INCOME TAX ACT, 1961

Section 57

Income from other sources - Deduction under section 57(iii) - Interest expense on moneys borrowed -

Assessee was said to be a partner in five family run partnership firms. The case was selected for scrutiny and a notice under section 143(2) was issued. Assessee sent a reply giving details as to the five partnership firms, in which he was a partner and also the names of persons, from whom he availed loan. The case of assessee was that those persons, who had lent money to assessee, were also income tax assessee and that the interest paid to them by assessee were duly accounted for in their respective return of income filed by them. AO, while completing the assessment under section 143(3) found that assessee did not furnish the details of dates of receipt of loans, copies of agreements, modes of receipt of loans and other details. Apart from that, AO observed that financial position and liquidity ratio of the assessee appeared to be sound. Accordingly, deduction claimed was disallowed. Held: Assessee specifically stated that loans were availed through banking channels and interest amounts were paid to lenders, who have disclosed the same in their respective return of income and tax had been remitted by them on the interest income. Had AO directed assessee to produce those lenders to appear for an enquiry by issuing notice, probably correct factual decision would have been ascertained. This aspect had not been dealt with in order passed by Tribunal who proceeded on a totally different footing, which neither appears to be case of assessee nor that of Revenue. Therefore, matter was remanded back to AO for a fresh consideration.

Relied:CIT v. Popular Vehicles and Services Ltd. (2010) 325 ITR 523 (Ker) : 2010 TaxPub(DT) 0851 (Ker-HC) Rajendra Kumar Jain v. ITO [ITA No.2110/Mds/2016, dt. 22-12-2016]

REFERRED :

FAVOUR : Matter remanded

A.Y. : 2011-12

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