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Income Tax Appellate Tribunal, “SMC” Bench, Mumbai
The assessee has filed this appeal challenging the order dated 7.6.2019 passed by learned CIT(A)-8, Mumbai and it relates to A.Y. 2013-14.
The assessee is aggrieved by the decision of learned CIT(A) in confirming the disallowance made under section 36(1)(iii) and also addition made under section 14A of the I.T. Act.
None appeared on behalf of the assessee. Notice sent by registered post has been returned back as unclaimed. Hence, we proceed to dispose of the appeal ex-parte, without presence of the assessee.
We have heard learned Departmental Representative and perused the record. The assessee company is engaged in the business of trading in electronic items and investment. The Assessing Officer noticed that the assessee has given interest free loans and advances to its sister concerns to the tune of Rs. 51.94 crore. The Assessing Officer also noticed that the 2 Electroparts (India) Pvt. Ltd.
assessee has incurred interest expenditure of Rs. 1.93 crore on unsecured loans taken by it. Accordingly, the Assessing Officer disallowed proportionate interest expenditure to the tune of Rs. 47.57 crores on the reasoning that the assessee has diverted interest bearing loans for giving advances to its sister concern without charging interest. Learned CIT(A) also confirmed the same.
We noticed that the assessee has submitted before the Assessing Officer as well as learned CIT(A) that it has taken interest free loan of Rs. 240 crores from Techno Electronics Ltd. and also another interest free loan of Rs. 62 crores from Videocon Industries Ltd. It was submitted that the above said interest free loans taken by the assessee have been used for giving advance free loans to sister concerns. However, we noticed that this particular contention of the assessee has not been examined by the Assessing Officer as well as learned CIT(A). In our view, no disallowance out of interest expenditure is called for, if the interest free funds available with the assessee was more than the quantum of interest free advances given by it. We take support for this view from the decision rendered by Hon’ble jurisdictional Bombay High Court in the case of M/s HDFC Bank Ltd. Since this factual aspect require verification, we are of the view that this issue needs to be restored to the file of learned CIT(A) for examining it afresh. Accordingly we set aside the order passed by learned CIT(A) on this issue and restore the same to his file for examining it afresh in the light of discussion made supra.
The assessee has raised one more ground relates to addition made under section 14A of the I.T. Act. However, we noticed that the Assessing Officer has not made any such disallowance in the assessment order. The assessee has also not raised any ground relating to 14A before learned CIT(A). Hence, we are unable to understand as to why the assessee has raised the issue relating to 14A before us. Accordingly we decline to admit the said ground.
3 Electroparts (India) Pvt. Ltd.
In the result, the appeal filed by the assessee is partly allowed for statistical purposes.
Order pronounced in the open court on 21.06.2022.