815/-. The ld. Assessing Officer has noticed the details of interest earned and interest paid. After considering the explanation of assessee, he disallowed the claim of assessee to the extent of ₹ 1,07,38,991/-. The finding recorded by the Assessing Officer reads as under:- 4. Interest Expenses On perusal of the original return of income filed on 23.10.2008 it is observed that the assessee has claimed Interest Expenses of ₹ 1,09,29,139/- as against the interest income of ₹ 50,27,815/- as detailed under: Interest Earned Interest Paid Bank Interest 3142 Manibhai V. Patel, HUF 1157595 Interest on FDRs with Banks 3563608 Kailashben Manibhai Patel 1082772 NSS Interest 27266 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ision of ITAT delivered in his own case for AY 2003-04. Furthermore the interest expense of ₹ 1,90,148/- debited and claimed in this proprietary concern pertains to Shah Ambalal Dosachand only and TDS of ₹ 19,585/- is deducted on it. In support details of TDS expenses and copy of TDS Chalaln is enclosed herewith. The same should therefore be allowed in full. Moreover there is an opening balance of ₹ 21,81,42l/- as on 1/4/2007 and so it is an old balance which justify the allowability as per ITAT s Order. The assessee only furnished the details of TDS of ₹ 19585/- on interest paid of ₹ 1,90,148/-. The assessee furnished the copy of challan of ₹ 19585/- only as a proof of depositing the TDS into the Govt. A/c. on 16.04.2008. From the submission of the assessee it is seen that the assessee himself admitted that interest expenses of ₹ 1,90,148/- is claimed as business expenses in his proprietary concern M/s. Apollo Organizers Builders which means the balance interest expenses of ₹ 1,07,38,991/- has been claimed to earn income from other sources i. E. Interest Income of ₹ 50,27,815/-which is apparently unreasonable and cannot b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellant, I find that the appellant has declared the impugned interest income of ₹ 50,27,815/- and expenditure of ₹ 1,09,29,139/- under the head income from other sources in the original return of income filed on 23.10.2008 for A. Y.2008-09. Subsequently, the appellant filed revised return of income on 30.03.2009, declaring impugned interest income and expenditure under the head business and profession . It is a fact on record observed by the Assessing Officer that the original return of income was belated return and therefore, the revised return was treated as nonest by the Assessing Officer. Meaning thereby, the impugned interest income and expenditure were assessed by the Assessing Officer under the head income from other sources . The Assessing Officer noticed that the interest income is only ₹ 50,27,815/- and interest expenditure against the same claimed by the appellant is ₹ 1,09,29,139/- and therefore, not satisfied with explanation offered for various reasons discussed above disallowed interest expenditure of ₹ 1,07,38,991/-. As discussed, supra, the Ld. A. R. submitted voluminous details and arguments to allow the impugned interest e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the investment which resulted into such huge loss to the appellant under the head income from other sources . It is an undisputed fact that the appellant has shown the impugned interest income and expenditure under the head income from other sources and therefore, only the interest expenditure incurred for earning impugned interest income can be allowed to the appellant in view of direct provisions of section 57 of the IT. Act. The argument of the appellant that the unsecured loan borrowed on interest has been used for earning impugned interest income as well as for other business purposes will come to his rescue only to the extent the borrowings utilized directly for earning interest chargeable under the head income from other sources. The argument of the appellant that most of the parties to whom interest has been paid are old and the interest payment to such old parties has been accepted by the department as well as the Hon ble ITAT, Ahmedabad has considerable force. On random verification of the past record, I observed that the appellant has declared interest income and expenditure under the head income from other sources, but in most of the earlier years, the interest inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clared interest income and expenditure under the head income from other sources but in most of earlier years, the interest income is more than the interest expenditure, therefore, it was allowed. (c) No prudent businessman would borrow the funds at higher rate of interest and invest those funds at lower rate of interest. 8. A perusal of the finding of ld. Commissioner of Income Tax (Appeals) makes it clear that in principle ld. Commissioner of Income Tax (Appeals) was satisfied that assessee had taken loans/borrowings at interest and invested those for earning interest income which has been shown as income from other sources . In the past, such income was accepted and expenditure was allowed because assessee has more interest income than the expenditure. This year, Ld. First Appellate Authority did not allow the claim of assessee fully for the reason that interest income was not sufficient to take care of interest expenditure and, Ld. First Appellate Authority inferred that assessee must have invested the funds somewhere else. This observation is not based on any evidence from the record. It is only an assumption on the ground that no businessman would take funds on a high ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 915834 MEHSANA URBAN BANK 20/53 148106 PINALBEN MANANBHAI PATEL 61278 AMBALAL DOSACHAND SHAH 300886 GUJARAT TUBEWELL CO. 20787 (-)9141842 (-)4009600 10. Copy of the assessment order dated 31st December, 2008 passed u/s. 153A read with section 143)(3) is available on the record. The assessee has filed his original return of income on 31st August, 2007 declaring a loss of ₹ 55,65,831/-. Since a search was carried out at his premises on first of November, 2006, a notice u/s. 153A was issued and he filed the return on 28th February, 2008 again and claimed the loss of ₹ 55,65,831/-. The Assessing Officer has passed his assessment order on 31st December, 2008. He determined the total income of the assessee at (-)55,15,806/-. Thus, the ld. Assessing Officer has accepted the loss of Rs. -55,15,806/-. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Less: Deductions UNJHA SPCIES COPRIATON 6019 SHAH AMBALAL DOSARAM 16110 MEHSANA URBAN BANK A/C. 13/09/70 61767 MEHSANA URBAN BANK A/C 20/53 211796 MEHSANA URBAN BANK A/C 17/6269 2420427 MEHSANA URBAN BANK A/C 23/421 486140 AJITKUMAR TRIBHOVANDAS PATEL 121879 MAULIK MANI BHAI PATEL 2580591 MANIBEN MANILAL PATEL 1254959 KAILASHBEN MANIBHAI PATEL 1948456 MANIBHAI V. PATEL HUF 1344735 (-) 10452879 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tum of expenditure and exclusively refers to the object and purpose of expenditure. Though these expressions are not used in section 57 but the overall meaning of section 57 is also to the same effect that, the expenditure ought to be incurred for earning income which is assessable under the head income from other sources . If the logic of ld. Commissioner of Income Tax (Appeals) is accepted, then, in each and every case, expenditure would be allowed only, when there is resultant income. In other words, there cannot be any loss in any activity which results income from other sources . All the details were before the ld. Commissioner of Income Tax (Appeals) but instead of pin pointing any concrete diversion of interest bearing funds; ld. Commissioner of Income Tax (Appeals) only assumed that some funds might have been used by the assessee for some other purposes. The department has been consistently accepting the claim in earlier years and in subsequent years. It appears that in the beginning, assessee has more income under the head income from other sources as than the interest expenditure, but in Assessment Year 2006-07, 2007-08 and 2009-10, the interest expenditure was more t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndisclosed income of the assessee. Thus, the action of the Assessing Officer on this count is contradictory to each other and amounts to double taxation and non-application of mind for the sake of making flimsy addition. The Hon ble Commissioner of Income Tax (Appeals) may be pleased to delete the said disallowance of ₹ 6 lacs in computing capital gains and also delete the addition of ₹ 6 lacs as alleged undisclosed income. For ready reference copy of Appellant s letter dated 23.11.2010 (Annex. 1), copy of appellant s letter dated 03.11.2010 (Annex.3 with relevant enclosures marked as Annex.3.1 to 3.6 are submitted herewith for kind-perusal and necessary actions. 6.2 I have carefully considered the above submissions and gone through the record. I find that the assessee has submitted all the material details during assessment proceedings before the Assessing Officer vide his letter dated 03.11.2010 (P. B. 108 to 388) and further letter dated 23.11.2010 (P. B. 390 to 394). The assessee has made payment of ₹ 6 lakhs by account payee cheque on 06.04.2008 for the construction made and corresponding bill raised by the party and the A. O. himself has held that as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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