DCIT, C-1, LUDHIANA vs. M/S MAJESTIC AUTO LIMITED, LUDHIANA

PDF · subscribers
ITA 406/CHANDI/2018Status: DisposedITAT Chandigarh13 December 2018AY 2012-133 pages
AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that if an assessee possesses sufficient own interest-free funds, it is presumed that interest-free advances/investments are made from these own funds. Therefore, disallowance of interest expenditure in such cases is not justified.

What were the facts?

The Revenue appealed against the deletion of additions made by the Assessing Officer on account of disallowance of interest expenditure. The CIT(A) had deleted these additions, finding that the assessee had sufficient own interest-free funds to cover capital work in progress and advances.

What were the issues?

Whether disallowance of interest expenditure is justified when the assessee has sufficient own interest-free funds to cover capital advances and work in progress.

Which sections of the Income-tax Act were involved?

Section 36(1)(iii)

AI-generated summary — verify with the full judgment below

Cases cited in this judgment(3)Show list

Detected automatically from the text. Citations are also linked where they appear in the judgment. The count shows how many other judgments on BharatTax rely on the same authority.

Heard together (2 matters)

ITA No. 406/CHD/2018
ITA No. 804/CHD/2018

Read from the judgment's own cause title. This page is filed under one of them.

आदेश/Order

Per Sanjay Garg, Judicial Member:

The captioned appeals have been preferred by the Revenue against

the separate orders of the Commissioner of Income Tax (Appeals)-I,

Ludhiana [hereinafter referred to as ‘CIT(A)’] agitating the action of the

CIT(A) in deleting the additions made by the Assessing officer on account

of disallowance out of interest expenditure u/s 36(1)(iii) of the Income-tax

Act, 1961 (in short 'the Act').

2.

We have heard the rival contentions. A perusal of the orders of the

CIT(A) revels that the Ld. CIT(A) has given a categorical finding that

assessee was possessed of sufficient own / interest free funds to cover the

capital work in progress and capital advances. He, therefore, relying upon

the decision of the Jurisdictional High Court in the case of ‘Bright

Enterprises Pvt Ltd Vs. CIT, Jalandhar’ 381 ITR 107 and also considering

the fact that the assessee had not borrowed any specific loans for the

aforesaid capital advances and capital work in progress, deleted the

additions so made by the Assessing officer.

3.

The issue is now squarely covered by the various decisions of the

High Courts including that of the decision of the Hon'ble Jurisdictional

High Court in the case of ‘Bright Enterprises Pvt. Ltd Vs. CIT, Jalandhar’

(supra), ‘CIT Vs. Kapsons Associates’ (2016) 381 ITR 204 (P&H) and the

latest decision of the Coordinate Bench of the Tribunal (incidentally

consisted of both of us) in the case of ‘ACIT Vs. Janak Global Resources

Pvt Ltd’ ITA No. 470/Chd/2018 order dated 16.10.2018, wherein, the issue

ITA Nos. 406, 799 & 809-Chd-2014- M/s Majestic Auto Limited, Ludhiana 3

has been decided in favour of the assessee by also considering the decision of the Hon'ble Apex Court in the case of ‘Hero Cycles Vs. CIT’ 379 ITR 347 (SC) and also findings arrived in the case of Avon Cycles Ltd. Vs. CIT in ITA No.277 of 2013. The Hon'ble Courts have held that if the assessee is possessed of sufficient own interest free funds to meet the investments / interest free advances, then, under the circumstances, presumption will be that interest free advances / investments have been made by the assessee out of own funds / interest free funds. In view of this, there is no merit in the appeals of the Revenue and the same are accordingly dismissed. Order pronounced in the Open Court on 13.12.2018

Sd/- Sd/- ( बी , आर . आर . कुमार / B.R.R. KUMAR) (संजय गग� / SANJAY GARG ) लेखा सद�य/ Accountant Member �या�यक सद�य /Judicial Member

Dated : .2018 “आर.के.” आदेश क� ��त�ल�प अ�े�षत/ Copy of the order forwarded to : 1. अपीलाथ�/ The Appellant 2. ��यथ�/ The Respondent 3. आयकर आयु�त/ CIT 4. आयकर आयु�त (अपील)/ The CIT(A) 5. �वभागीय ��त�न�ध, आयकर अपील�य आ�धकरण, च�डीगढ़/ DR, ITAT, CHANDIGARH 6. गाड� फाईल/ Guard File

आदेशानुसार/ By order, सहायक पंजीकार/ Assistant Registrar

More judgments on Section 36(1)(iii)

All 3,665 judgments and leading authorities on Section 36(1)(iii) →

Recent GST High Court judgments

Search GST case law →