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Income Tax Appellate Tribunal, DELHI BENCHES: ‘F’, NEW DELHI
Before: SMT. BEENA A PILLAI & SHRI PRASHANT MAHARISHI
(Appellant) (Respondent) Revenue by : Sh. Surender Pal, Sr. DR Assessee by : None Date of Hearing : 06/11/2018 Date of Pronouncement: 14/11/2018 ORDER PER BEENA A PILLAI, JUDICIAL MEMBER Present appeal has been filed by revenue against order dated 14/11/17 passed by Ld. CIT (A)-11, New Delhi for assessment year 2014-15 on following grounds of appeal: 1. “Whether in the facts and circumstances of the case, the Ld. CIT(A) has erred in allowing the appeal of the assessee by deleting disallowance of interest amounting to Rs. 1,91,98,016/-?
2. The department craves leave to add, to alter or amend any ground of appeal raised above at the time of hearing?”
Brief facts of the case are as under: Assessee filed its return of income on 22/11/14, declaring total income of Rs.22,29,023/-. The case was selected for scrutiny and Lucky Exports notice under section 143 (2) of the Act along with questionnaire under section 142 (1) of the Act was issued to assessee. In response to statutory notices, representative of assessee appeared before the Ld. AO is and filed requisite details as called for.
2.1 Ld. AO observed that assessee is engaged in business of trading and export of lab, agricultural, electrical solar and hospital equipments, engineering goods, medicine, spices, rice computer parts chemicals, machinery and equipments, commissioning of projects abroad with installation of plants.
2.2 Ld.AO observed that assessee has shown secured loans of Rs.9,26,21,147/- from various banks and has claimed financial expenses amounting to Rs.7,67,64,326/-. It is also observed that assessee gave interest-free loans and advances to various sister concerns and has made investment in properties in the name of firm, as well as partners. Ld.AO asked assessee as to why proportionate interest should not be disallowed for diverging interest-bearing funds for non-business purposes.
2.3 Assessee replied to show cause by submitting that it had sufficient interest free funds available at its disposal and, therefore, disallowance cannot be made.
2.4 Ld.AO not been satisfied with reply of assessee disallowed a sum of Rs.1,91,98,016/- on account of proportionate interest computed at the rate of 10%.
2.5 Aggrieved by order of Ld. AO assessee preferred appeal before Ld. CIT (A), who allowed claim of assessee. 2
Lucky Exports 2.6 Aggrieved by order of Ld. CIT (A), revenue is in appeal before us now.
At the outset, none has appeared on behalf of assessee before us at the time of hearing. Considering smallness of issue, we do not intend to keep the appeal pending and, therefore, is being decided ex parte, assessee.
Ld. Sr. DR placed reliance upon observations of Ld. AO. We have perused records placed before us in the light of submissions advanced by Ld. Sr. DR.
Ld. CIT (A) considered the issue at length. It is observed that assessee has advanced loans to its sister concern and also made investment in properties as under: “Ld.AO has alleged that assessee advanced interest- bearing funds for giving interest-free loans to its sister concern and for making investment in properties which are non-business purposes.” S.No. Party Name Average Amount of Period Interest Advance/Investments @10% till 31.03.2012 1. Property- 17,99,22,878 1/4/2013 1,79,92,288 Global to Foyer, 31/3/2014 Gurgaon 2. Rajesh 1,20,57,275 1/4/2013 12,05,728 Sondhi to 31/3/2014 Total 1,91,98,016/-
Before Ld. CIT(A), assessee submitted that, out of Rs.19,20,41,754/- is a sum of Rs.2,71,44,030/- was advanced during earlier year, which has been duly accepted by Ld. AO in assessment year 2010-11. It is also stated that a sum of Rs.12,83,27,112/-, has been extended during assessment year 2011-12 and Rs.6,00,39,922/-, during assessment year 2012-13. It has been submitted by assessee before Ld. CIT (A) that a sum of Rs. 1,23,200/- is fresh advances during year under consideration. It was submitted by assessee that during relevant period, assessee had sufficient interest free funds available. It was submitted that for assessment years 2011-12 and 2012-13 Ld. AO in scrutiny assessment under section 143 (3) of the Act, disallowed similar interest expenses which was subsequently deleted in order passed by the then Ld. CIT (A).
While granting relief to assessee for year under consideration, Ld. CIT (A) observed that assessee has got enough interest-free funds available it is disposal, out of which these advances/investments have been made. He placed reliance upon analysis of funds available at disposal of assessee reproduced in his order. Before us Ld. Sr. DR has not been able to produce any contrary evidences/observations in order to deviate from aforestated view by Ld. CIT (A). There is nothing on record to show that entire interest free advance made to sister concern pertains to year under consideration. We are, therefore, not inclined to interfere with findings of Ld. CIT (A) and same is upheld. Accordingly grounds raised by revenue stands dismissed. In the result appeal filed by revenue stands dismissed. Order pronounced in the open court on 14/11/2018 Sd/- Sd/- (PRASHANT MAHARISHI) (BEENA A PILLAI) ACCOUNTANT MEMBER JUDICIAL MEMBER Dt. 14th November,2018 *Kavita Arora