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TMI Blog2021 (12) TMI 641X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome Tax Officer, Ward-4(5), Jaipur (Assessing authority) dated 26/12/2016 by which he disallowed interest 7,55,837/- paid as expenditure for purchasing shares in Natani Rolling Mills Pvt. Ltd., Neelkanth Industries Pvt. Ltd. In the preceding years and added in the returned income, thus, the impugned assessment order as well as appellate order both are against the provisions of the Act, bad in law, erroneous and liable to be quashed and addition of Rs. 7,55,837/ liable to be deleted, hence, the same may kindly be deleted, and the interest paid may kindly be allowed as business expenditure u/s 36(1)(iii) of the Act. 2. That, the Learned Appellate Authority has grossly erred on the facts and on the law in sustaining assessment order of the Assessing authority dated 26/12/2016 by which he disallowed interest 7,55,837/- paid as expenditure for purchasing shares in Natani Rolling Mills Pvt. Ltd., Neel Kanth Industries Pvt. Ltd. And added in the returned income, it is further clarified that these share were purchased before the assessment year 2010-11 and not in the year under consideration, thus, the impugned assessment order as well as appellate order, both are against the provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... having received the above show cause notice, I came to Jaipur for conducting the required proceedings, and approached to the Chartered Accountant who appeared before the Appellate Authority in the case, about the service of the appellate order, because the assessment order was also served on my consultant who appeared before the Income Tax Officer during the course of the assessment under scrutiny of the case, and he refused about service of the appellate order, after refusal by the Chartered Accountant I asked to my parents i.e. Father and Mother who are residing here, about the order, because I have been living at Swaroop Ganj (Abu)along with my Family after starting the business there, but, my mother who received the Speed post could not understood about the post/order and forgot about the post received by her and she gave me on 05/03/2020. That, After having received the envelop from my mother, I came to know about the service of appellate orders for the assessment years 2014-15 and 2015-16 in one envelop, but could not understand about date of service because there is no stamp of the concerning post office the dates either of booking or delivery, for your kind perusal and s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as laches on the part of the litigant or an attempt to save limitation in the underhand way. If the party who is seeking condonation of delay has not acted in malafide manner and reasons explained are factually correct then the Court should be liberal in construing the sufficient cause and lean in favour of such party. A justice-oriented approach has to be taken while deciding the matter for condonation of delay. However, this does not mean that a litigant gets free right to approach the court at its will. 8. If we apply the settled principles as laid down by the Hon'ble Supreme Court as well as other courts on the facts of the present case we find that the assessee has explained cause of delay, therefore, in the facts and circumstances of the case, we condone the delay of 78 days in filing the present appeal and admit the appeal for hearing. 9. The brief facts of the case are that the assessee derives income from Natani Rolling Mills Pvt. Ltd. as salary being Director of the company, house property and interest also. Return of income was electronically filed on 16/12/2015 declaring total income of Rs. 3,36,120/-. The case of the assessee was selected for scrutiny through CASS fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar that the appellant-assessee has the same shares only and there in no any direct nexus of investment out of the loan during the period under consideration because no any shares were purchased during the period under consideration. That, the appellant-assessee took loan for business purposes from the financial institutions namely Bajaj Finance and thereafter from the HDFC Bank Ltd. That, the appellant-assessee has been doing business as working partner in the partnership firms as well as profession/vocation as Director in three Companies, We have to see the relevant provision of the Income tax Act, 1961 (Act) to decide whether the directorship in the Companies is profession or not, we are pleased to reproduce here under the relevant provision 2(36) of the Act, which as under:- Section 2(36) "Profession" includes Vocation. We would like to have your kind attention that in view of the above definition of the profession the appellant-assessee is entitled for deductions of interest on loans took for business/profession , such matters have been considered by the Hon'ble Guahati High Court in the case of Nabadwip Chandra Roy vs Commissioner Of Income-Tax ... on 30 November, (195 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (MP) 13. On the other hand, the ld. DR has vehemently supported the order of the lower authorities and submitted that the ld. CIT(A) has passed a well reasoned order discussing all the material facts and circumstances of the case. 14. We have heard the rival contentions of both the parties and have also gone through the written submissions filed by the assessee. We have also deliberated upon the decisions cited in the orders passed by the authorities below as well as cited before us and we have also gone through the orders passed by the revenue authorities. As per facts of the present case, we observed that the assessee is deriving his income from Natani Rolling Mills Pvt. Ltd as salary there from being director therein, house property, Interest also. The assessee filed his e-return of income on 14/02/2015 declaring total income of Rs. 2,14,800/-. The assessee took a loan from HDFC Bank Ltd for business purposes of Rs. 2.5 Crore interest @ 13.75% in the financial year 2012-13 and the assessee made investment in shares of Natani Rolling Mills Pvt. Ltd. Rs. 7,32,000/- and Neel Kanth Industries Pvt. Ltd. Rs. 47,65,000/-. The assessee had made investment in Oliya Import and Export in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 7,32,000/-, thus, the total share were purchased of Rs. 54,97,000/-, thus, we are view of that the assessee has the same shares only and there in no any direct nexus of investment out of the loan during the period under consideration because no any shares were purchased during the period under consideration. 17. We further observed that the assessee took loan for business purposes from the financial institutions namely Bajaj Finance and thereafter from the HDFC Bank Ltd. The assessee has been doing business as working partner in the partnership firms as well as profession/vocation as Director in three Companies. In this regard, now we have to see the relevant provision of the Act to decide whether the directorship in the Companies is profession or not, for which we reproduce the relevant provisions of Section 2(36) of the Act, which as under:- Section 2(36) "Profession" includes Vocation. From perusal of the above definition of the profession the assessee is entitled for deductions of interest on loans took for business/profession. In this regard, we draw strength from the decision of the Hon'ble Guahati High Court in the case of Nabadwip Chandra Roy vs Commissioner Of Incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k as well as to others also. In this regard, we draw strength from the decision of the Hon'ble Supreme Court in the case of S.A. Builders Ltd. Vs Commissioner of Income Tax (Appeals), Chandigarh and Others, order dated 14/12/2006 reported in AIR 2007 SC 482, (2007)1 SCC 781, MANU/SC/8798/2006 wherein it was held as under: "20. We agree with the view taken by the Delhi High Court in CIT V. Dalmia Cement (Bhart) Ltd. MANU/DE/0309/2002 :[2002] 254 ITR 377 (Delhi) that once it is established that there was nexus between expenditure and the purpose of the business (which need not necessarily be the business the assessee itself), the revenue cannot justifiably claim to put itself in the arm-chair of businessmen or in the position of the board of directors and assume the role to decide how much is reasonable expenditure having regard to the circumstances of the case. No businessmen can be compelled to maximize its profit. The Income Tax Authorities must put themselves in the shoes of the assesse and see how to prudent businessmen would act. The authorities must not look at the matter from their own view point but that of a prudent businessmen. As already stated above, we have to see the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt is not utilized by the assessee in its own business but had been advanced as interest-free loan to its sister concern is not relevant. What is relevant is whether the amount was advanced as a measure of commercial expediency and not from the point of view whether the amount was advanced for earning profits. Once it is established that there was nexus between the expenditure and purpose of the business (which need not necessarily be the business of the assessee itself) the Revenue cannot justifiably claim to put itself in the armchair of the businessman or in the position of the board of directors and assume the role to decide how much is reasonable expenditure having regard to the circumstances of the case. No businessman can be compelled to maximize his profits." 15. In view of the authoritative pronouncement of the apex Court and other judgments referred supra, in our view, the assessee admittedly had its own funds, as referred to earlier, and admittedly such funds/reserves being substantially higher than, even otherwise, the advances to the debtors, no notional interest or hypothetical interest could have been disallowed on such facts. The Revenue has failed to prove nex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f twelve per cent simple interest per annum; or" Thus, in view of the above provisions of the Act and the deed of partnership, it is crystal clear that the assessee could not took interest on advances as working capital to it's partnership firm i.e. Oliya Import Export exceeding 12% which was advanced as working capital. It is important to mention here that in the course of business, it is not necessary to have profit only and there should not be any loss therein. As far as advances to Giriraj Buildcon is concerned, we noticed that the Giriraj Buildcon is a sister concern of the assessee as proprietor of the Giriraj Buildcon was also a director in the Natani Rolling Mills Pvt. Ltd. and had dealing in purchasing from the company during the period under consideration and in subsequent year also. Hence, looking to the commercial expediency given some advance for his business. Considering the totality of facts and circumstances of the case, material placed on record as well as the relevant provisions of the Act, we found merit in the contentions raised by the assessee and the ld. DR has not brought on record any new material to rebut or controvert the submissions and documents placed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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