SH. RUCHI SHARMA,JAMMU vs. THE INCOME TAX OFFICER, JAMMU

ITA 135/ASR/2017Status: DisposedITAT Amritsar08 March 20195 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal held that the assessee failed to provide any explanation for the business purpose of the advance. However, the plea regarding sufficient own funds to cover the advance was considered, and the matter was remanded for verification of whether bank borrowings were diverted for non-business purposes.

What were the facts?

The assessee advanced interest-free loans to a sister concern without any business purpose, while incurring interest expenses on bank borrowings. The Assessing Officer disallowed the interest expense and initiated penalty proceedings.

What were the issues?

Whether penalty under Section 271(1)(c) is leviable for advancing interest-free loans to a sister concern, and whether the interest expense on borrowed funds is deductible when own funds are available.

Which sections of the Income-tax Act were involved?

Section 271(1)(c),Section 36(1)(iii)

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Cases cited in this judgment(9)Show list

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Income Tax Appellate Tribunal, AMRITSAR BENCH, AMRITSAR (SMC

Before: SH. SANJAY ARORA

Hearing: 21.02.2019Pronounced: 15.03.2019

Per Sanjay Arora, AM: This is an Appeal by the Assessee directed against the Order by the Commissioner of Income Tax (Appeals), Jammu ('CIT(A)' for short) dated 28.12.2016, dismissing the assessee’s appeal contesting the levy or penalty under section 271(1)(c) of the Income Tax Act, 1961 ('the Act' hereinafter) for the Assessment Year (AY) 2010-11 vide order dated 26.03.2015. 2. The assessee, a manufacturer of resin and turpentine oil from resin procured from the forest department, was during assessment proceedings found to have advanced loan/s to its’ sister concern, M/s. P.R. Chemicals, on interest free basis during the relevant previous year. The advance was further found to be without any 2 Ruchi Sharm

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