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Income Tax Appellate Tribunal, “A” BENCH, AHMEDABAD
Before: SHRI PRADIP KUMAR KEDIA
The captioned appeal has been filed at the instance of the Assessee against the order of the Commissioner of Income Tax (Appeals)-1, Vadodara (‘CIT(A)’ in short), dated 20.07.2018 arising in the assessment order dated 29.12.2016 passed by the Assessing Officer (AO) under s. 143(3) of the Income Tax Act, 1961 (the Act) concerning AY 2014-15.
[Jewel Consumer Care Pvt. Ltd. vs. ACIT] A.Y. 2014-15 - 2 - 2. The substantive ground of appeal raised by assessee read hereunder:
“1. Disallowance u/s 36(1)(iii) The ld. CIT(A)-I, Baroda has erred in law and facts in confirming the disallowance of Interest Expenses of Rs. 3,72,000/- u/s 36(1)(iii). The ld. CIT(A)-I has followed the order of his predecessor for AY 2011-12 and confirmed the addition. The ld. CIT(A) has failed to appreciate that the Appellant had sufficient interest free funds to cover the interest free advances to the Appellant's sister concern in relation to the above disallowance. The ld. CIT(A)-I has also failed to appreciate that the said interest free advances were provided by the Appellant to its sister concern for business purpose and with a clear commercial purpose and thus the conclusion that the said funds were applied for a non-business purpose was erroneous. The ld. CIT(A)-1 has also failed to appreciate that the issue on identical facts stands covered by the Hon. ITAT in favour of the Appellant for AY 2007-08 and AY 2008-09 vide & 757/Ahd/2012 respectively.”
We have heard the rival submissions on the issue. The disallowance of interest expenses of Rs.3,72,000/- under s.36(1)(iii) of the Act is in controversy.
It is the case of the assesse that interest expenditure has been incurred on certain interest free advances to sister concern M/s. Amigo Dispensing Solutions Pvt. Ltd. The AO has alleged that the said advances have been made for non-business purposes and consequently, interest incurred thereon cannot be claimed as deduction in view of the provision of Section 36(1)(iii) of the Act. The CIT(A), in first appeal, has confirmed the aforesaid action of disallowance by AO placing reliance on the order of the CIT(A) on similar facts concerning AY 2011-12. It is submitted on behalf of the assessee that the disallowance made by the Revenue authorities on similar facts has been reversed by the ITAT in & 3437/Ahd/2014 order dated 09.07.2018 concerning AYs. 2010-11 & 2011-12 for the same assessee. Similar reversal of disallowance was stated to have been done by the co-ordinate bench in ITA No. 1008/Ahd/2017 order dated 03.05.2019 concerning AY 2013-14. On facts, it was pointed out on behalf of the assessee that interest free ITA No. 2070/Ahd/18 [Jewel Consumer Care Pvt. Ltd. vs. ACIT] A.Y. 2014-15 - 3 - funds in the form of capital/reserves etc. is substantially in excess of the interest free advances given by the assessee. The interest free capital and reserves are stated to be in the vicinity of Rs.26 Crores as against the interest free advance of Rs.31 Lakhs in question. It was thus claimed that in the instant case, interest free funds available at the disposal of assessee are sufficient to meet the interest free advances and thus a presumption would arise that interest free advances were lent from interest free funds and not borrowed funds.
In view of the decision of the Hon’ble Bombay High Court in the case of CIT vs. Reliance Utilities & Power Ltd., [2009] 313 ITR 340 (Bom.)and similar approach adopted by the co-ordinate bench in earlier years, we find sufficient reasons to admit the claim of the assessee for reversal of disallowance favourably.
In the result, appeal of the assessee is allowed.
This Order pronounced on 24/06/2020
Sd/- Sd/- (MADHUMITA ROY) (PRADIP KUMAR KEDIA) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad: Dated 24/06/2020 True Copy S. K. SINHA आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. राज�व / Revenue 2. आवेदक / Assessee 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त- अपील / CIT (A) 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड� फाइल / Guard file. By order/आदेश से,
उप/सहायक पंजीकार आयकर अपील�य अ�धकरण, अहमदाबाद ।