M/S ROBUST TRANSPORTATION PRIVATE LIMITED,MUMBAI vs. INCOME TAX OFFICER, WARD 15(3)(1), MUMBAI

ITA 4803/MUM/2025Status: DisposedITAT Mumbai11 December 2025AY 2017-18Bench: SHRI AMIT SHUKLA (Judicial Member), SHRI VIKRAM SINGH YADAV (Accountant Member)15 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the addition of notional interest was unsustainable as the assessee had sufficient interest-free funds to cover the advances and no borrowed funds were utilized. The doctrine of real income prevents taxing hypothetical income that has not accrued.

What were the facts?

The assessee company, which had not yet commenced its main business, gave interest-free loans and advances totaling ₹21.71 crore to certain entities. The Assessing Officer (AO) added notional interest of ₹1.73 crore to the assessee's income, presuming the advances were made from borrowed funds.

What were the issues?

Whether notional interest can be taxed on interest-free advances when the assessee has sufficient interest-free funds and no borrowed funds were used. Whether the doctrine of real income applies to prevent taxation of hypothetical income.

Which sections of the Income-tax Act were involved?

Section 143(3)

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Income Tax Appellate Tribunal, ‘D’ BENCH

For Appellant: Shri Ashwani Kumar CA and Ms. Deepali Agarwal
For Respondent: Shri Annavaran Kosuri, Sr
Hearing: 25/11/2025Pronounced: 11/12/2025

PER AMIT SHUKLA (J.M): This appeal, being ITA No. 4803/Mum/2025, has been filed by the assessee against the order dated 16 June 2025 passed by the National Faceless Appeal Centre, Delhi, arising from the assessment framed under section 143(3) of the Income-tax Act, 1961 for Assessment Year 2017–18. The solitary and central grievance of the assessee is against the sustenance of an addition of ₹1,73,68,000 made by the Assessing Officer by way of notional interest @ 8% on 2 Robust Transportation Pvt. Ltd., aggregate loans and advances of ₹21,71,00,000 given by the assessee-company to certain entities during the relevant previous year. According to the asse

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