RANGOLI PORTFOLIO PRIVATE LIMITED,PANCHKULA vs. DEPUTY COMMISSIONER OF INCOME TAX CIRCLE PANCHKULA, AAYAKAR BHAWAN, SECTOR TWO, PANCHKULA, HARYANA
1
IN THE INCOME TAX APPELLATE TRIBUNAL
“B” BENCH, CHANDIGARH
BEFORE HON’BLE SHRI RAJPAL YADAV, VICE PRESIDENT
AND HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM
आयकरअपीलसं./ ITA No.440/CHANDI/2023
(िनधाŊरणवषŊ / Assessment Year: 2017-18)
M/s Rangoli Portfolio Private Limited
SCO. No. 354, Sector 9
Panchkula. 134109. बनाम/ Vs.
DCIT
Panchkula
̾थायीलेखासं./जीआइआरसं./PAN/GIR No. AADCR-5197-F
(अपीलाथŎ/Appellant)
:
(ŮȑथŎ / Respondent)
अपीलाथŎकीओरसे/ Appellant by :
Sh.B.M.Monga, (Advocate) & Sh. Rohit
Kaura, (Advocate) & Ms. Khyati Avinash
(Advocate)– Ld. ARs
ŮȑथŎकीओरसे/Respondent by :
Smt. Kusum Bansal (CIT) – Ld. DR
सुनवाईकीतारीख/Date of Hearing
:
03-04-2025
घोषणाकीतारीख /Date of Pronouncement
:
21-04-2025
आदेश / O R D E R
Manoj Kumar Aggarwal (Accountant Member)
Aforesaid appeal by assessee for Assessment Year (AY) 2017-18 arises out of an order of learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [CIT(A)] dated 16-05-2023 in the matter of an assessment framed by Ld. Assessing Officer [AO] u/s. 143(3) of the Act on 02-12-2019. The sole grievance of the assessee is confirmation of interest disallowance for 2
Rs.65.42 Lacs. Having heard rival submissions and upon perusal of case records, the appeal is disposed-off as under.
2. The assessee is dealing in stocks / securities. During the course of assessment proceedings, it transpired that the assessee obtained unsecured loans from its directors and paid interest to them. One of the directors viz. Shri Laxmi Niwas Maheshwari apparently transferred loan from OD account of his proprietorship concern M/s Rangoli Tradelink to the assessee. The Ld. AO alleged that the same was in violation of Company (Acceptance of Deposit) Rules 2014 and therefore, the expenditure as claimed by the assessee would be hit by Explanation-1
to Sec.37(1). The assessee refuted the allegation and stated that the director had high net worth and all the surplus funds were invested in fixed deposits against which overdraft limits were obtained for day-to- day working. The unsecuredloan as extend by the director were not out of borrowed funds. The OD limit was against fixed deposits receipts only. Though Ld. AO accepted this fact, he disallowed interest of Rs.65.42 Lacs as paid to the director. The Ld. CIT(A) confirmed the assessment against which the assessee is in further appeal before us.
3. From the facts, it emerges that the assessee has obtained unsecured loans from its directors for business purposes and paid interest on such borrowings. The interest payment has been claimed by the assessee u/s 36(1)(iii) and not u/s 37(1). The provisions of Sec.36(1)(iii) are specific provisions and the interest could be disallowed only if the borrowings were not used for the purpose of assessee’s business. No such finding of diversion of funds for non- business purpose has been rendered by Ld. AO. In our opinion, the provisions of Sec.37(1) have wrongly been invoked since the assessee’s interest expenditure claim was u/s 36(1)(iii) and there was no violation of these provisions. It is another aspect that even considering the provisions of Sec.37(1), it was amply demonstrated that the funds were sourced out of OD limit which was taken against fixed deposits receipts as held by the director. On these facts, no case of violation of deposit rules could be made out against the assessee.
Therefore, we delete the impugned addition.
4. The appeal stand allowed.
Order pronounced on 21-04-2025, (RAJPAL YADAV) (MANOJ KUMAR AGGARWAL)
VICE PRESIDENT लेखासद˟ /ACCOUNTANT MEMBER
Dated: 21-04-2025. आदेश की Ůितिलिप अŤेिषत /Copy of the Order forwarded to :
1. अपीलाथŎ/Appellant
2. ŮȑथŎ/Respondent
3. आयकरआयुƅ/CIT
4. िवभागीयŮितिनिध/DR
5. गाडŊफाईल/GF