SARDAR DAIRY LTD.,MEHSANA vs. THE ITO, WARD-3, MEHSANA

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ITA 1606/AHD/2017Status: DisposedITAT Ahmedabad31 January 2019AY 2014-153 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal deleted the disallowance, following its earlier decisions for prior assessment years. The assessee had sufficient interest-free capital to cover the advances.

What were the facts?

The assessee gave interest-free advances of Rs. 33,33,105/-. The Assessing Officer disallowed interest expenditure of Rs. 3,35,976/- by calculating notional interest on these advances.

What were the issues?

Whether disallowance of interest expenditure is justified on interest-free advances when the assessee has sufficient interest-free capital.

Which sections of the Income-tax Act were involved?

Section 36(1)(iii)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “SMC” BENCH, AHMEDABAD

Before: SHRI PRADIP KUMAR KEDIA & SHRI MAHAVIR PRASAD

For Respondent: Shri T. Sankar, Sr.D.R

आदेश/O R D E R

PER PRADIP KUMAR KEDIA - AM:

The captioned appeal has been filed at the instance of the

Assessee against the order of the Commissioner of Income Tax

(Appeals), Gandhinagar (‘CIT(A)’ in short), dated 03.05.2017

arising in the assessment order dated 01.11.2016 passed by the

ITA No. 1606/Ahd/17 [Sardar Dairy Ltd. vs. ITO] A.Y. 2014-15 - 2 -

Assessing Officer (AO) under s. 143(3) of the Income Tax Act,

1961 (the Act) concerning AY 2014-15.

2.

The solitary issue in the captioned appeal is disallowance of

interest amount to Rs.3,35,976/- under S. 36(1)(iii) of the Act on

account of interest free advances of Rs.33,33,105/- lent by the

assessee.

3.

With the assistance of the learned AR for the assessee, we

have gone through the record carefully. It emerges from the

record that the assessee has given advance of Rs.33.33 Lakhs

without charging any interest. The learned AO has calculated

notional interest on such interest free advance and disallowed

interest expenditure to the extent of Rs.3,35,976/-. An identical

disallowance was made in AY 2012-13 and AY 2013-14.

However, on appeal to the Tribunal, the disallowance was deleted

on the ground that the assessee was having its own interest free

capital far in excess of the corresponding advances in question.

The issue having been adjudicated in favour of the assessee on

these facts in the earlier assessment years (refer ITA

No.3082/Ahd/2016 AY 2013-14), which in turn, is in conformity

with the long line of judicial precedent, we do not see any reason

ITA No. 1606/Ahd/17 [Sardar Dairy Ltd. vs. ITO] A.Y. 2014-15 - 3 -

to depart from the aforesaid view. The order of the CIT(A) thus

requires to be set aside and the AO is directed to delete the

disallowance on this score.

4.

In the result, the appeal of the assessee is allowed.

This Order pronounced in Open Court on 31/01/2019

Sd/- Sd/- (MAHAVIR PRASAD) (PRADIP KUMAR KEDIA) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad: Dated 31/01/2019 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 ।

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