Tax Management India. Com
                        Law and Practice: A Digital eBook ...

Category of Documents

TMI - Tax Management India. Com
Case Laws Acts Notifications Circulars Classification Forms Manuals SMS News Articles
Highlights
D. Forum
What's New

Share:      

        Home        
 

TMI Blog

Home

2019 (10) TMI 391

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... 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 proprietary concerns. 2. That, the Ld. CIT(A) erred in not having considered that there is no separate identity of the propriet .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... 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, bank statements, loan confirmations and bill/vouchers were produced by the A.R. of the assessee. Enquiries have been made by issuing letters u/s 133(6) of the Act. The replies to the same were tallied with the assessee's claim. The AO also noticed that the assessee has .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... siness . 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 has not been placed in the appeal papers. And, therefore, the Ld. CIT(A) confirmed the action of the AO on this different reason. Aggrieved, the assessee is before the Tribunal. 5. I have heard rival submissions and gone through the facts and circumstances of the case carefully. It is noted that the assessee has two proprietorship concerns namely, M/s. Sri Balaji Prints and M/s. R .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... y 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 as partners and carrying on business may sue or be sued in the name of firm of which such persons are partners at the time of accruing of cause of action, however under Order XXX of the Code of Civil Procedure and under any other provision of code a person carrying on business in a name other than his can sue in the name other than his. In Miraj Marketing Corporation (supra) relied on by the respondent, it was held that a sole proprietorship firm which is not a l .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... 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 Balance Sheet placed at page 3 of paper book. From a perusal of it, it is discerned that the investment in proprietorship concerns totals to ₹ 1,39,18,579.38/-. The own funds of the assessee is when totaled comes to ₹ 48,47,568.07 which fund even if was utilized entirely in the proprietorship concern, I note was not sufficient to cover the entire investment of ₹ 1.39 cr. i.e. difference is noted as (₹ 1.30 cr. - ₹ 48.49 lakhs = ₹ 81.51 lacs). Therfore in the light of this fact, it can be safely as .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

 

 

 

 

|| Home || About us || Feedback || Contact us || Disclaimer || Terms of Use || Privacy Policy || Database || Members || Refer Us ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.
|| Site Map - Recent || Site Map ||