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TMI Blog2021 (12) TMI 641X X X X Extracts X X X X X X X X Extracts X X X X ..... ny shares were purchased during the period under consideration.. Assessee took loan for business purposes from the financial institutions namely Bajaj Finance and thereafter from the HDFC Bank Ltd. The assessee has been doing business as working partner in the partnership firms as well as profession/vocation as Director in three Companies. From perusal of Section 2(36) Profession includes Vocation definition of the profession the assessee is entitled for deductions of interest on loans took for business/profession. Thus, it is crystal clear that the interest was paid in the business and commercial expediency apart from that there was no any direct nexus between the investment in shares and loans taken thereafter - as the assessee borrowed the funds from the bank as well as other, the borrowing was for the business purposes only and interest thereon was paid to the Bank as well as to others also.See SA BUILDERS LTD. VERSUS COMMISSIONER OF INCOME-TAX [ 2006 (12) TMI 82 - SUPREME COURT] We found merit in the contentions raised by the assessee and the ld. DR has not brought on record any new material to rebut or controvert the submissions and documents placed before us, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... grounds of appeal: 1. That, the Learned Commissioner of Income Tax (Appeals)-Ajmer,(Appellate Authority) has grossly erred on the facts and on the law in sustaining assessment order of the Income Tax Officer, Ward-4(5), Jaipur (Assessing authority) dated 26/12/2016 by which he disallowed interest 7,55,837/- paid as expenditure for purchasing shares in Natani Rolling Mills Pvt. Ltd., Neelkanth Industries Pvt. Ltd. In the preceding years and added in the returned income, thus, the impugned assessment order as well as appellate order both are against the provisions of the Act, bad in law, erroneous and liable to be quashed and addition of ₹ 7,55,837/ liable to be deleted, hence, the same may kindly be deleted, and the interest paid may kindly be allowed as business expenditure u/s 36(1)(iii) of the Act. 2. That, the Learned Appellate Authority has grossly erred on the facts and on the law in sustaining assessment order of the Assessing authority dated 26/12/2016 by which he disallowed interest 7,55,837/- paid as expenditure for purchasing shares in Natani Rolling Mills Pvt. Ltd., Neel Kanth Industries Pvt. Ltd. And added in the returned income, it is further clarif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come to Jaipur casually in two-three months / major festivals. That, I received a show cause notice u/s 271(1)0 of the I.T. Act, 61 from the Income Tax Officer, Ward-4(5), Jaipur on 04/03/2020 through e-mail for imposing penalty. That, after having received the above show cause notice, I came to Jaipur for conducting the required proceedings, and approached to the Chartered Accountant who appeared before the Appellate Authority in the case, about the service of the appellate order, because the assessment order was also served on my consultant who appeared before the Income Tax Officer during the course of the assessment under scrutiny of the case, and he refused about service of the appellate order, after refusal by the Chartered Accountant I asked to my parents i.e. Father and Mother who are residing here, about the order, because I have been living at Swaroop Ganj (Abu)along with my Family after starting the business there, but, my mother who received the Speed post could not understood about the post/order and forgot about the post received by her and she gave me on 05/03/2020. That, After having received the envelop from my mother, I came to know about the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applied in a meaningful manner which subserves ends of justice and technical considerations should not come in the way of cause of substantial justice. There is no quarrel that the explanation and reasons explained for delay must be bonafide and not merely a device to cover an ulterior purpose such as laches on the part of the litigant or an attempt to save limitation in the underhand way. If the party who is seeking condonation of delay has not acted in malafide manner and reasons explained are factually correct then the Court should be liberal in construing the sufficient cause and lean in favour of such party. A justice-oriented approach has to be taken while deciding the matter for condonation of delay. However, this does not mean that a litigant gets free right to approach the court at its will. 8. If we apply the settled principles as laid down by the Hon ble Supreme Court as well as other courts on the facts of the present case we find that the assessee has explained cause of delay, therefore, in the facts and circumstances of the case, we condone the delay of 78 days in filing the present appeal and admit the appeal for hearing. 9. The brief facts of the case are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clear from the page number 5 of the paper book submitted on 08/11/2021 before this Hon ble bench and the share in another Company Natani Rolling Mills (Pvt,) Ltd. Were also purchased before the assessment year 2009-10 of ₹ 7,32,000/-, thus, the total share were purchased of ₹ 54,97,000/-, thus, in view of the above facts it is crystal clear that the appellant-assessee has the same shares only and there in no any direct nexus of investment out of the loan during the period under consideration because no any shares were purchased during the period under consideration. That, the appellant-assessee took loan for business purposes from the financial institutions namely Bajaj Finance and thereafter from the HDFC Bank Ltd. That, the appellant-assessee has been doing business as working partner in the partnership firms as well as profession/vocation as Director in three Companies, We have to see the relevant provision of the Income tax Act, 1961 (Act) to decide whether the directorship in the Companies is profession or not, we are pleased to reproduce here under the relevant provision 2(36) of the Act, which as under:- Section 2(36) Profession includes V ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lders Ltd. Vs Commissioner of Income Tax (Appeals), Chandigarh and Others, order dated 14/12/2006 reported in AIR 2007 SC 482, (2007)1 SCC 781, MANU/SC/8798/2006. (ii) Commissioner of Income Tax Vs Vijay Solvex Ltd. (2015) 274 CTR (Raj.) 384. (iii) Commissioner of Income Tax Vs Rajeev Lochan Kanoria, (1994) 208 ITR 616 (Cal) (iv). Commissioner of Income Tax Vs Sanghi Finance and Investment Ltd. (2005) 273 ITR 268 (MP) 13. On the other hand, the ld. DR has vehemently supported the order of the lower authorities and submitted that the ld. CIT(A) has passed a well reasoned order discussing all the material facts and circumstances of the case. 14. We have heard the rival contentions of both the parties and have also gone through the written submissions filed by the assessee. We have also deliberated upon the decisions cited in the orders passed by the authorities below as well as cited before us and we have also gone through the orders passed by the revenue authorities. As per facts of the present case, we observed that the assessee is deriving his income from Natani Rolling Mills Pvt. Ltd as salary there from being director therein, house property, Inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n all kinds of Iron and Steel such as Round Bars, MS Angle, Sections, Channels etc. The assessee is director in Natani Rolling Mills (Pvt,) Ltd and Neelkanth Industries (Pvt.) Ltd since long back and purchased shares of Neelkanth Industries (Pvt.) Ltd. prior to the assessment year 2009-10 of ₹ 47,65,000/- and there was no any further investment in the shares and the share in another Company Natani Rolling Mills (Pvt.) Ltd. were also purchased before the assessment year 2009-10 of ₹ 7,32,000/-, thus, the total share were purchased of ₹ 54,97,000/-, thus, we are view of that the assessee has the same shares only and there in no any direct nexus of investment out of the loan during the period under consideration because no any shares were purchased during the period under consideration. 17. We further observed that the assessee took loan for business purposes from the financial institutions namely Bajaj Finance and thereafter from the HDFC Bank Ltd. The assessee has been doing business as working partner in the partnership firms as well as profession/vocation as Director in three Companies. In this regard, now we have to see the relevant provision of the Act to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, shall be deemed to be capital borrowed within the meaning of this clause; From perusal of the above sub-section, three ingredients are required for allowing interest paid which are as under;- 1. There should be borrowing of funds 2. Borrowing should be for business purpose, and 3. There should be payment of interest. The assessee fulfills all the above three conditions, as the assessee borrowed the funds from the bank as well as other, the borrowing was for the business purposes only and interest thereon was paid to the Bank as well as to others also. In this regard, we draw strength from the decision of the Hon ble Supreme Court in the case of S.A. Builders Ltd. Vs Commissioner of Income Tax (Appeals), Chandigarh and Others, order dated 14/12/2006 reported in AIR 2007 SC 482, (2007)1 SCC 781, MANU/SC/8798/2006 wherein it was held as under: 20. We agree with the view taken by the Delhi High Court in CIT V. Dalmia Cement (Bhart) Ltd. MANU/DE/0309/2002 :[2002] 254 ITR 377 (Delhi) that once it is established that there was nexus between expenditure and the purpose of the business (which need not necessarily be the business the assessee itself), the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enditure may not have been incurred under any legal obligation, but yet it is allowable as a business expenditure if it was incurred on grounds of commercial expediency. 9.1 The Hon'ble apex Court further observed in the above judgment as under: To consider whether one should allow deduction under s. 36(1)(iii) of interest paid by the assessee on amounts borrowed by it for advancing to a sister concern, the authorities and the Courts should examine the purpose for which the assessee advanced the money and what the sister concern did with the money. That the borrowed amount is not utilized by the assessee in its own business but had been advanced as interest-free loan to its sister concern is not relevant. What is relevant is whether the amount was advanced as a measure of commercial expediency and not from the point of view whether the amount was advanced for earning profits. Once it is established that there was nexus between the expenditure and purpose of the business (which need not necessarily be the business of the assessee itself) the Revenue cannot justifiably claim to put itself in the armchair of the businessman or in the position of the board of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , we reproduce the relevant provision of the Act as under:- Section 40(b)(ii): any payment of remuneration to any partner who is a working partner, or of interest to any partner, which, in either case, is not authorized by, or is not in accordance with, the terms of the partnership deed: or, 40(b)(iii) .Not relevant here. Section 40(b)(iv) any payment of interest to any partner which is authorized by, and is in accordance with, the terms of the partnership deed and relevant to any period falling after the date of such partnership deed is in so far as such amount exceeds the amount calculated at rate of twelve per cent simple interest per annum; or Thus, in view of the above provisions of the Act and the deed of partnership, it is crystal clear that the assessee could not took interest on advances as working capital to it s partnership firm i.e. Oliya Import Export exceeding 12% which was advanced as working capital. It is important to mention here that in the course of business, it is not necessary to have profit only and there should not be any loss therein. As far as advances to Giriraj Buildcon is concerned, we noticed that the Giriraj Buildcon is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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