TaxTMI 
TaxTMI 
2020 (8) TMI 356
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....e in the correct head and only real income is to be taxed if he considers that disclosure in wrong head of income. 4. ld. Assessing Officer has failed to appreciate the consistent system of assessee and accepted by department." Facts of the case: 3. Return of income in this case was filed on 19.11.2016 declaring "Nil" income. The case was selected for Limited Scrutiny for the reason "Whether the deduction against income from other sources has been correctly shown in the return of Income". Accordingly, notice u/s 143(2) was issued and the assessment u/s 143(3) was framed at an income of Rs. 1,59,37,110/- by disallowing the deduction claimed by the assessee under the head income from other sources. For better appreciation of facts, the relevant portion of the order of the ld. CIT (A) is reproduced hereunder:- "The brief facts of the case are that Return of income in this case was e-filed on 19.11.2016 declaring "Nil" income. The return was processed u/s 143(1) of the I.T. Act, 1961. Subsequently, this case was selected for Limited Scrutiny with the reason "Whether the deduction against income from other sources has been correctly shown in the return of income.....
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.... with the provisions of chapter XVII-B. Before me, the AR of the appellant contended that the AO was wrong in rejecting the claim of deduction u/s 57(iii) of the Income Tax Act and treating the interest Income as business income, AR claimed that the nexus between income earned and expenditure claimed was established. The AR further contended that even if the interest paid/interest received was i part of business activity, the interest paid should be allowed u/s 37(1) of the Income Tax Act. The claim of the appellant was examined. The undisputed fact is that the appellant has claimed deduction of Rs. 1,59,31,109/ u/s 57 of the I T Act, 1961 on account of interest paid against the interest income of Rs. 1,34,39,809/- and thus claimed loss of Rs. 24,97,300/. The AO after examining the facts/evidences filed, recorded a finding that the appellant was unable to establish a nexus between income earned under the head Income from Other Sources' and expenditure laid out or expended wholly and exclusively for purpose of earning such income as per section 57(iii) of the Income Tax Act. The AR of the appellant, however, claimed that nexus is established and filed docu....
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....t paid of Rs. 1,59,31,109/ was expended to earn interest income of Rs. 1,34,39,809/-. In the absence of such a nexus having been established, I see no reason to interfere with the finding of the AO that the claim of deduction of Rs. 159,31,109/- does not fall within the ambit of Section 56(iii) of the Income Tax Act. Also, as the appellant had admitted before the AO that he was conducting the business of giving loans on interest, the AO rightly treated his interest income as business income. As to the AR's claim that if the interest income is treated as business income, he may be allowed interest expenses u/s 37 of the Income Tax Act. To examine the claim of the AR of the appellant I would like to refer to provisions of Section 37 or the Income Tax Act which mandates as under: 37. (1) "Any expenditure (not being expenditure of the nature described in sections 30 to 36 and not being in the nature of capital expenditure or personal expenses of the assessee), laid out or expended wholly and exclusively for the purposes of the business or profession shall be allowed in computing the income chargeable under the head, "Profits and Gains of Business or Professio....
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....nus not only during the assessment stage but even at the appellate stage too, despite being given ample opportunities, as indicated above. In these circumstances, there is no occasion to deviate from the conclusion drawn by the AO that assessee has no concrete evidence with him to justify the claim of above expenses. In the absence of supporting evidences, bills & vouchers, books of accounts, it is fair and just on the part of the AO to consider various business exigencies and make an estimate for making disallowance cut of expenses claimed. Keeping in view the above factual matrix of the case, I am of the considered view that AO has rightly made an earnest attempt to make just and reasonable disallowance to the extent of 10% out of total expenses claimed of Rs. 2,21,25,132/-. The same is upheld and ground of appeal taken by the appellant is dismissed. A similar adjudication has been made by ITAT, Bangalore in the case of Kanhaiya Lal Dudheria vs CIT on 17 May, 2017 in ITA 782 and 1495, wherein the Tribunal held as under: "But the onus lies on the assessee to prove that the expenditure was incurred for the purpose of business. Once the assessee discharges this onu....
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....he provisions of Section 57 of the Act, we find that the assessee has earned interest of Rs. 1,34,39,809/- from the following parties: Sl.No. Particulars Amount 1. Universal Buildwell Pvt. Ltd. 6420000.00 2. Ram Kishore Nagarmal Marketing Pvt. Ltd. 3941360.00 3. C L International 397017.00 4. Kabra Plastics Ltd. 1961432.00 5. Sanjay Kumar Kalwadia 240000.00 6. Shailesh Kumar Kalwadia 240000.00 7. Sharad Kalwadia 240000.00 Total 1,34,39,809.00 6. The assessee has paid interest to the following parties: Sl.No. Particulars Amount 1. Satish Pushpa Chander Goyal 120000.00 2. Anjani Singhania HUF 94867.00 3. Neena Singhania 45175.00 4. Anil Bansal 3489777.00 5. Anand Parkash Singhania 757340.00 6. RKS Global Agencies Ltd. 4025891.00 7. Abha Gupta 322900.00 8. Ram Kishore Organics Pvt. Ltd. 522278.00 9. Ram & Ram Commercial 109000.00 10. Aditya Birla Finance Ltd. 6351639.00 11. Interest paid to Relance Capital Ltd. 96242.00 Total 1,59,37,109.00 7. But for the amount received....