NEHA GLOBAL TRENDS PVT LTD,DELHI vs. DCIT CIRCLE-18(1), NEW DELHI

The assessee raises the following substantive grounds in the instant appeal: 1. The learned CIT(A) has erred in quoting wrong facts while passing the impugned appellate order. 2. The learned CIT(A) erred in misinterpreting the provisions of section 36(1)(iii) and ignored the decision of Hon’ble 3. The Ld. CIT(A) erred in confirming the disallowance of Rs.30,93,345/- out of interest expenses claimed by the appellant. 4. The ld. CIT(A) erred in enhancing the assessed income by disallowing interest expenses of Rs.60,23,473/- out of interest expenses claimed by the appellant.

Suffice to say, it emerges during the course of hearing that the assessee’s instant appeal raises the sole substantive ground challenging both the lower authorities’ action disallowing section 36(i)(iii) interest expenditure of Rs.30,93,345/-; in the course of assessment framed on 16.12.2016, followed by enhancement of Rs.60,23,473/-, in the lower appellate proceedings by the CIT(A) thereby exercising his juri iction under section 251(1A) of the Act. 5. It is in this factual backdrop that the Revenue vehemently argues during the course of hearing that given fact the assessee having made interest free advances to its related and other parties for non-business purposes, it is a clear-cut instance of diversion of 3 | P a g e interest bearing funds for non-business purposes liable to be disallowed under section 36(1)(iii) of the Act. 5. We have given our thoughtful consideration to the assessee’s pleadings and Revenue’s foregoing vehement contentions. We are of the considered view that the assessee all along has placed reliance on hon’ble apex court’s landmark decision in SA Builders’ case (2007) 288 ITR 1 (SC) that interest bearing funds utilized for advances made to sister concerns involving business/commercial expediency could not be disallowed. 6. Learned departmental representative could hardly dispute that such an element of assessee’s commercial expediency has nowhere been examined in detail in both the lower authorities’ respective findings including enhancement (supra). Faced with this situation, it is thus deemed appropriate in the larger interest of justice to restore the instant issue back to the Assessing Officer for its afresh appropriate adjudication and factual verification subject to a rider that the assessee shall plead and prove all the relevant facts within three effective opportunities, at it’s own risk and responsibility, in consequential proceedings. Ordered accordingly. 7. This assessee’s appeal is allowed for statistical purposes. 4 | P a g e