| SooperKanoon Citation | sooperkanoon.com/74156 |
| Court | Income Tax Appellate Tribunal ITAT Jodhpur |
| Decided On | Jul-18-2005 |
| Judge | R Syal |
| Reported in | (2005)96TTJ(Jodh.)656 |
| Appellant | Saleem Chawda |
| Respondent | income Tax Officer |
2. Ground l(i) deals with the confirmation of addition of Rs, 1,500 out of vehicle and travelling expenses.
3. Out of the total expenses to the tune of Rs. 7,000 and odd, the AO made addition of Rs. 1,500 as the expenses were not properly vouched and the element of personal use out of travelling and vehicle expenses could not be ruled out. The learned CIT(A) confirmed the action. In my considered opinion, it would be just and fair if the addition is reduced to Rs. 1,000 thereby allowing relief of Rs. 500 by considering the quantum of total expenditure claimed by the assessee under these heads at Rs. 7,000 and odd.
4. Ground No. l(ii) is against the addition of Rs. 1,000 out of tea expenses of Rs. 2,808 which was confirmed in the first appeal. This expenditure comes to around Rs. 200 and odd per month. The same appears to be reasonable and does not warrant any interference. This ground is allowed.
5. Ground No. l(iii) is against the confirmation of addition of interest of Rs. 1,21,652.
6. The AO noted that a sum of Rs. 2,15,282 was claimed in the P&L a/c as interest paid to NUCB Ltd. and creditors. While scrutinizing balance sheet filed along with return of income, It was observed that the land and building shown by the assessee on the asset side of the balance sheet at Rs. 10,96,795 was his personal asset. The assessee had only shown credit balance of his capital of Rs. 2,84,158. In this way, it was noticed that the assessee had total debit balance of his capital of Rs. 8,12,637 (Rs. 10,96,795 minus Rs. 2,84,158). It was, therefore, opined that the assessee had utilized the interest-bearing loans taken for overdrawing his capital. By making disallowance of interest @ 15 per cent per month (sic) on the overdrawn capital an addition of Rs. 1,22,395 was made. In the first appeal, the learned CIT(A) after allowing nominal relief confirmed the action of the AO and sustained the addition of Rs. 1,21,652.
7. It was contended by the learned Authorised Representative that both the authorities below had erred in making and confirming the said addition as the assessee had sufficient resources available at his disposal, which were non- interest bearing and those were utilized in the purchase of the land and building. It was further contended that the said investment was made in the year ending on 31st March, 1999, relevant to asst. yr. 1999-2000 and no disallowance of interest was either made in that year or in the succeeding year. It was, therefore, urged that no disallowance was warranted in this year as well. It was also submitted that even if the expenditure on interest was held to be not allowable against business income, still the assessee would be entitled to claim of deduction under Section 24 of the Act because the amount was borrowed for acquiring or constructing the residential house. He relied on certain decisions to contend that the addition was not warranted on this count also. In the opposition, the learned Departmental Representative relied on the order passed by the first appellate authority.
8. After considering the rival submissions and perusing the relevant material on record, it is found as an undisputed position that the property in question was purchased/constructed in the financial year ending on 31st March, 1999. Copy of the cash book for relevant dates has been provided in the paper book from pp. 13 to 39. It shows that the investment was made in the house two years prior to the year in question. The learned Authorised Representative has relied on certain decisions to contend that no addition can be made for disallowance of interest when transaction took place in such earlier years and no disallowance of interest was made in the earlier years. I find force in this submission of the learned Authorised Representative as it has been held in CIT v. Sridev Enterprises that no disallowance of interest to the extent of opening capital balance can be made where such disallowance was not made in the earlier years. In view of this precedent, I am satisfied that the addition was wrongly sustained. The other contention of the learned Authorised Representative regarding deductibility of interest under Section 24 of the Act also carries substantial force. I accordingly order for the deletion of this addition.
9. Second ground is against sustenance of addition of Rs. 20,500 on account of low household withdrawals.
10. The assessee had shown household expenses at Rs. 55,500 inclusive of contribution made by his wife at Rs. 6,000. The AO estimated total household expenses at Rs. 98,500 as a result of which an addition of Rs. 47,000 was made. In the first appeal, the learned CIT(A) reduced the addition to Rs. 20,500.
11. After considering the rival submissions and perusing the relevant material on record, it is seen that the very basis of addition is the estimate of household expenses, being without any specific details. As it is a question of estimate only, I am of the considered opinion that it would be in order if the addition is reduced by 50 per cent to Rs. 10,250. I order accordingly.
12. Last effective ground regarding charging of interest under Section 234B being consequential, is disposed of accordingly.