ASSISSTANT COMMISSIONER OF INCOME TAX, CIRCLE-1, EXEMPTION, CHANDIGARH, CHANDIGARH vs. PATIALA URBAN PLANNING AND DEVELOPMENT AUTHORITY, PATIALA

PER RAJPAL YADAV, VP The Revenue is in appeal before the Tribunal against the order of the ld. Commissioner of Income Tax (Appeals) [in short ‘the CIT (A)’] dated 14.12.2023 passed for assessment year 2014-15. 2. The solitary grievance of the Revenue is that ld. CIT(A) has erred in deleting the addition of Rs.8,78,42,211/- which A.Y.2014-15 2

was added by the AO with the aid of Section 36(1)(iii) of the Act.
2. With the assistance of ld. Representative, we have gone through the record carefully. The assessee has given loans to Municipal
Corporation,
Patiala,
Punjab
Municipal
Infrastructure
Development
Company and PUDA.

The assessee did not charge interest on these loans. The ld. AO has worked out notional interest which ought to have been charged by the assessee at 12% on these loans. Accordingly, he made the disallowance of Rs.8,78,42,211/-.
3. On appeal, ld. CIT(A) has deleted the disallowance by observing that the assessee has more surplus funds than the interest free advances given by it. The ld. CIT(A) has relied upon the judgement of Hon'ble Supreme Court in the case of CIT Vs Reliance Industries, Civil Appeal No. 37 of 2019
wherein Hon'ble Supreme Court has upheld the judgement of Hon'ble Bombay High Court in CIT Vs Reliance Utilities reported in 313 ITR page No. 340. The judgement of Hon'ble
Supreme Court is reported in 410 ITR 466. We find that ld.
CIT(A) has took note of the details of available funds with the A.Y.2014-15
3

assessee as well as how the funds have been advanced. It emerges out from the record that as on 31.03.2013 the assessee has advanced Rs.77.98 Cr to its two concerns namely,
Municipal
Corporation,
Patiala and Punjab
Municipal Infrastructure Development Company. During the accounting year relevant for assessment year 2014-15, it has only advanced Rs.22 lacs to PUDA. No disallowance was made in the immediately preceding year. The fresh advances were made out of surplus funds available with the assessee.
Therefore, in view of the position of law propounded by the Hon'ble Supreme Court in the case of CIT Vs Reliance
Utilities 313 ITR Page 340, no disallowance could have been made. The CIT(A) has rightly appreciated the facts and circumstances and has rightly deleted the additions. We do not find any merit in this appeal. It is dismissed.
4. In the result, the appeal of the Revenue is dismissed.
Order pronounced on 26.03.2025. (MANOJ KUMAR AGGARWAL)
VICE PRESIDENT

“Poonam”
A.Y.2014-15
4

आदेश क ितिलिप अ ेिषत/ Copy of the order forwarded to :

आदेशानुसार/ By order,
सहायक पंजीकार/