9911796707
TMI Blog2022 (5) TMI 512X X X X Extracts X X X X X X X X Extracts X X X X ..... not file return of income within the due date of filing of return of income as mentioned in the notice dated 10/11/2014 issued u/s 153A of the Act. We find that the submissions made by both the sides are contrary In nature and, therefore, we deem fit and proper to restore this issue back to the file of the AO with a direction to find out or verify the exact claim of the set off of loss and carried forward, if any, and decide the issue in accordance with law and on merits after providing opportunity of hearing to assessee. Thus, this ground raised by the revenue is treated as allowed for statistical purposes. Addition on account of interest attributable to the debit balance of the partners - partners had withdrawn huge funds from the firm but no interest was charged on these drawings. Thus, according to AO, the interest bearing funds were diverted/misutilised by the partners in the form of interest free drawings - HELD THAT:- On perusal of the balance sheet, it clearly shows that the assessee s capital account is showing debit balance and further observed that no interest has been charged by the assessee on the debit balance of the partner s capital account whereas the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich could show that the partners withdrawal were made out of the interest free advances available? iv) Whether on the facts and circumstances of the case and in law the Id. CIT(A) failed to appreciate that the total fund available with the assessee is Rs. 197.19 crores against the debit balance of the partners is at Rs. 138.09/- and it is not the case of the assessee that entire debit balance is out of interest free advances available. v) Without prejudice to the grounds at (i), (ii) (iii) above, whether on the facts and circumstances of the case and in law the Id. CIT(A) ought to have disallowed the interest attributable to the debit balance of the partners in the ratio of total fund (interest free and interest bearing fund) to the total debit balance of the partners. vi) The appellant craves leave to amend or alter any ground or add any other grounds which may be necessary. 3. The decision taken in AY 2012-13, shall mutatis-mutandis apply to AY 2013-14 as well. 4. Briefly, the facts of the case are that the assessee company is engaged in the business of development, constructions and real estate activities. During the previous year, relevant to AY under c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 139(3) and the same is extracted hereunder for kind perusal: If any person who 44[*** J has sustained a loss in any previous year under the head Profits and gains of business or profession or under the head Capital gains and claims that the loss or any part thereof should be carried forward under sub-section (1) of section 72, or sub-section (2) of section 73, or sub-section (1) 45[or sub-section (3)J of section 74, 46[or sub-section (3) of section 74AJ, he may furnish, within the time allowed under sub-section (1) 47[***J, a return of loss in the prescribed form48 and verified in the prescribed manner and containing such other particulars as may be prescribed, and all the provisions of this Act shall apply as if it were a return under sub-section (1). A detailed reading of the section it is clear that loss claimed under the head profits and gains of business or under the head capital gains should not be allowed to be carried forward as envisaged u, '5.72(1) etc if the return of income was not filed within in due date mentioned u/s 139(1) of the IT Act. Thus, the prior condition is that a return of income declaring loss under above mentioned heads should ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pply to the assessment made under this section; (ii ) in an assessment or reassessment made in respect of an assessment year under this section, the tax shall be chargeable at the rate or rates as applicable to such assessment year. As already submitted, the assessee claimed loss to the tune of Rs.2,70,07,786/- on the basis of profit and loss account filed along with the return of income. The assessing officer concluded the same should not be allowed and therefore she proceeded to disallow the same. Thus, the assessing officer took an improper stand. The provisions of the Act says that the computation as per the belated return of income results in loss the same should not be allowed to be carryforward. Nowhere in the act it was mentioned that the loss itself should be ignored in respect of a belated return of income and the assessing officer should proceed with further computation of income on the basis of the same return of income. Thus, the stand taken by the assessing officer has no basis and is completely against the provisions of the act. It is further submitted that the loss of Rs. 2,70, 07,786/- includes unabsorbed depreciation of Rs.39,23,689/-. The assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not filed the return of income u/s 139(1) of the Act.. The return of income u/s 153A was filed on 07/08/2015, which was beyond the time granted by the AO vide notice dated 10/11/2014. As per section 139(3) of the Act, if the assessee did not file return of income within the due date, the loss for the current year s cannot be carried forward. On perusal of the paper book filed by the assessee, we find that the assessee set off of loss for current year from the other heads of income and there is a brought forward loss of Rs. 53,15,526/- from AY 2011-12, which has been carried forward. We also find from the copy of the acknowledgment of return that there is a current year s loss of Rs. 39,23,689/-. Since this is a searched case, as per the provisions of section 153A(1a), provisions of section 139 would apply. But, in the impugned case, the assessee has not filed its return of income as specified in the notice issued u/s 153A read with section 139(3) and, therefore, loss claimed in the return of income for the current AY cannot be carried forward. The AO has disallowed current year s entire loss and he has not given set off of loss of the current year from the other heads of income. Du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring funds were diverted/misutilised by the partners in the form of interest free drawings. In this connection, during the course of assessment proceedings the assessee was asked as to why the interest expenditure claimed should not be disallowed. In, response, the assessee submitted as under: Shri P.Amruth Prasad and Uppu Srinivas are the main partners in M/s.Amsri Builders. The said firm is the flag bearer of the Amsri Group. Basically the partners acquired or entered several development agreements for the land bank through Mis. Amsri Builders. Further, the partners have contemplated Mis. Amsri Builders as their main firm. Thus, the partners made the firm as instrumental to get the funds received and temporarily parked in the Amsri Builders account on various occasions. Subsequently, the partners ploughed back the funds through their capital account to the required destinations as per the understanding. This becomes customary practice in the real estate industry. It is to be noted that the firm has received huge interest free advances for the purpose of investment in the firm or in other companies I firms. The said interest free advances routed through partners capital ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce as there are huge debit balances outstanding in partners capital accounts whereas the assessee is paying interest on the borrowals. The AO concluded that the assessee ought to have charged interest on capital account debit balances and disallowed the interest claimed. The assessee is not obligated to charge interest and debit balances and further, the interest can be disallowed only if the direct connection between the loan and the withdrawals by the assessee can be established. It is seen from the details filed that the assessee has received huge amounts free of interest which are also outstanding. The direct connection between the withdrawals by the partners and interest bearing loans has not been established by the AG. In view of the factual position as above disallowance of interest is not justified/warranted. Accordingly, the addition made on account of the above is deleted. 15. The ld. DR submitted that partners have withdrawn excess money and no interest has been charged by the assessee on the excess withdrawal as there are no interest free funds available with the assessee. Further, he submitted that interest bearing funds taken by the assessee has not been utilized ..... X X X X Extracts X X X X X X X X Extracts X X X X
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