TMI Blog2019 (10) TMI 391X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee. Thus, it is seen that AO has accepted the allowability of the said interest expenditure in subsequent years and, therefore, a consistent stand needs to have been taken and taking into consideration the facts noted supra, we allow the claim of the assessee. - Decided in favour of assessee. - I.T.A. No. 505/Kol/2019 - - - Dated:- 25-9-2019 - Shri A. T. Varkey, JM For the Appellant : Shri Ravi Tulsiyan, FCA For the Respondent : Shri Pinaki Mukherjee, Addl. CIT, Sr. DR ORDER This appeal preferred by the assessee is against the order of the Ld. CIT(A)-13, Kolkata dated 31.12.2018 for AY 2012-13 on the following grounds: 1. That, on the facts and in the circumstances of the case, the Ld. CIT(A) erred in having upheld the disallowance of interest expenditure of ₹ 10,06,209/- on unsecured loan borrowed and invested in the capital of two proprietary concerns as not allowable business expenditure in the hands of the appellant on the alleged ground that the loan and interest thereon had been shown in his P/L Account and not in the respective books of the proprieta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed and your appellant be given such relief(s) as prayed for. 8. That, the appellant craves leave to amend, alter, modify, substitute, add to, abridge and/or rescind any or all of the above grounds. 2. Though the assessee has preferred eight grounds of appeal, the main grounds are given in ground nos. 1 to 6 above. Ground nos. 7 and 8 are general in nature, so it stands dismissed. 3. The main grievance of the assessee is regarding the action of the Ld. CIT(A) in upholding the disallowance of interest expenditure to the tune of ₹ 10,06,209/- which the assessee an individual, who have taken unsecured loan and invested in his two proprietary concerns. Brief facts of the issue as noted by AO are that the assessee e-filed the return of income for the assessment year 2012-13 on 30/9/2012 declaring a total income of ₹ 6,68,971/-. Later the case was selected for scrutiny through CASS and accordingly notices u/s 142(1) and 143(2) were issued and served upon the assessee. During the concerned previous year the assessee was engaged in trading of yarn. The AO acknowledges that during the assessment proceedings, books of accounts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the accounts of that business which is subject to audit u/s.44AB in order to enable the auditor to report properly on the said loans in Form 3CD. But in this case the assessee did not include the interest expenditure of ₹ 10,06,209/- and the related loan amount in the audited accounts of his proprietorship business . In view of the above reasons, the said amount was disallowed by the AO and added back to the total income of the assessee. 4. Aggrieved, the assessee preferred an appeal before the Ld. CIT(A) who did not go into the reasons given by the AO to deny the disallowance, however, had given a different reason to deny the claim. According to Ld. CIT(A) , it is for the assessee to prove with cash flow statement or otherwise as to how the personal loan was utilized in each of his business. According to the Ld. CIT(A), since the assessee did not prove that loan was substantially used for his business, the AO s action cannot be interfered with . According to Ld. CIT(A), the balance sheet figure shows only the amount as on 31.03.2012 and the utilisation of loan could be demonstrated by way of loan trail which ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and, therefore, disallowed the interest claim to have been expended by the assessee to the tune of ₹ 10,06,209/-. The Ld. CIT(A) has confirmed the action of the AO by alleging that the assessee has failed to produce any specific details by submitting cash flow trail of the loan amount being utilized by the two business concerns and confirmed the action of AO. Assailing the action of the Ld. CIT(A), the Ld. AR contended that proprietary concern is a type of enterprise i.e. owned and run by one person and there is no legal distinction between the owner and the business entity. Therefore, proprietary concern is not a separate legal entity. For the aforesaid proposition the Ld. AR drew our attention to the Hon ble Delhi High Court decision in the case of Svapn Constructions Vs. Idpl Employees Cooperative Group 127 (2006) DLT 80 wherein Hon ble High Court has held as under: 15. Perusal of the petition reveals that petition has been filed in the name of sole proprietorship firm which is not a legal entity through its sole proprietor. A sole proprietorship firm is not a legal entity which can sue in its own name though any two persons claiming or being liable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unregistered proprietorship firm and the said suit is to be instituted in the name of proprietor. There is no statement made in the plaint by the plaintiff as to who is the proprietor of the firm. Sh. Amitabh Sharma was described in the Cause title of the plaint only as an authorised representative. The name of the proprietor of the said proprietorship firm is not given in the plaint. The plaint was not signed by the authorised representative. A sole proprietorship firm is not a legal entity which can sue or be sued in its own name. Such suit relating to or against the affairs or claims of a proprietorship concern has to be brought or made against the person who is the sole proprietor of the firm . 7. Thus it was contended by the Ld. AR that when there is no separate identity of the proprietary concern and the proprietor (i.e. the assessee in this case), even if the interest expenditure incurred for the purpose of business is accounted for in the books of the proprietor (i.e. the assessee) and not in the books of the proprietary concerns, it will not alter or affect the allowability of the explanation. Further, the Ld. AR drew my attention to P L Account and Balan ..... X X X X Extracts X X X X X X X X Extracts X X X X
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