INCOME-TAX OFFICER vs. M/S. JALGAON INVESTMENT PVT. LTD.,, JALGAON

The brief facts of the case as emanating from the records are : The assessee is engaged in purchase and sale of onions. The assessee filed its return of income for the impugned assessment year on 30-09-2011 declaring total income of Rs.1,15,790/-. The case of assessee was selected for scrutiny, consequently, statutory notice u/s. 143(2) of the Act was issued to the assessee on 24-09-2012. In scrutiny assessment proceedings, the Assessing Officer observed that the assessee has taken loan from its Directors/Shareholders and has paid interest @ 14.46%. The Assessing Officer held that no business expediency is established for obtaining loan from the Directors / Shareholders and the interest paid by the assessee company to the Directors is excessive. The Assessing Officer restricted the payment of interest @ 12% and disallowed the remaining interest payment aggregating to Rs.1,43,82,332/- u/s. 40A(2)(b) of the Act.

Smt. Deepa Khare appearing on behalf of the assessee-respondent vehemently defended the impugned order. The ld. Counsel for the assessee submitted that since the assessee has not claimed the payment of interest as expenditure there is no question of disallowing the same.

Ms. Shabana Parveen representing the Department vehemently defended the assessment order. The ld. DR submitted that the assessee has failed to show the business expediency for taking loan from the Directors/Shareholders. The ld. DR further contended that the assessee has paid excessive interest on loan taken from the Directors / Shareholders of the assessee company.

We have heard the submissions made by representatives of rival sides and have perused the orders of authorities below. The solitary issue in appeal by the Revenue is deleting of disallowance of interest allegedly paid by the assessee company to the Directors/Shareholders on unsecured loans. The Commissioner of Income Tax (Appeals) has deleted the addition by observing as under : “6. ……… It is seen that the appellant had neither debited the interest paid to Profit & loss account nor claimed any deduction on account of interest paid on unsecured loan in the Return of Income filed and the same fact is also admitted by the A.O. in his assessment order. Rather appellant has capitalized the interest paid to the cost of investment in shares of Jain irrigation systems ltd. as per consistent practice followed. Since no deduction on account of interest payment is at all claimed by the appellant question of any disallowance of interest u/s. 40A(2)(a) could not arise.”

The ld. DR has failed to controvert the findings of the Commissioner of Income Tax (Appeals). No material has been placed on record by the Revenue to show that the interest expenditure has been claimed by the

In the result, the appeal of Revenue is dismissed.