AI Drafter 
TaxTMI 
TaxTMI 
2019 (6) TMI 1695
X X X X Extracts X X X X
X X X X Extracts X X X X
....er of the Commissioner of Income-Tax (Appeals)-IO referred to as "the Commissioner (Appeals)" is bad in law and erroneous as to fact. 2. The Commissioner (Appeals) erred in confirming loss of Rs.2,94,917/- in place of loss of Rs.14,97,969/- returned. " 3. The Commissioner (Appeals) ought to have appreciated that assessee is a partner in M/s. Sweetoo Apparels in which he is 40% partner and for huge future expansion of the firm he had to invest and bring proportionate capital by own or borrowed funds by paying interest, and that because of huge expansion of the firm, it had made loss on account of bank interest and depreciation which turned his capital in a negative balance. 4. The Commissioner (Appeals) ought to ha....
X X X X Extracts X X X X
X X X X Extracts X X X X
....essee are interconnected to the common issue of disallowance of interest u/s. 57(iii) of the act in respect of unsecured loan obtained for investment in the partnership firm. 4. The fact in brief is that return of income declaring loss of Rs. 14,97,969/- was filed on 27th Sep, 2013. Subsequently, the case was selected under scrutiny by issuing of notice u/s. 143(2) of the act on 3rd Sep, 2014. During the course of assessment on verification of computation of total income filed by the assessee, the assessing officer has noticed that assessee shown income of Rs. 810 from interest earned on saving bank account. Against the aforesaid income, the assessee has claimed deduction of Rs. 12,03,052/- on account of interest paid on unsecured loan i....
X X X X Extracts X X X X
X X X X Extracts X X X X
...., the argument that the money has been borrowed for investing in the firm does not hold good on the facts of the case. If the money has indeed been invested in the partnership firm of the appellant, the appellant would not have an opening debit balance in the partners capital account. The AO has prepared a chart starting from F.Y.2003-04 till F.Y.2012-13listing'the amount of interest paid, the total income and the break up of such income. On perusal of the same it is seen that till F.Y. 2011-12 the appellant has earned more in terms of the profit in the partnership firm, remuneration and interest from partnership firm than the interest paid. In F.Y. 2011-12 the interest income from the partnership firm was Rs. 12,51,918/- out of which R....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... is no income being earned by the appellant either in this assessment year or in future years which would be assessable under the head income from other sources. This argument of the appellant fails on the factual basis as has been held in the earlier part of this order, as the appellant in this order has paid interest on the debit balance on the capital account with the partnership firm. Even on this ground the argument of the appellant are not tenable. 5.3 The reliance on the judgment of Hon'ble Supreme Court in the case of CIT vs Rajendra Prasad Moody, is also not applicable to the facts of the case of the appellant as the issue before Hon'ble Supreme Court was whether interest on borrowed funds which have been invested ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ot accepted and rejected. The grounds of appeal are accordingly dismissed." 6. We have heard the rival contention and perused the material on record. It is undisputed fact that assessee has obtained unsecured loan for investing in the partnership firm as contribution to his capital account. It is very clear as elaborated in the finding of the ld. CIT(A) that there was debit balance of assessee's capital account in the partnership firm as the opening debit balance was of Rs. 32,60,328/- and closing debit balance was of Rs. 1,08,07,884/-. The ld. CIT(A) has clearly demonstrated in his finding that due to the aforesaid debit balance in the capital account, the assessee has paid net interest to the partnership firm to the amount of Rs. 3,29,....