2018 (11) TMI 586 - AT - Income Tax

Tribunal dismisses appeal on interest disallowance & commission payment lack of nexus.

Shri Ashok Kumar Mantri Kishangarh Versus Income Tax Officer, Ward-1 Kishangarh

Shri Ashok Kumar Mantri Kishangarh Versus Income Tax Officer, Ward-1 Kishangarh - TMI Issues:1. Disallowance of interest paid on unsecured loans.2. Disallowance of commission paid to the appellant's son.Analysis:1. Interest on Unsecured Loans:The assessee appealed against the order of the CIT(A) confirming the addition of interest paid on unsecured loans. The AR contended that the loan was utilized for investment in a partnership firm, resulting in remuneration and interest income. However, the AO observed a lack of evidence establishing the nexus between the loan and investments in the partnership firm, leading to disallowance. The AR cited precedents, but the Tribunal found them inapplicable to the present case. As the assessee failed to substantiate the utilization of borrowed funds for partnership investments, the Tribunal upheld the disallowance.2. Commission Paid to Son:Regarding the disallowance of commission paid to the appellant's son, the AR argued that the commission was incurred in the course of business, supported by documents like account confirmations and financial statements. However, discrepancies arose regarding the nature of services rendered by the son and the purpose of his visit to China. Despite the appellant's submissions, including evidence of the son's income tax returns, the authorities found a lack of verifiable evidence demonstrating the son's actual contribution to earning the commission income. As the necessary nexus between the services rendered and income earned was not established, the disallowance of the commission payment was upheld.In conclusion, the Tribunal dismissed the appeal filed by the assessee, upholding the disallowances of interest on unsecured loans and commission paid to the appellant's son. The decision was pronounced in open court on 01/10/2018.