TMI Blog2014 (2) TMI 1213X X X X Extracts X X X X X X X X Extracts X X X X ..... ore us, amount received by the assessee was meant for purchasing a flat. Therefore, respectfully, following the order of the coordinating bench in the case of wife of the assessee, Mrs. Amisha B Koradia we reverse the order of the FAA and decided ground no. 1 in favour of the assessee. Disallowance of interest - Held that:- There is no dispute about the fact that the assessee has overdrawn from the partnership firm M/s Sagar Construction; therefore, the interest paid to the Sagar Construction for the debit balance in the capital account is an allowable expenditure against the business income of the assessee and particularly against the interest/remuneration received from the partnership firm. - Decided in favour of assessee. - ITA No. 9170/Mum/2010, ITA No. 02/Mum/2011 - - - Dated:- 14-2-2014 - B. R. Mittal (Judicial Member) And Rajendra (Accountant Member) For the Petitioner : Surendra Kumar For the Respondent : Vimal Punmiya ORDER Rajendra (Accountant Member) Challenging the orders dt. 19-10-2010 of the CIT(A)-20, Mumbai, Assessing officer (AO) and the assessee have filed corss-appeals. AO has raised following Grounds of Appeal: 1. On the facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the submissions of the assessee and the assessment order he held that from the balance-sheet it transpired that the assessee had shown fixed assets at ₹ 73, 87, 743/-, that the break-up of the fixed assets showed investment in residential flats at ₹ 48, 95, 739/-, that the said figure represented the opening balance brought forward from the earlier year, that the break-up also showed the closing balance of the same figure of ₹ 48, 95, 739/-, that there was thus no investment made during the current year, that break-up of the fixel assets was also given to the AO, that he had referred to in the assessment order, that it was not understandable as to how and why the AO had made the impugned addition. Thereore, addition made of ₹ 48, 95, 739/- by the AO had no legs to stand. 2.2. Before us, Departmental Representative (DR) supported the orders of the AO , wheres as the Authorised Representative(AR) supported the order of the FAA and submitted that no investment was made during the year under appeal. We have heard the rival submissions and perused the material before us. We find that the FAA has given a categorical finding of fact that the property was not own ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fter considering the submission of the assessee and the assessment order he held that a plain reading of the assessment order shows that the AO has simply made presumptuous and baseless addition of ₹ 4, 24, 000/-. 3.2. Before us, DR supported the order of the AO and AR made the same submissions that were made before the FAA. After hearing the rival submissions we are of the opinion that assessee did not own three properties as alleged by the AO. As the order of the AO is not based on facts and the FAA has decided the issue considering the factual position, so confirming his order we decide ground no. 2 against the AO. Appeal filed by the AO stands dismissed. ITA/02/Mum/2011, AY-2007-08: 4. Now, we would take the appeal filed by the assessee. First ground of appeal is about confirma tion of the partial addition of ₹ 70, 40, 850/- as Deemed dividend u/s. 2(22)(e) of the Act. During the assessment proceedings AO found that the assessee was a beneficial shareholder in M/s Karodia Construction P. Ltd. (KCPL)holding 50% of their shares, that he had taken loan of ₹ 99, 32, 251/- from the said company which had accumulated profits of ₹ 8, 00, 97, 861.AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the extent of its accumulated profit would amount to dividend in the hands of such shareholder, that only advance or loan made in the ordinary course of its business were treated as exempt where the lending of money was a substantial part of the business of the company, that said conditions did not apply in the case under appeal, that the provisions of the section did not exclude a payment if that was advanced towards purchase of a property even if same was refunded later. He relied upon the judgments of the Hon ble Bombay High Court and Supreme Court delivered in the cases of P. K. Badiani (76 ITR361)and Mukundidy K Shah(290ITR433)held that the concept of deemed dividend under Section 2(22)(e) of the Act postulated two factors, namely, whether payment was a loan and whether on the date of payment there existed accumulated profits , that those two factors had to be correlated, that in the matter under appeal said correlation led to the conclusion that there was credit balance of ₹ 70, 40, 850/-in the account of the company in the books of the assessee, that the AO s action was right in treating the balance to the extent of ₹ 70, 40, 850/- as deemed dividend. He res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the books of account of the company, then it cannot be presumed that the said amount falls under the ambit of loan and advances in the provisions of sec. 2(22)(e) of the Act. Moreover, it is pertinent to note that ₹ 50 lacs was given to the assessee on 15.02.2007 and therefore, this amount remains only for 1 months during the year under consideration. Further, the amount of ₹ 8 lacs was given to the assessee on 28th Dec 2006 and the said amount remains with the assessee only for 3 months in view of the short span of period of 1 months in respect of ₹ 50 lacs and 3 months in respect of 8 lacs. It is otherwise not permissible to make full addition of the said amount for the year under consideration. Once the assessee has established that the said amount was given to the assessee for the purchase of flat which is in the nature of commercial transaction between the parties, then in the absence of proving contrary by the department, the addition to the extent of ₹ 58 lacs is not justified. This view is fortified by series of decision as relied upon by the assessee. Hence, in view of the above discussion and in the facts and circumstances of the case, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isha B Koradia(supra).DR supported the order of the FAA. 5.3. We have heard the rival submissions and perused the material before us. We find that identical issue has been dealt by the Tribunal in the matter of the wife of the assessee as under: We have heard the ld. AR as well as the ld DR and considered the relevant material on record. The assessee has introduced ₹ 50 lacs as capital in Aditya Developers and withdrawal of ₹ 56 lacs with Sagar Construction. Thus, the assessee has earned interest income from partnership firms M/s Aditya Developers, at the same time; the assessee had interest expenditure of ₹ 65, 429/- on debit balance with the other partnership firm 8. At the outset, we note that the Assessing Officer has assessed interest income received from the firm as income from other sources which itself contrary to the provisions of sec. 28(v). Charging of payment of interest is provided under the partnership deed and therefore, the amount of interest received from the partnership firm has to be assessed as business income in terms of sect. 28(v) which provides as under: (v) any interest, salary, bonus, commission or remuneration, by whate ..... X X X X Extracts X X X X X X X X Extracts X X X X
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