ITAT deletes Addition made by disallowance of Interest Expenses accrued from Investment made in Shares and Securities [Read Order]

The  Mumbai  bench of Income Tax Appellate Tribunal (ITAT) has recently deleted an addition made on account of disallowance of interest expenses accrued on account of investment made in shares and securities.

The appeal was filed by  assessee Hitesh Shantilal Mehta against the orders passed by the Commissioner of Income Tax (Appeals) for the Assessment Year 1993-94.

The fact of the case was that, assessee had created a provision in respect of interest liability. This liability had accrued on account of investment made in shares and securities through various broker firms of Harshad S. Mehta Group.

The assessee had brought to the notice of the Assessing Officer (AO) that a similar addition in the past has been deleted by the Tribunal in the case of Dr. Pratima H. Mehta, one of the family members of the assessee. The AO brushed aside the decision cited by the assessee and disallowed interest expenses.

During the hearing Dharmesh Shah, counsel for the assessee submitted that in Assessee’s own case for assessment year 2012-13, the Tribunal had allowed the claim of assessee subject to verification and interest quantification.

Dr. P. Daniel, counsel for the revenue, supported the decision of the lower authorities.

It was pointed out by the tribunal that , while adjudicating this issue in assessee’s appeal for assessment year  2012-13 has observed that the assesee’s ground is similar to ground no. 1 raised in the case of Sudhir S. Mehta in for assessment year 2009-10.

The tribunal further observed that while deciding the issue of liability of interest expenses in the case of Sudhir S. Mehta  the bench had concluded as follows, “In view of our aforesaid discussion we set aside the order of the CIT(A) and direct the AO to allow deduction in respect of said interest accrued and calculated at 12% per annum amounting to Rs.2,64,72,208/- after disallowing proportionate interest in respect of the investment in shares amounting to Rs.3,51,176/- after verifying the calculation of the interest quantification.”

The two member bench of Vikas Awasthy, (Judicial Member) and Amarjit Singh, (Accountant Member) allowed the appeal filed by the assessee and deleted the addition made by the AO.

To Read the full text of the Order CLICK HERE

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