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TMI Blog2024 (6) TMI 523X X X X Extracts X X X X X X X X Extracts X X X X ..... erest expenditure has been incurred on the loans which were taken by the proprietorship concern for its business purchases which later on transferred to the capital account of the assessee. Therefore, the interest expenditure is connected with the proprietorship concern which has been sold. Such interest expenditure is not connected in any manner with the interest which has been earned on the late payment of sale consideration by the purchaser company. The receipt of the sale consideration by the assessee in five years was as per the terms of contract between two parties and such interest income being revenue in nature has been correctly charged under the head income from other sources . But the interest expenditure however being connected with the sale of proprietorship concern, which is liable for tax under the head capital gain and thus the expenditure incurred for investment in the proprietorship concern is related to cost of the said proprietary concern to the assessee. Thus on this ground only the claim of the assessee is not allowable. Further, we find that assessee has failed to substantiate any deduction of the tax at source on such interest credited or actual payment of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts submitted. 5. The learned CIT(A) has erred in law and in facts and in circumstances of case to held wrongly that the interest payments stated to be payable by the appellant to various parties are not actually been paid upto 31-03-2020. 6. The learned CIT(A) has erred in law and in facts and in circumstances of case to held that the interest payments are not truly legitimate rather only employed as a strategy to lower the taxable income and such observation is only on the basis of surmises presumptions rather then on actual facts. 7. The learned CIT(A)has erred in law and in facts and in circumstances of case to appreciate the facts that loans and advances on which interest has been paid has arisen only from the loan taken on which interest has been paid and assuming that even if it is not believed by CIT(A), The learned CIT(A) has not given finding that loans taken has been used for any other purposes. 8. The learned CIT(A) has failed to understand how the interest can be paid if there is no liability of unsecured loan in books of accounts and failed to understand that The interest paid is directly against interest received If the assessee has not incurred the expenditure on su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ld. CIT(A) upheld the disallowance. Aggrieved, the assessee is in appeal before the Tribunal by way of raising grounds as reproduced above. 4. Before us, the Ld. counsel for the assessee filed a Paper Book containing pages 1 to 124. 5. The grounds raised by the assessee are in respect of sole issue of disallowance of deduction of the interest claimed u/s 57 of the Act against the interest income received by the assessee. In ground No. 12 this specific issue has been raised by the assessee. All the grounds being connected with the single issue of disallowance of interest expenditure, all these grounds raised are adjudicated together. 6. Briefly stated, facts qua the issue in dispute are that the assessee was carrying on business under the proprietorship concern namely M/s Rajwadi Emporium, which was transferred as going concern to M/s Rajwadi Emporium India P. Ltd. w.e.f. 01.04.2017. An agreement for takeover of business as going concern was made between the assessee and the purchaser company on 31.03.2017. A copy of said agreement is placed on paper book page 94 to 97. As per terms of this agreement, the vendor i.e. assessee would sale and the purchaser i.e. company buy all the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Private Limited Company. However, it is seen that the unsecured loans existed in the balance sheet of the proprietorship concern of the appellant as on 31-03-2017. The agreement of transfer of business is for takeover of business as a going concern. All the assets and liabilities of the proprietorship concern except the bank balances would become the assets and liabilities of the purchaser. Accordingly, the purchaser has taken over the business along with the existing liabilities including the unsecured loans of the proprietary concern. Further, there is no reason why the unsecured loans should be retained by the appellant when the business is sold as a going concern. Also, the business run by the appellant is a proprietorship concern which does not have separate legal existence. Further, the appellant does not have any other business other than the proprietorship concern run in the name of M/s Rajwadi Emporium. That being the case, it becomes only academic whether the unsecured loans were transferred from the books of the proprietorship concern to the proprietor viz... the appellant. 5.5 Further, it is claimed by the appellant that interest at the rate of 18% has been paid by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee. The income from sale or transfer of the proprietary concern has not been shown under the head income from other sources . Therefore, the loan taken for the purpose of proprietary concern sold now cannot be claimed as interest expenditure against the interest income received by the assessee for delayed payment of the sale consideration of the proprietary concern. Accordingly, he submitted that order of the lower authorities on the issue in dispute might be sustained. 9. We have heard rival submission of the parties and perused the relevant material on record. The issue in dispute is in respect of deduction under the provisions of section 57 of the Act for interest expenditure incurred on loans appearing in the capital account of proprietary concern against the interest income received on delayed payment of sale consideration of said proprietary concern namely M/s Rajwadi Emporium. The expenditure incurred for realizing interest receipt is only allowed as deduction under the provisions of the Act, therefore, for claiming deduction, the onus was on the assessee to substantiate whether the interest expenditure has been incurred for the purpose of earning the said interest incom ..... X X X X Extracts X X X X X X X X Extracts X X X X
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