DEPUTY COMMISSIONER OF INCOME TAX Vs. DINESH KUMAR SACHDEVA
INCOME TAX APPELLATE TRIBUNAL
DEPUTY COMMISSIONER OF INCOME TAX
Dinesh Kumar Sachdeva
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G.D.AGRAWAL, J. -
(1.) THIS appeal by the Revenue is directed against the order of learned CIT(A) -XXVII, New Delhi dated 16th March, 2010 for the AY 2007 -08.
(2.) GROUND No.1 of the Revenue's appeal reads as under: -
"On the facts and circumstances of the case, the ld.CIT(A) has erred in deleting the addition of Rs. 14,49,068/ - out of additions of Rs.15,27,929/ - made on account of interest paid to bank u/s 57(iii) of the IT Act."
(3.) THE facts of the case are that the assessee claimed deduction for an amount of Rs.15,27,929/ - received from M/s Sachdeva Buildcon Pvt.Ltd. (hereinafter referred to as 'SBPL') under the head 'income from other
sources'. The Assessing Officer asked the assessee to justify the deduction of the sum of Rs.15,27,929/ -
on account of interest paid to banks. It was claimed by the assessee that he has paid the interest to ICICI
Bank and ABN Amro Bank. The money borrowed from these two banks has been utilized for giving loans
to SBPL. The Assessing Officer was not satisfied with the claim of the assessee because the assessee has
not furnished any evidence in support of his contention that the money borrowed from the banks has been
utilized for giving loan to SBPL. On appeal, learned CIT(A) examined the details furnished by the assessee
and he restricted the disallowance to Rs.78,861/ - and directed the Assessing Officer to allow the claim of
deduction in respect of the remaining interest. The Revenue, aggrieved with the order of learned CIT(A),
is in appeal while the assessee has accepted the order of learned CIT(A).
We have heard the arguments of both the sides and perused relevant material placed before us. At the time of hearing before us, assessee furnished the details of loan taken from the bank and the amount
given to SBPL. From the said details, we find that the assessee claimed to have borrowed the sum of
Rs.77,48,250/ - from ICICI Bank and out of which, Rs.75,00,000/ - is advance to SBPL. The assessee
further borrowed the sum of Rs.1,25,00,000/ - from ICICI Bank, out of which, Rs.49,60,345/ - is advanced
to SBPL. A sum of 1,00,00,000/ - is claimed to have been borrowed from ABN Amro Bank and the entire
amount is utilized for giving loan to SBPL. From these details furnished by the assessee before us, the
working of the disallowance of interest made by the CIT(A) is not verifiable. In our opinion, it would meet
the ends of justice if the matter is set aside to the file of the Assessing Officer and he is directed to rework
out the disallowance of interest considering the utilization of borrowed money. We order accordingly. So
far as legal principle is concerned that wherever borrowed money has been utilized for giving advance for
the purpose of earning of interest, interest paid by the assessee on such borrowed money is to be allowed.
In view of the above, we set aside the orders of authorities below on this point and restore the matter to
the file of the Assessing Officer. We direct the Assessing Officer to verify the utilization of the borrowed
money from ICICI Bank as well as ABN Amro Bank and to the extent the borrowed money has been
utilized for giving advance to SBPL, the Assessing Officer will allow the deduction for interest paid to ICICI
Bank/ABN Amro Bank. Needless to mention that the Assessing Officer will allow adequate opportunity of
being heard to the assessee.;
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