ITA No.7584/Mum/2016 Mihir Ashok Sampat Assessment Year-2012-13 IN INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI, BEFORE SHRI SAKTIJIT DEY, JM AND SHRI MANOJ KUMAR AGGARWAL, AM. I.T.A. No.7584/Mum/2016 (Assessment Year 2012-13) Mihir Ashok Sampat ACIT Circle 17(2) 274/279, Room no.18 Aaykar Bhavan, M.K. Road 2nd Floor, pearl Arcade, Chheda Mansion Vs. Mumbai-400 020. Narshi Natha Street, Mumbai-400 009. PAN/GIR No. AEQPS8335 (Appellant) (Respondent) Appellant by Shri Rashmikant C. Modi & Ms. Ketki Rajeshirke Ld. ARs Respondent by Ms. Kavita P. Kaushik- Ld.DR 23/09/2019 Date of Hearing 23/09/2019 Date of Pronouncement ORDER Manoj Kumar Aggarwal (Accountant Member)- 1. Aforesaid appeal by assessee for Assessment Year [in short referred to as AY ] 2012-13 contest order of Ld. Commissioner of Income-Tax (Appeals)-28, Mumbai, [in short referred to as CIT(A) ], Appeal No.CIT(A)- 2 ITA No.7584/Mum/2016 Mihir Ashok Sampat Assessment Year-2012-13 28/IT-50/ACIT-17(2)/2015-16 dated 17/10/2016 on following grounds of appeal: - Grounds of Appeal stated herein below are without prejudice to each other: - 1) learned Commissioner of Income Tax (Appeals) erred in confirming disallowance of interest of Rs. 33,96,886/- paid to bank. 2) learned Commissioner of Income Tax (Appeals) erred in holding that income earned by way of interest as rule be treated as income from other sources. provisions of Income Tax Act provide that interest received from firm by partner to be assessed under head "Profit & Gains of Business". 3) learned Commissioner of Income Tax (Appeals) erred in rejecting claim of appellant made during assessment proceedings for considering interest expenditure against interest received from partnership firm where he is partner. 4) learned Commissioner of Income Tax (Appeals) ought to have considered appellant's claim of interest paid to bank against income received from two partnership firms (where appellant is partner and computed under head "Profit and Gains of Business". We have heard and considered rival submissions. 2.1 Facts as emanating from record are that assessee being resident individual was assessed for impugned AY u/s 143(3) on 27/02/2015 wherein income of assessee was determined at Rs.54.81 Lacs after certain adjustment as against returned income of Rs.20.84 Lacs filed by assessee on 29/03/2014. 2.2 During assessment proceedings, it transpired that assessee earned interest on Bank Fixed Deposit for Rs.92,800/- against which assessee claimed interest expenditure of Rs.33,96,886/- and eventually reflected loss of Rs.33,04,086/- under head Income from other Sources. In defense, assessee submitted that it obtained mortgage loan on property and invested same in two partnership firms and earned interest 3 ITA No.7584/Mum/2016 Mihir Ashok Sampat Assessment Year-2012-13 thereupon for Rs.19.06 Lacs, which was Business Income for assessee. However, by mistake, interest expenditure was claimed under head Income from other Sources as against Business Income. However, in absence of supporting material to prove nexus of borrowed funds with investment made in firms, said plea was rejected. Finally, interest expenditure claimed under head income from other sources was disallowed. stand of Ld. AO, upon confirmation by first appellate authority, is under challenge before us. 3. Ld. Authorized Representative for Assessee [AR], drawing our attention to documents kept in paper-book, sought to put forward assessee s case by submitting that borrowed funds were used to make investment in partnership firm and there was nexus between two. In above background, it was submitted that expenditure was allowable against business income earned by assessee by way of interest from firms. Ld. DR, on other hand, pointed out assessee could not prove said nexus during assessment proceedings. Upon perusal of documents placed before us, bench formed opinion that assessee s correct income was to be computed in accordance with law. Therefore, matter stand restored back to Ld. AO for re-adjudication, in light of submissions made by Ld. AR, before us. Needless to add that adequate opportunity of being heard shall be granted to assessee. onus to prove nexus of borrowed funds with investment made in firms shall rest upon assessee. 4 ITA No.7584/Mum/2016 Mihir Ashok Sampat Assessment Year-2012-13 4. appeal may be treated as allowed for statistical purposes. Order pronounced in open court on 23rd September, 2019. Sd/- Sd/- (Saktijit Dey) (Manoj Kumar Aggarwal) / Judicial Member / Accountant Member Mumbai Dated 23/09/2019 Sr.PS-Jaisy Varghese Copy of Order forwarded to 1. Appellant 2. Respondent 3. CIT(A) 4. CIT concerned 5. DR, ITAT, Mumbai 6. S / Guard File / BY ORDER, (Dy./Asstt.Registrar), ITAT, Mumbai Mihir Ashok Sampat v. ACIT Circle 17(2), Mumbai