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Income Tax Appellate Tribunal, IN THE INCOME TAX APPELLATE TRIBUNAL
Before: SHRI BEFORE SHRI G.D. AGRAWALG.D. AGRAWALG.D. AGRAWAL & G.D. AGRAWAL & AND & SHRI SUDHANSHU SRIVASTAVA SHRI SUDHANSHU SRIVASTAVASHRI SUDHANSHU SRIVASTAVA SHRI SUDHANSHU SRIVASTAVA
This appeal by the Revenue for the assessment year 2010-11 is directed against the order of learned CIT(A)-XIII, New Delhi dated 6th December, 2013.
The only ground raised by the Revenue reads as under :-
“Whether on the facts and in the circumstances of the case and in law, ld.CIT(A) has erred in deleting the addition of Rs.66,88,884/- made by the AO on account of interest income.”
2 ITA-1278/Del/2014
The facts of the case are that the Assessing Officer disallowed `66,88,884/- out of interest paid by the assessee with the following observation :-
“From the above it is clear that on the one hand the assessee is paying interest at a higher rate ranging from 14% to 17% on unsecured loan, from 10% to 16.75% on secured loan and on the other hand he is charging interest from its sister concern at a lower rate of 10% thus either interest on unsecured loan/secured loan should be restricted to 10% or interest charged from sister concern should be increased to at least 15%. Therefore interest from sister concern is being increased to 15%. During the year assessee has charged @ 10% on Rs.11954.60 lacs which is Rs.1,33,77,768/- and the same is increased to Rs.2,00,66,652/- by making addition of 5% interest income amounting to Rs.66,88,884/- to the total income of the assessee during the year.”
Learned CIT(A) deleted the addition with the following finding :-
“3.1 I have carefully considered the facts of this case and the submissions filed by the counsel of the appellant. It is observed that the Assessing Officer has made the addition of Rs.66,88,884/- on account of interest on notional basis. The appellant company has borrowed funds by way of inter-corporate deposits at the rate of interest ranging between 10% to 17% from various parties. The funds have been lent @ 13% to 17% p.a. The appellant had advanced a loan @ 10% p.a. in the earlier year and during the year the interest was charged at the contracted rate as agreed in the preceding year. The Assessing Officer has held that the appellant had charged interest @ 10% whereas the interest has been paid @ 10% to 17% per annum. The various details filed during the assessment proceedings have been checked and it is noted that during the year under consideration the appellant had borrowed funds @ 10% to 17% p.a. and charged interest @ 13% to 17% p.a. on the advances made during the year. The Hon'ble Supreme Court in the case of S.A. Builders Ltd. vs. CIT
3 ITA-1278/Del/2014 reported in 288 ITR 001 held that “the expression” commercial expediency” is one of wide import and includes such expenditure as a prudent businessman incurs for the purpose of business. The expenditure may not have been incurred under any legal obligation yet it is allowable business expenditure if it was incurred on grounds of commercial expediency.
The appellant had borrowed funds by way of inter- corporate deposits @ 10% to 17% p.a. during the year and lent @ 13% to 17% p.a. during the year. There is one instance where the interest has been charged @ 10% p.a. at the contracted rate in the earlier year and no disallowance of interest has been made by the Assessing Officer in that year. The Assessing Officer had made the addition on notional basis without pointing out any specific link of borrowing at the higher rate and lending at the lower rate. The adhoc addition of Rs.66,88,884/- made by the Assessing Officer is, therefore, deleted.”
The Revenue, aggrieved with the order of learned CIT(A), is in appeal before us.
We have heard the arguments of both the sides and have perused the material placed before us. After considering the facts of the case and submissions of both the sides, we do not find any infirmity in the above order of learned CIT(A). The assessee has borrowed the money by way of inter-corporate deposit at the rate of 10% to 17%. During the year under consideration, the assessee lent the money at the rate of 13% to 17%. There is only one instance where the interest has been charged at the rate of 10% per annum. However, it was in respect of the money advanced earlier and therefore, interest continued to be charged at the rate on which the money was advanced. No nexus has been pointed out by the Assessing Officer that the money borrowed at a higher rate of interest has been advanced at a lesser rate. In view of the above, we do not 4 ITA-1278/Del/2014 find any justification to interfere with the order of learned CIT(A). The same is upheld.
In the result, the appeal of the Revenue is dismissed. Decision pronounced in the open Court on 13.12.2016.