M/S. RASHI IMPEX PVT. LTD.,KOLKATA vs. D.C.I.T., CC-3(2), KOLKATA, KOLKATA

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ITSSA 3/KOL/2023Status: DisposedITAT Kolkata22 August 2023AY 2014-20155 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 held that the disallowance of interest expenditure was not justified. The Assessing Officer's finding was not categorical; he did not pinpoint specific cash credits taken by the assessee that were not used for business. Instead, he merely referred to the assessee's net worth, non-current investments, and long-term loans and advances. The Tribunal noted that the loans or other credits obtained by the assessee, on which interest was paid, were not new and had been existing credits in prior years. Crucially, the interest expenditure had been allowed in earlier years. Therefore, disallowing such interest cost in the current years was incorrect, as the credits were taken and used for business purposes. The Assessing Officer had not conducted any inquiry to disprove this. Consequently, the Tribunal allowed this ground of appeal for both years and deleted the disallowances. No other grounds were pressed by the assessee.

What were the facts?

The assessee, M/s. Rashi Impex Pvt. Limited, filed appeals against the orders of the CIT(Appeals)-21, Kolkata, for Assessment Years 2014-15 and 2015-16. These appeals stemmed from search proceedings under section 132 of the Income Tax Act conducted on the 'UNIGLOBAL GROUP' on September 9, 2015, leading to a notice under section 153A. The assessee declared losses for both assessment years. The Assessing Officer disallowed interest expenditure of Rs. 8,50,196/- for AY 2014-15 and Rs. 9,74,127/- for AY 2015-16, a disallowance confirmed by the CIT(Appeals). The assessee contended that the interest was on old credits, allowed in prior years, with no change in facts. The Revenue argued the assessee failed to demonstrate the use of credits for business.

What were the issues?

1. Whether the Tribunal had to decide if the disallowance of interest expenditure of Rs. 8,50,196/- for AY 2014-15 and Rs. 9,74,127/- for AY 2015-16 was justified, turning on the interpretation of Section 37 of the Income Tax Act, 1961. Assessee's contentions: The interest paid was on old credits, not fresh ones. These credits were used for business purposes, and the interest expenditure had been allowed in earlier assessment years by the Assessing Officer. There was no change in the factual circumstances, only a different appreciation by the Assessing Officer. The assessee relied on details from its paper book, specifically page 41 for AY 2014-15 and page 17, noting finance costs under Note 17. Revenue's contentions: The assessee failed to demonstrate that the credits on which interest was paid were utilized for business purposes.

Which sections of the Income-tax Act were involved?

Section 132,Section 153A,Section 37

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘A’ BENCH, KOLKATA

Before: Shri Rajpal Yadav, Vice- & Shri Rajesh Kumar

Per Shri Rajpal Yadav, Vice-President (KZ):- The present two appeals are directed by the assessee against the separate orders of ld. Commissioner of Income Tax (Appeals)-21, Kolkata dated 30th November,

IT(SS)A Nos. 3 & 4/KOL/2023 Assessment Years : 2014-2015 & 2015-2016 M/s. Rashi Impex Pvt. Limited 2022 passed for Assessment Years 2014-15 & 2015-16 respectively.

2.

The assessee has raised seven grounds of appeal in A.Y. 2014-15 and four grounds of appeal in A.Y. 2015- 16. The ld. Counsel for the assessee did not press any of the grounds except Ground No. 1 in both the years. Therefore, all other grounds are rejected.

3.

The issue involved in Ground No. 1 in both the years is common except variation in the quantum. The grievance of the assessee is that the ld. CIT(Appeals) has erred in confirming the disallowance made by the ld. Assessing Officer of Rs.8,50,196/- and Rs.9,74,127/-. These amounts represent the interest expenditure.

4.

Brief facts of the case are that a search under section 132 of the Income Tax Act was conducted on “UNIGLOBAL GROUP” of cases on 09.09.2015. The assessee appears to be one of the entities in the Group. Accordingly a notice under section 153A of the income Tax Act was issued to the assessee, which was duly served upon it. It has filed return of income on 20.11.2016 electronically declaring a loss of Rs.30,81,435/- and Rs.26,80,435/- in A.Y. 2014-15 and 2015-16 respectively. The ld. Assessing Officer has passed the assessment order on 31.12.2017. The finding

IT(SS)A Nos. 3 & 4/KOL/2023 Assessment Years : 2014-2015 & 2015-2016 M/s. Rashi Impex Pvt. Limited of the ld. Assessing Officer in both the years is verbatim except variation in the quantum mentioned by him. According to the ld. Assessing Officer, the assessee has net worth of Rs.14.34 crores and Rs.15.41 crores and it has non-current investments of Rs.9.15 crores and Rs.9.13 crores in these years respectively. The assessee further advanced long-term loans of Rs.25.51 crores and Rs.20.79 crores. The ld. Assessing Officer thereafter simply observed that from the financial it shows that credits taken from the Bank are not used for the purpose of business of the assessee and, therefore, interest paid on the credits cannot be allowed to the assessee. Accordingly he made a disallowance of Rs.8,50,196/- and Rs.9,74,127/- in A.Y. 2014-15 and 2015-16 respectively. The appeal to the ld. CIT(Appeals) did not bring any relief to the assessee.

5.

The ld. Counsel for the assessee submitted that the assessee has not taken any fresh credit. The loan and other credits on which interest was paid are old credits. It has been paying interest on these and claiming deduction. The ld. Assessing Officer in earlier years has allowed this claim to the assessee. There is no change in the facts and circumstances except the angle with which the ld. Assessing officer has appreciated it. He took us through page no. 41 of the paper book filed in A.Y. 2014- 15. He also drew our attention towards page no. 17. He

IT(SS)A Nos. 3 & 4/KOL/2023 Assessment Years : 2014-2015 & 2015-2016 M/s. Rashi Impex Pvt. Limited brought to our notice the Note No. 17 exhibiting the finance cost. On the strength of these details, he contended that no disallowance ought to have been done by the ld. Assessing Officer.

6.

The ld. CIT(DR), on the other hand, submitted that the assessee failed to demonstrate the user of these credits for business on which, it has paid interest.

7.

We have duly considered the rival contentions and gone through the record carefully. The finding of the ld. Assessing Officer is not categorical. He has not pinpointed that cash credits have been taken by the assessee, which were not used for the business purposes. He only made reference to net worth, non- current investments and long-term loans and advances given by the assessee. The loans or other credits obtained by the assessee had interest cost or also not new in this year. They were existing credits upon them. Interest expenditure was allowed in earlier years. Therefore, in these years, such interest cost cannot be disallowed. The simple reason is that these credits were taken by the assessee and used for the purpose of the business. The ld. Assessing Officer has not made any inquiry in this connection. Therefore, we allow this ground of appeal in both the years and delete the disallowances.

IT(SS)A Nos. 3 & 4/KOL/2023 Assessment Years : 2014-2015 & 2015-2016 M/s. Rashi Impex Pvt. Limited

8.

In the result, both the appeals of the assessee are allowed.

Order pronounced in the open Court on August 22, 2023.

Sd/- Sd/- (Rajesh Kumar) (Rajpal Yadav) Accountant Member Vice-President(KZ) Kolkata, the 22nd day of August, 2023

(1) M/s. Rashi Impex Pvt. Limited, Copies to : C/o. M/s. Salarpuria Jajodia & Co., 7, C.R. Avenue, 3rd Floor, Kolkata-700072

(2) Deputy Commissioner of Income Tax, Central Circle-3(2), Kolkata, 110, Shantipally, E.M. Bypass, Kolkata-700107 (3) Commissioner of Income Tax (Appeals), Kolkata-21; (4) Commissioner of Income Tax , (5) The Departmental Representative (6) Guard File TRUE COPY By order

Assistant Registrar Income Tax Appellate Tribunal, Kolkata Benches, Kolkata Laha/Sr. P.S.

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