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Income Tax Appellate Tribunal, ‘SMC’ BENCH, KOLKATA
Before: Sri J. Sudhakar Reddy
Assessment Year: 2010-11 Shri Manish Sood…………….......................…….………………….………………………………..………Appellant [PAN : AQYPS 3950 P] ACIT, Circle-30, Kolkata ………….….……………………………………………….…………………...Respondent Appearances by: Shri Sabyasachi Banerjee, Advocate, appeared on behalf of the Appellant. Shri Robin Choudhury, Addl. CIT, appeared on behalf of the Respondent. Date of concluding the hearing : January 8, 2019 Date of pronouncing the order : January 16, 2019 ORDER Per J. Sudhakar Reddy :-
This appeal by the assessee is directed against the order of the ld. Commissioner of Income Tax (Appeals)-10, (hereinafter the ‘ld. CIT(A)’), dated 18.06.2018 passed u/s 143(3) of the Income Tax Act, 1961 (the ‘Act’) for the assessment year 2010-11.
The assessee is an individual. He derives income from salary, house property and capital gains. During the course of assessment proceedings, the Assessing Officer found that the assessee had advanced loans to four different companies, the list of which are in Page 2 of the assessment order. Out of the four companies/organizations to whom the assessee has advanced monies, interest was declared on the loans given to M/s. Gupta Engineering Co. and M/s. Emporium Training & Consultancy Pvt. Ltd. In the case of loan of Rs.1,00,000/- given to M/s. K.M. Tubes Pvt. Ltd. and Rs.24,97,000/- given to M/s. True Travel Maxx (P) Ltd. no interest income was shown on these. The Assessing Officer made addition of notional interest @9% on these two loans.
Aggrieved, the assessee carried the matter in appeal. The ld. CIT(A) confirmed the addition on the ground that the Assessing Officer calculated the 2 Shri Manish Sood Assessment Year: 2014-15 opportunity cost of the funds that has been let out by the assessee to the sister concerns and no commercial expediency was shown.
Aggrieved, the assessee is before us. The ld. Counsel for the assessee relies on the judgement of Hon’ble High Court of Delhi in the case of M/s Shivnandan Buildcon Pvt. Ltd. vs. CIT in W.P.(C) 6265/2013, judgment dated 30.04.2015 for the proposition that notional income cannot be brought to tax. The ld. DR submitted what was brought to tax was not notional income but only opportunity cost.
In my opinion, the terms and conditions on which the assessee had advanced the money to these two concerns have to be looked into prior to coming to any conclusion in the matter. It is true that notional income cannot be brought to tax as held by Hon’ble Guwahati High Court in the case of Highways Construction Co. Pvt. Ltd. [1993] 199 ITR 702 which was followed by the Hon’ble Delhi High Court in the case of M/s Shivnandan Buildcon Pvt. Ltd. (supra). At the same time accrued interest has to be brought to tax. In the case in hand, this aspect was not verified by the Assessing Officer. We do not have before us the copies of the agreement or terms on which the advances/loans were given. Hence, we set aside the matter to the file of the Assessing Officer for fresh adjudication. The Assessing Officer shall verify the documents based on which the advances were given.
In the result, the appeal of the assessee is allowed for statistical purposes.