TMI Blog2022 (4) TMI 383X X X X Extracts X X X X X X X X Extracts X X X X ..... Kaur, Sr. DR ORDER Per N. K. Saini, Vice President This is an appeal by the Assessee against the order of the Ld. CIT(A)-5, Ludhiana dt. 19/09/2019. 2. Following grounds have been raised in this appeal: 1. That the orders of Ld. CIT(A) is illegal, erroneous and perverse and thus needs to be quashed. 2. That the Ld. CIT(A) is not justified in concurring with the findings of A.O., in confirming the addition of ₹ 31,28,907/- on account of interest paid/incurred on the loans taken against the income earned from interest being income from other sources amounting to ₹ 31,49,213/- being allowable under the provisions of Section 57 of the Income Tax Act, 1961. 3. That without prejudice to above, the Ld. CIT(A) is not justified in upholding the addition made by the Ld. A.O., of ₹ 31,28,907/- which finding of the CIT(A) are illegal, arbitrary and perverse and against well settled law and thus deserve to be set aside in the interest of justice. 4. That without prejudice to above, the appellant also disputes the quantum of addition as highly excessive. 5. That the appellant craves leave to add, amend or delete any of the grounds of appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have submitted the bifurcation of deduction claimed u/s. 57 of ₹ 31,28,907/- as follows:- 1. Interest Paid on unsecured loans = ₹ 27,02,188/- 2. Interest paid on loan against property = ₹ 4,26,719/- TOTAL = ₹ 31.28.907/- You have also submitted the copy of income tax computation for 2016-17 which is showing a list of 15 persons to whom you have paid interest on unsecured loans together with copies of their ledger accounts. Firstly, the payment for loan for house property amounting to ₹ 4,26,719/- does not constitute as an expenditure for earning the interest income shown in income from other sources. Secondly, you have not submitted the copy of the bank statement showing the actual expenditure of giving interest on unsecured loans which the assessee has claimed as deduction u/s. 57. You have not established any nexus between the borrowed money for making investment in giving unsecured loans to earn the interest income. No nexus has been established between the amounts of interest received and interest paid till today. Thirdly, from the perusal of the interest paid accounts of 15 persons it is found that no TDS has been ded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7. 3. That in the show cause notice, you have stated that the assessee has claimed deduction for ₹ 4,26,719/- for loan for house property. In fact, the said interest was paid for Loan against Property instead of loan for house property as stated by you and the interest paid on loan against property is clearly eligible for deduction u/s. 57 of the Act. In funds received by the assessee out of the loan against property was also utilized for giving unsecured loans. 4. That in most of the cases interest to be paid on unsecured loans has been credited to the amount of the parties. However, in few cases, interest payments have been made through banking channel and the same is duly reflected in the bank statement. We enclosed herewith the relevant extract of the bank statement of the Axis Bank saving account for F.Y. 2015-16 highlighting the interest payments as Annexure-1. 5. That the assessee has not made tax deduction at source (TDS) as the provisions of Section 194A(I) of the Act does not apply to individual. Further, the assessee also does not fall under the first proviso to Sec. 194A(I) of the Act as he has not made any sale etc. during the financial year imme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The reliance was placed on the following case laws: CIT vs. Rajendra Prasad Moody (115 ITR 519) (SC) JK Industries (297 ITR 176) (Karn) Venkateshwara real estate enterprises vs. CIT (Karn) CIT vs. Taj International Jewellers (Del) Sh. Roshan Sethia vs. ACIT (Mumbai 'D' Bench ITAT) 5.3. The Assessee also submitted to the A.O. vide reply dt. 14/12/2018 as under: ...The interest expenditure (claimed u/s. 57) has been made to earn the interest income shown under the head Other Interest in the computation of income. In this connection, we may inform that funds generated through repayment of the loans and advances made by the parties to the assessee are further regularly utilized in advancing loans to some other parties. The assessee may inform that all funds received and paid are being kept in a common bank account; it is not possible to match each and every repayment of the loan advanced by the assessee with the loans received by the assessee. However, there is a complete nexus between the interest paid qua to the interest income and the assessee is very much eligible for deduction u/s. 57 of the Act. The statement of the bank accou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO has not brought on record that the expenses claimed by the assessee were not incurred wholly exclusively for the purpose of earning the income, however this argument is found erroneous and flawed. It is a settled principle of law under Income Tax Acts that for claiming any deduction, the onus of proving the same lies on the assessee. The AO is only required to examine the allow-ability of the deduction as per the law and rf not found as per law, then disallow the same. 7. Now the assessee is in appeal. 8. The Ld. Counsel for the assessee at the very outset stated that this issue is squarely covered in favour of the assessee vide order dt. 11/03/2021 in ITA No. 1354 to 1356/Chd/2019 for the A.Y. 2016-17 in cases of Shri Kamal Parkash Goyal and others, Ludhiana Vs. The ACIT, Circle-2, Ludhiana. Copy of the said order was furnished which is placed on record. It was further stated that the assessee belongs to the family of the said assessee Shri Kamal Parkash Goyal who agitated the matter before the ITAT Bench 'A' Chandigarh. 9. In her rival submissions the Ld. Sr. DR strongly supported the orders of the authorities below and reiterated the observations made in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... record that the activity of the assessee of taking interest bearing loan and making advances to other parties is continued for the last so many years. The assessee in this activity has earned net positive interest income. In our view in such a case, there is no need to establish one to one nexus between each of the transaction of loan taken and loan advanced by the assessee. There transactions of taking unsecured loans otherwise has not been disputed by the Department. Even the Assessing Officer has not made any effort to verify the genuineness of the transaction by summoning the concerned parties either who have advanced loan to assessee or the parties have taken loan from the assessee. There is no allegation that the assessee has used the interest bearing funds for some other purposes. Under the circumstances, in our view, the assessee is entitled to set off the interest expenditure against the interest income earned by the assessee and the net of the same has rightly been offered by the assessee for taxation. In view of above discussion, the addition made by the Assessing Officer is ordered to be deleted. The ld. Representative parties have submitted that the facts and issues in ..... 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