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Income Tax Appellate Tribunal, AHMEDABAD “B” BENCH
Before: Shri Rajpal Yadav & Shri Amarjit Singh
आदेश/ORDER PER : AMARJIT SINGH, ACCOUNTANT MEMBER:-
This assessee’s appeal for A.Y. 2014-15, arises from order of the CIT(A)-5, Ahmedabad dated 01-11-2017, in proceedings under section 143(3) of the Income Tax Act, 1961; in short “the Act”.
I.T.A No. 2644/Ahd/2017 A.Y. 2014-15 Page No 2 M/s. B.K. Commodities vs. ITO
The solitary ground of appeal of the assessee is against the decision of ld. CIT(A) confirming the addition of Rs. 71,96,623/- in respect of disallowance of interest payable to partners and of other unsecured loan because the same was unpaid as on 31st March, 2014.
The fact in brief is that assessee has filed return of income on 28th 3. Nov, 2014 declaring total income at Rs. 823200/-. Subsequently, the case was selected under scrutiny by issuing of notice u/s. 143(2) of the act on 31st August, 2015. During the course of assessment, the assessing officer has noticed that asessee had debited profit and loss a/c on account of interest payable of Rs. 7,19,623/-. The assessing officer was of the view that interest payable was in the nature of provision only, therefore, he was of the view of the aforesaid amount of interest payable was not an allowable as expenditure. Therefore, the assessing officer has disallowed the same and added to the total income of the assessee.
Aggrieved assessee has filed appeal before the ld. CIT(A). The ld. CIT(A) has dismissed the appeal of the assessee reiterating the same reason as mentioned by the assessing officer.
We have heard the rival contentions and perused the material on record carefully. It is undisputed fact that assesse was following mercantile system of accounting during the year under consideration. The assessee has incurred expenses in the form of interest on unsecured loans obtained from partners as well as other parties. As per the mercantile system of accounting interest expenses are to be debited to the profit and loss account irrespective
I.T.A No. 2644/Ahd/2017 A.Y. 2014-15 Page No 3 M/s. B.K. Commodities vs. ITO
of the fact that as to whether the same has been paid or not. We observe that assessing officer and ld. CIT(A) has taken a incorrect view that if unpaid interest is added to the unsecured loan such interest would not appear in the balance sheet. We consider that the assessee has shown the interest amount payable to the partners and other as outstanding under the mercantile system of accounting and the assessing officer and ld. CIT(A) has completely taken a wrong assumption, therefore, the impugned addition deserves to be deleted. Accordingly, the appeal of the aassessee is allowed.
In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 21-02-2019
Sd/- Sd/- (RAJPAL YADAV) (AMARJIT SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad : Dated 21/02/2019 आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से, उप/सहायक पंजीकार आयकर अपील�य अ�धकरण, अहमदाबाद