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Income Tax Appellate Tribunal, “D” BENCH, AHMEDABAD
Before: SHRI WASEEM AHMED&
PER Ms. MADHUMITA ROY - JM: The instant appeal filed by the assessee is against the order dated 07.02.2017 passed by the Commissioner of Income Tax (Appeals)-1, Vadodara under section 143(3) of the Income Tax Act, 1961 (in short ‘the Act’) arising out of the order dated 09.02.2016 passed by the Asst. Commissioner of Income Tax, Circle – 1(1)(2), Baroda for the Assessment Year 2013-14. 2. The assessee, a private limited company engaged in the business of manufacturing of various household plastic products and oral care products, filed its return of income on 30.09.2013 declaring total income at Jewel Consumer Care Pvt. Ltd. vs. ACIT Asst.Year –2013-14 Rs.45,93,140/- upon scrutiny notice dated 01.09.2014 u/s 143(2) of the Act was issued followed by a notice u/s 142(1) dated 05.01.2015 along with a detailed questionnaire and served upon the assessee. The assessee has given interest free advances to its sister concern M/s. Amigo Dispensing Solutions Pvt. Ltd. for business purpose, which was from its borrowed funds. The same was provided with a clear intention of commercial purpose. The assessee is also having sufficient interest free fund to cover the said interest free advances. However, the Learned AO disallowed such interest expenses to the tune of Rs.4,61,419/- on the ground that the said interest related to borrowed fund, which were not used for business purpose. The Learned CIT(A) in appeal relying upon the decision passed by his predecessor in appellant’s own case for A.Y. 2011-12 upheld such disallowance, hence appeal preferred by the assessee is before us.
At the very outset of the matter, the Learned Counsel appearing for the assessee submitted before us that Learned Tribunal in ITA No.3436 & 3437/Ahd/2014 for A.Y. 2010-11 & 2011-12 in assessee’s own appeal dealt with the similar issue and decided the same in favour of the assessee by deleting such disallowance. He therefore, prays for the similar relief before us. However, the Learned DR has not made any relevant argument contradicting the contentions made by the assessee in support of his case.
Heard the representative of the respective parties, perused the relevant materials available on record. We have also carefully considered the order passed by the Learned Tribunal in ITA No.3436 & 3437/Ahd/2014 for A.Y. Asst.Year –2013-14 2010-11 & 2011-12 in assessee’s own case. The relevant portion whereof is as follows:
Brief facts of the case are that during the assessment proceedings it revealed to the AO that the assessee had advanced interest free loan amounting to Rs.61 lakhs to M/s.Amigo Dispensing Solutions P.Ltd. The AO has confronted the assessee to show as to why interest income of the interest free loans and advanced should not be disallowed. In response to the query of the AO, assessee filed a detailed reply wherein it took two fold pleas. In the first fold of contentions, it was submitted that advances were given to the sister concerns on account of business exigency and in the second fold, it was contended that the assessee has sufficient interest free funds, out of which, it could be construed that, these advances were given. The ld.AO did not accept these contentions of the assessee and made disallowance of Rs.9,42,268/- in the Asstt.Year 2010-11 and Rs.6,82,954/- in the Asstt.Year 2011-12. Appeal to the ld.CIT(A) did not bring any relief to the assessee.
The ld.counsel for the assessee at the very outset submitted that similar disallowances were made in the assessment years 2007-08 and 2008-
The issue travelled upto the Tribunal and the Tribunal upheld deletion of disallowance vide its order dated 8.3.2013 passed in ITA No.2618/Ahd/2010 and 757/Ahd/2012 and appeals of the Revenue have been dismissed by the Tribunal. Copy of the Tribunal’s order has been placed on page nos.85 to 93 Asst.Year –2013-14 merely observing that loans were given before availability of interest free funds. We are in assessment years 2010-11 and 2011-12. From 1.4.2006, assessee has been showing excess interest free funds. Out of which it could be assumed that these advances were made. This plea of the assessee cannot be rejected merely by observing that loans were given before 1.4.2006. There is no logic in the stand point of the ld.CIT(A). Every year is an independent assessment year and even if the assessee has been charging interest on the advances given by him, but after a particular date, it can stop charging interest by treating the advance as given from interest free funds. In the present case, the assessee has demonstrated that it is having sufficient interest free funds out of which the loans given even in earlier years can be characterized as given in the present year. Accordingly, we allow his ground of appeal and delete the disallowance.
Respectfully relying upon the judgment passed by the co-ordinate bench, we find no reason to make such disallowance by the authorities below hence, the addition made by the authorities is hereby deleted.
In the result, assessee’s appeal is allowed. This Order pronounced in Open Court on 03/05/2019 ( WASEEM AHMED ) ( Ms. MADHUMITA ROY ) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated /05/2019 Asst.Year –2013-14 आदेश क" ""त"ल"प अ"े"षत/Copy of the Order forwarded to : 1. अपीलाथ" / The Appellant
""यथ" / The Respondent. 3. संबं"धत आयकर आयु"त / Concerned CIT 4. आयकर आयु"त(अपील) / The CIT(A)-1, Vadodara.
"वभागीय ""त"न"ध, आयकर अपील"य अ"धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड" फाईल / Guard file. आदेशानुसार/ BY ORDER, स"या"पत ""त //// उप/सहायक पंजीकार (Dy./Asstt.