ITO, WARD- 25(2), NEW DELHI vs. TELESPICE WIRELESS PVT. LTD., NEW DELHI
In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.
What did the Tribunal hold?
The Tribunal held that in the absence of any specific provision in the Income Tax Act for determining notional interest on presumptive basis, the AO's addition was not justified. The CIT(A)'s deletion of the addition was upheld.
What were the facts?
The assessee company, incorporated to provide telecom services, had significant own funds and gave interest-free loans to various parties in the ordinary course of business. The Assessing Officer (AO) made an addition for notional interest on these outstanding loans.
What were the issues?
Whether notional interest can be charged on interest-free loans given by the assessee in the ordinary course of business, when the assessee has sufficient own funds and no interest expense is claimed.
AI-generated summary — verify with the full judgment below
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- CIT v. Daulat Ram Rawatmull525 citing87 ITR 349 · 1973 · SC · Read judgment
Income Tax Appellate Tribunal, DELHI BENCH ‘G’, NEW DELHI
Before: Sh. Amit ShuklaDr. B. R. R. Kumar
Heard together (3 matters)
Read from the judgment's own cause title. This page is filed under one of them.
The present appeals have been filed by the Revenue against the order of ld. CIT(A)-42, New Delhi dated 15.12.2017, order of ld. CIT(A)-32, New Delhi dated 23.11.2017 and the order of ld. CIT(A)-33, New Delhi dated 15.12.2017 .
Since, the issues involved in all these appeals are identical, they were heard together and being adjudicated by a common order.
ITA Nos. 4520, 4521 & 4661/Del/2018 2 Telespice Wireless Pvt. Ltd. 3. In following grounds have been raised by the Revenue:
“1. That the Ld. CIT(A) has erred in law as well as on the facts and the circumstances of the case in deleting the addition of Rs.127,31,43,600/- made by the AO on account of interest free loans amounting Rs. 14,14,60,40,000/- given to various parties by merely relying on decision of Hon’ble Supreme Court in the case of CIT Vs. Daulat Ram Rawat Mall 1973 87 ITR 349 without appreciating the facts of present case as in of 2008 dated 01.06.2012 in VIT V. Sungero Ltd., the Hon’ble High Court of Delhi after discussing the aforesaid decision of Daulat Ram Rawat Mull (supra), Opined that the “order must be read as a whole to see whether test of perversity is satisfied.”
Heard the arguments of both the parties and perused the material available on record.
The solitary ground taken up by the Revenue is against the order of the ld. CIT(A) deleting the notional interest determined by the Assessing Officer.
The assessee company was incorporated with the object of providing services namely basic telephone services, cellular/mobile telephone services, internet broadband services and other value added services. The assessee filed return of income on 29.09.2012 showing current year loss of Rs.46,169/-.
The Assessing Officer made addition of Rs.127,30,97,431/- on account of imputed interest @9% per annum on the outstanding amount of loan/advances to various parties of Rs.1414.60 Crores as per table below: , 4521 & 4661/Del/2018 3 Telespice Wireless Pvt. Ltd. S. Name and address of the party Amount (In Rs.) No. 1. M/s Drive Development (P) Ltd. 4,50,000/- 2. M/s new Idea Development Pvt. 14,142,250,000/- Ltd. 3. M/s Majestic Infracon (P) Ltd. 33,40,000/- (formally known as DB Infracon Pvt. Ltd.) Total 14,14,60,40,000/-
The undisputed facts of the case are that the assessee had own funds in form of share capital, reserves & surplus to the tune of Rs.1414.60 Crores in which the assessee has not incurred any interest expenses and loans were also given in the ordinary course of business without interest. Further, the assessee has not claimed any interest in the P&L account. We have gone through the judgments referred by the Revenue and find that they are not even remotely related to the facts of the instant case. In the absence of any provision of the Income Tax Act to determine the notional interest received /receivable on presumptive basis, we decline to interfere with the order of the ld. CIT(A).
In the result, all the appeals of the Revenue are dismissed. Order Pronounced in the Open Court on 21/10/2021.
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