M/S. MILESTONE MERCANDISE PVT. LTD.,MUMBAI vs. DCIT 7 (1)(1), MUMBAI

1. Passing the order against violation of natural justice The Ld CIT(A) erred in passing the order without providing proper opportunity of hearing to the appellant Company. Thereby, passing the order without proper opportunity of hearing is erroneous and liable to be set aside.

Disallowance of Interest Expenses without relying upon the Income Tax Act, 1961 Without Prejudice to the above The Ld. CIT(A) erred in confirming the disallowance made by Ld. Assessing Officer (hereinafter referred to as the "Ld AO] with regards to the interest expenses wherein no provision of Income Tax Act, 1961 has been relied upon for the aforesaid disallowance and the Ld. CITIA) has assumed the section of disallowance in the CIT(A) order. Therefore, such addition is bad in law & erroneous in facts and thereby liable to be deleted.

Disallowance of Interest Without Prejudice to the above, The Ld CITIA) erred in confirming the disallowance made by Ld. Assessing Officer (hereinafter referred to as the "La AO"] of interest of Rs.1,30,11,304/- Such disallowance is made without any basis and without any proper reasoning/explanation. Hence, such disallowance is thereby had in law & erroneous in facts and thereby liable to be deleted. 4. The Appellant craves leave to add, alter, rescind or amend any of the above grounds.” 2. Fact in brief is that return of income declaring income of Rs.1,69,46,578/- was filed on 28.09.2013. The case was subject to scrutiny assessment and notice u/s 143(2) of the Act was issued on 15.09.2014. During the course of assessment the A.O noticed that the assessee has borrowed funds from related parties and paid interest @ 28% per annum. However, the assessee had given loan to wholly owned subsidiary of Rs.1,21,26,874/- as on 31.03.2013 without charging any interest, therefore, the A.O has disallowed the interest payment made to wholly owned subsidiary @ 28% per annum to the extent of Rs.1,21,76,874/- at Rs.33,95,525/- and added to the total income of the assessee. The A.O has also noticed that assessee has given advances to group companies @ 9% and closing balance of such loan as on 31.03.2013 was Rs.5,06,09,362/-. In this regard the A.O observed that assessee had borrowed funds from related party at the interest rate of 28% per annum, however, it has charged lesser interest @ 9% on the loan given by it to group companies. Therefore, the differential interest of 3 M/s Milestone Mercandise Pvt. Ltd. Vs. DCIT-7(1)(1)