ACIT, CIRCLE-52(1), NEW DELHI vs. N.S.SOFTWARE, NEW DELHI

The solitary grievance of the revenue is that the CIT(A) erred in deleting the disallowance made by the AO on account of interest paid amounting to Rs.51616215/-.

Representatives were heard at length. Having heard the representatives we have carefully perused the orders of the authorities below.

Briefly stated the facts of the case are that during the course of the scrutiny assessment proceedings the AO noticed that the assessee has debited Rs.70504114/- on account of interest paid to the bank against the secured loan of Rs.60,20,05,378/-. The AO further noticed that out of total borrowed fund the assessee firm has given advances to the partners of the firm amounting to Rs.44,07,29,445/- without charging any interest.

The assessee was asked to show caused why the interest debited to the P & L account may not be proportionately diallowed as the interest bearing loan has been diverted to non interest bearing advances.

In its reply the assessee stated that similar situation arose in A.Y.2005-06 to 2011-12 where the assessment was completed after thorough scrutiny and no such disallowance was proposed / made by the AO. It was explained that the loan was borrowed for business purposes and there is no adverse finding given in earlier assessment years.

The contention of the assessee did not find favour with the AO who proceeded by computing proportionate disallowance and made addition of Rs.5,16,16,215/-.

Assessee carried the matter before the CIT(A) and reiterated its contention. It was also brought to the notice of the CIT(A) that inspite of specific clause in the partnership deed, the assessee firm is not paying any interest on the credit balance of capital amounting to Rs.250.84 crores to its partners. After considering the facts and the submissions the CIT(A) held as under :-

We find that the loan was taken by the assessee in A.Y.2007-08 and its paying interest since then and claiming the same as expenditure. We find that the returns for A.Y.2007-08 to 2011-12 were selected for scrutiny assessment and no disallowances on account of interest claimed by the assessee were made.

The disallowance was made for the first time in A.Y.2012-13 which was deleted by the CIT(A) and the order of the CIT(A) was upheld by this Tribunal in order dated 17.01.2022. The Hon’ble Supreme Court in the case of Radhasoami Satsang Vs. CIT 193 ITR 321 has held that if the facts are the same and the law has not changed than the consistent view has to be taken as in earlier assessment years. 11. On facts of the case in hand, rule of consistency squarely apply and, therefore, we do not find any error or infirmity in the findings of the CIT(A). The appeal filed by the revenue is accordingly dismissed. Order pronounced in the open court on 08.08.2022.