ARVIND HEALTHCARE (P) LTD.,CHENNAI vs. ITO COMPANY WARD 1(1), CHENNAI

This is an appeal filed by the assessee against the order of the Commissioner of Income-tax (Appeals)-4, Chennai in ITA No.5/2011-12/A.Y 2003-04/CIT(A)-4 dated 20.02.2018 for the assessment year 2003-04.

Mr.R.T.Vijayaraghavan represented on behalf of the Assessee and Mr.Balina Suresh Babu represented on behalf of the Revenue.

It was submitted by ld.A.R that original assessment in the case of assessee came to be completed u/s.143(1) of the Act on 19.04.2014. Subsequently notice u/s.148 of the Act had been issued on 08.02.2010 beyond four years period for bringing to tax interest payments under the head ‘income from other sources’ on the ground that the assessee did not have business activity during the relevant assessment year. It was a submission that at the outset, there was no fresh material available with the ld. Assessing Officer for the purpose of reopening of assessment. It was a further submission that the assessee company was incorporated during assessment year 2000-01, and the assessee company is engaged in the business of purchase and sale of pharma raw materials. It was a submission that assessee company is also dealing in health care products. It was a submission that being a company, the assessee had borrowed certain funds which had been required immediately and the same had been given on interest. It was a submission that the ld. Assessing Officer disallowed the interest paid on the ground that there was no business activity. It was a submission that as the assessee had borrowed funds, interest had to be paid. It was a submission that the principle was not being disputed, but only the interest payments on the loan taken has been disallowed, alleging no business activity. It was a prayer that the reopening itself is liable to be quashed and even on merits, the interest payment was liable to be allowed in so far as the interest receipt has also been taxed.

In reply, the ld.D.R vehemently supported the orders of the ld. Assessing Officer and the Ld.CIT(A).

We have considered the rival submissions. A perusal of the assessment order clearly shows that ld. Assessing Officer has issued a notice u/s.148 of the Act beyond the period of 4 years without having any fresh evidences nor pointing out what is the failure on the part of the assessee to truly and fully disclosed material facts required for his assessment. This being so, the reopening of the assessment itself is invalid. Even on merits, it is not disputed that interest receipt has been taxed. Once the interest receipt has been taxed, obviously the expenditure incurred in respect of earning such interest receipt being the interest outgo is also liable to be allowed. This being so, even on merits no addition is called for.

In the result, the appeal of the assessee is allowed.