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Income Tax Appellate Tribunal, “A” BENCH, MUMBAI
O R D E R भहावीय ससिंह, उऩाध्मऺ के द्वाया / PER MAHAVIR SINGH, VP: This appeal of assessee is arising out of the order of the Commissioner of Income Tax (Appeals)]-55 Mumbai, [in short CIT(A)], in appeal No. CIT(A)-55/ACIT-17(1)/IT-431/17-18 dated 28.08.2018. The assessment was framed by the Asst. Commissioner of Income Tax, Circle 17(1), Mumbai (in short ACIT/ AO) for the A.Y. 2013-14 vide order dated 20.03.2016 under section 143(3) of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’). The first issue in this appeal of assessee is against the order of 2. CIT(A) confirming the action of the Assessing Officer in disallowing interest under section 37 of the Act by holding the same not for the “1. The learned Commissioner of Income Tax (Appeals) erred in confirming the disallowance of interest of ₹39,41,684/- without appreciating that the interest incurred was for the purpose of business and therefore allowable.
The learned Commissioner of Income Tax (Appeals) did not appreciate the explanation placed on record, all the details regarding to the advances which clearly established that the advances were not for the purpose of business.”
We have heard the rival contentions and gone through the facts and circumstances of the case. We noted from the assessment order that the assessee has claimed interest expenses amounting to ₹46,88,977/- paid on the unsecured loans and advances but at the same time has given interest free loans to various parties from which no interest income was disclosed. The Assessing Officer accordingly made a disallowance on total interest free loans and advances of ₹4,07,28,751/- and thereby disallowed a sum of ₹ 39,41,684. Aggrieved, assessee preferred the appeal before CIT(A), who also confirmed the action of the Assessing Officer. Aggrieved, assessee is in appeal before Tribunal.
Before us, the learned Counsel for the assessee filed the details of advances granted by the assessee to various parties on 31.03.2013, the details are as under:-
SN Name of the party Amount Name of the party Amount Total Interest Expenses (A) ₹59,50,174 Total Loans and Advances (Liability) (B) ₹6,14,82,123 Interest free advances (Asset) (C) ₹4,07,28,751 Disallowance (A/B*C) ₹39,41,684 6. Now before us, the assessee gave explanation in respect to the advances given to Matoshree Infrastructure Pvt. Ltd. of ₹3,34,68,000/-, advance of ₹49,29,668/- to Indo Canada JVB and VAT refund due to ₹2,55,054/-. The assessee without prejudice to the arguments on the merits stated that disallowance be restricted to ₹2,00,916/-. For this, assessee has given the computation as under: - Particulars Amount Total Interest Expenses (A) ₹59,50,174 Total Loans and Advances (Liability) (B) ₹6,14,82,123 Advances treated as granted for (C) ₹20,76,032 non-business purposes (₹4.07 crores -3.34 crores – 0.49 crores -0.025) Disallowance (A/B*C) ₹2,00,916 Reason given by assessee was that advances to Matoshree 7. Infrastructure Pvt. Ltd. of ₹3,34,60,000/- was in pursuant to the
The next issue in this appeal of assessee is as regards to the order of CIT(A) confirming the action of the Assessing Officer in making addition of ₹17,00,614/- being outstanding creditors under section 41(1) of the Act. For this, assessee has raised the following ground No.3 and 4: -
3. The learned Commissioner of Income Tax (Appeals) erred in confirming the addition of ₹17,00,614 u/s 41(1) despite the fact that, the said creditors were outstanding as at the date of
4. The learned Commissioner of Income Tax (Appeals) erred in not appreciating that the creditors were genuine, and therefore the action of the Assessing Officer was totally unwarranted.”
We have heard the rival contentions and gone though the facts and 9. circumstances of the case. We noted that it is neither disputed by the CIT(A) nor by the Assessing Officer that amounts were outstanding for the following creditors in the balance sheet as on 31.03.2013.