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Income Tax Appellate Tribunal, KOLKATA ‘B’ BENCH, KOLKATA
Before: Sri J. Sudhakar Reddy & Sri Aby T. Varkey
order : November 20th, 2020 ORDER Per J. Sudhakar Reddy, AM: Both these appeals filed by the assessee are directed against the common order of the Commissioner of Income Tax (Appeals)-4, Kolkata [hereinafter ld. ‘CIT(A)’ for short] dated 20.03.2018 passed u/s 250 of the Income Tax Act, 1961 (‘the Act’ for short) for AYs 2012-13 & 2013-14.
The sole issue that arises for adjudication in both these appeals, is the disallowance of interest expenditure, on the ground that, the loans borrowed are from the companies which have been showing marginal income, as in the case of a typical shell company. The Ld. CIT(A) concluded that the loan itself is bogus and therefore the AO rightly disallowed the interest expenditure.
After hearing rival contentions, we find that the lender companies have been assessed to tax. Orders passed u/s 143(3) of the Act in the case of lender companies are placed before us in paper book at pages 244 to 249 in the case of M/s. BSJ Consultants Pvt. Ltd., pages 250 to 254 in the case of M/s. Chandak Felt Works Pvt. Ltd., pages 255 to 256 in the case of M/s. Brite Asbestos & Engineering Pvt. Ltd, pages 257 to 262 in the 2 & 1039/Kol/2018 Assessment Years: 2012-13 & 2013-14 Moustache International (P) Ltd. case of M/s. Surendra Trexim Pvt. Ltd. and pages 263 to 267 in the case of M/s. Link Vinimay Pvt. Ltd. Having passed orders u/s 143(3) of the Act in the case of all the loan creditors, the AO and the ld. CIT(A) are wrong in coming to a conclusion that the companies are bogus companies. The existence of these companies is proved as the Income Tax Department has passed scrutiny assessment in these cases. 3.1. All these loan creditors have filed loan confirmation letters in reply to notices issued to them by the AO u/s 131 and 133(6) of the Act. These loans were taken by the assessee company in the earlier assessment years and the assessee company has been claimed deductions of interest paid to all these loan creditors year after year. Tax is being deducted at source on the interest payments made to them. The AO, in his orders passed u/s 143(3) of the Act for the AY 2011-12 on 31.03.2014, for the AY 2014-15 on 31.12.2016 and for the AY 2015-16 on 14.12.2017 in the case of the assessee companies has not doubted these loans and the interest payments and has accepted the claim of the assessee and granted deduction of interest payments. The AO has no adverse material to disallow the interest and come to a conclusion that the claim of the assessee is not allowable. The disallowance is made based on surmises and conjectures and not on admissible evidences.
On these facts, in our view, the disallowance of interest for both the assessment years is not justified.
In the result, we delete the disallowance made for both the assessment years and allow these appeals of the assessee.
In the result, both these appeals filed by the assessee are allowed. Kolkata, the 20th November, 2020. Sd/- Sd/- [Aby T. Varkey] [J. Sudhakar Reddy] Judicial Member Accountant Member Dated: 20.11.2020 Bidhan (P.S.)
3 & 1039/Kol/2018 Assessment Years: 2012-13 & 2013-14 Moustache International (P) Ltd. Copy of the order forwarded to:
1. 1. Moustache International (P) Ltd., 4/H/7, Commissariate Road, Hastings, Kolkata- 700 022.
2. DCIT, Circle-10(1), Kolkata.
3. CIT(A)-4, Kolkata. (sent through mail) 4. CIT- 5. CIT(DR), Kolkata Benches, Kolkata. (sent through mail)