TMI Blog2020 (4) TMI 612X X X X Extracts X X X X X X X X Extracts X X X X ..... at assessee has used the interest bearing funds for the purposes of earning exempt income to make any disallowance u/s 14A with respect to interest expenditure. As the ld AO has not established the nexus about investment of interest bearing funds in exempt income generating apparatus, no disallowance u/s 14A rwr 8D can be made on account of interest expenses. - Decided in favour of assessee. Addition on account of various expenses - assessee did not stated the nature of expenditure alongwith the justification and the details of the various expenses relating to building material ion for genuineness of its claim - HELD THAT:- Assessee furnished the details of the expenses asked by the A.O. and the details of the various expenses relating to building material - A.O. was not justified in stating that the assessee had not furnished any reply. On the other hand the CIT(A) after examining the details/material on record, came to the conclusion that the assessee had placed copy of account of building repair alongwith copy of major bills before the A.O. vide letter dt. 24/10/2017 and considering the quantum of repair this amount was very small. - Decided against revenue. Loss on Ret ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee had shown liability of ₹ 3,12,44,216/- on account of Loan from Ex Partners in the Schedule Forming Part of the Balance Sheet. He asked the assessee to state the nature of the liability alongwith the confirmation of the creditors. In response the assessee submitted that Ms. Shivani Singhal was the partner in the firm in the earlier years and on her retirement, she was not paid the due amount, with mutual consent and the impugned amount represented the amount due to the said Ex partner. The A.O. however was not satisfied from the reply of the assessee and made the addition of ₹ 3,12,44,216/- by observing in para 5.2 of the assessment order dt. 30/10/2017 as under: 5.2 The undersigned has considered the submission of the assessee. One thing is crystal clear that the assessee is no longer required to repay the liability of ₹ 3,12,44,216/- which is due from the year 2008 to Ms. Shivani Singhal, an ex-partner. Further, as submitted by the assessee in its reply dated 24.10.2017, reproduced under Para-5 above, Ms. Shivani Singhal (the creditor) has consented that this amount of ₹ 3,12,44,216/- is not required to be paid to her. Therefore, this is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be due unless and until the same is paid or written back in the books of the accounts. 4. In support of the fact that Ms. Shivani Singhal had not consented to waive off the said amount due from the firm, a copy of her Statement of Affairs prepared for the FY 2014-15 for her tax purposes is enclosed at page 41, which reflects that an amount of ₹ 3,12,44,216/- is due to be received from Hycron Electronics as on 31.3.2015. 5. Your honour may also like to observe that Hycron Electronics is a partnership firm, where all family members are its partners and in case any retiring partner does not have any need for funds, he/she can very well park it with the firm itself, as there is no risk of non-payment being a family run firm. 6. Your honour may please like to peruse the provisions of section 41 which deals with a situation where any sum is deemed to be business income of the Appellant-Assessee viz; (a) A loss, expenditure or trading liability has been incurred in the course of business or profession; (b) Allowance or deduction has been made in respect of such loss, expenditure or trading liability in the course of assessment in earlier years; and (c) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the amount would also not bring about a remission or cessation of the liability. In this regard, reliance is placed on CIT vs. Sadul Textiles Ltd. (1987) 167 ITR 634, J. K. Chemicals Ltd. vs. CIT (1966) 62 ITR 34(Bom) and (1978)114 ITR 853 (Karn). 12. The judgemental decision final rest with the appellant about the liability and unless and until it is written back in the books, it shall continue to be a liability for the appellant. The reliance was also placed on the following case laws: CIT Vs. Hotline Electronics Ltd. in ITA No. 1073/2011 dt. 23/12/2011 (Del) CIT Vs. Sugauli Sugar Works (P) Ltd. (1999) 236 ITR 518 (SC) CIT Vs. Bennett Coleman Co. Ltd. (1993) 201 ITR 1021 6. The Ld. CIT(A) after considering the submissions of the assessee deleted the impugned addition by observing in para 5.2.1 of the impugned order as under: I have perused the facts of the case, the action of the A.O. and the submission of the appellant. The appellant was required by the A.O. to explain the credit balance of Ms. Shivani Singhal. The appellant vide its letter dated 24.10.2017 reproduced in the assessment order submitted on this issue as under:- The ex-partn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the submissions of both the parties and perused the material available on the record. In the present case it is not in dispute that the impugned amount was the credit balance in the name of the Ex partner Ms. Shivani Singal who did not withdraw the same at the time of her retirement. This amount was shown in the balance sheet of the assessee as payable to Ms. Shivani which is evident from page no. 53 of the assessee s paper book which is the copy Schedule VII Forming Part of the Balance Sheet as at 31/03/2015 wherein this amount i.e. ₹ 3,12,44,216/- has been shown under current liability as loan from Ex partner, under the same head amount shown as on 31/03/2014 was at ₹ 3,22,58,862/- which shows that there was decrease in the amount during the year under consideration. So it cannot be said that there was a cessation of liability under section 41(1) of the Act. We therefore by considering the totality of the fact are of the view that the Ld. CIT(A) was fully justified in deleting the addition made by the A.O. by observing that the liability under consideration was not a trading liability rather it was the balance of the capital contributed by the Ex partner. 11. The n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e enabled the Assessing Officer to record satisfaction in terms of Section 14A of the Act, findings recorded by the CIT(A) and the ITAT that the Assessing Officer has failed to discharge this onus are neither perverse nor arbitrary and, therefore, do not call for interference. [underline supplied by us] 10. Therefore, it is the duty of the revenue to establish nexus of the funds that assessee has used the interest bearing funds for the purposes of earning exempt income to make any disallowance u/s 14A with respect to interest expenditure. As the ld AO has not established the nexus about investment of interest bearing funds in exempt income generating apparatus, no disallowance u/s 14A rwr 8D can be made on account of interest expenses. In view of this, we reverse the finding of the ld CIT (A) in confirming the disallowance of ₹ 936449/- on account of interest expenses u/s 14 rwr 8D of the Income tax Rules. Regarding the issue of other expenses we confirm the finding of the ld CIT (A) in confirming disallowance of ₹ 511023/-. In the result out of total disallowance of ₹ 1447472/- a sum of ₹ 936449/- on account of interest expenses stands del ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the IT Act. 4. In view of above, the action of the Ld AO is arbitrary, unjustified and not in accordance to the law and therefore the appeal of the assesse deserves to be allowed. 18. The Ld. CIT(A) after considering the submissions of the assessee deleted the impugned addition by observing in para 5.3.1 of the impugned order as under: 5.3.1 The appellant's submissions have already been reproduced supra. I have perused the facts of the case, the action of the A.O. and the submission of the appellant. The contention of the A.O. that no response was filed by the appellant is negated by the response of the appellant dated 24.10.2017 reproduced by the A.O. in the assessment order itself wherein the appellant has placed copy of account of building repairs alongwith copy of major bills. Considering the quantum of repairs, even materially the amount is small. Even otherwise, the assessing officer has failed to base his inference by comparing such expenditure made in the preceding years. Accordingly, I find no reason for the A.O. to doubt the genuineness or disallow the expenditure of ₹ 236456/- incurred on repairs. 19. Now the Department is in appeal. 20. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has observed in para 7 of the order that no reply has been filed by the assesse in response thereto about the nature of the amount pursuant to the note sheet entry dated 24.10.2017. 2. In regard to the above, it is respectfully submitted that ₹ 6,71,504/- being loss on retiring assets had been added back by the appellant in the computation of income for deriving the income from business and profession. The assets which had outlived its useful life were to be retired from the block of assets and added back to the income as evident from the computation of income placed at page 42 to 45 of paper book. 3. Since the appellant had already added the equal amount back while arriving at the income from business/profession and therefore adding the same again to the income from business and profession will tantamount to addition of the amount twice. In view of above, the action of the Ld AO is unwarranted, unjustified and not as per the provisions of law and therefore the appeal deserves to be allowed. 25. The Ld. CIT(A) after considering the submission of the assessee deleted the addition by observing that the assessee had suomotu made disallowance in its compu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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