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Income Tax Appellate Tribunal, CUTTACK BENCH, CUTTACK
Before: SHRI N.S. SAINI & SHRI KULDIP SINGH
PER KULDIP SINGH, JUDICIAL MEMBER :
The Appellant, Deputy Commissioner of Income-tax, Circle
1 (1), Bhubaneswar (hereinafter referred to as ‘the assessee’) by
filing the aforesaid appeal sought to set aside the order dated
28.01.2015 passed by the Commissioner of Income-tax (Appeals)-
2, Bhubaneswar qua the assessment year 2011-12 on the grounds
inter alia that :-
“1. On the facts and in the circumstances of the case, the Ld. CIT (A) is not justified in law as well as on facts by deleting addition of Rs.36,97,718/- made
2 ITA No.155/CTK./2015
by the AO u/s 36(1)(iii) towards deduction of interest.
On the facts and in the circumstances of the case, the Ld. CIT (A) has erred in law in not accepting the examination of findings made by the AO on the issues.”
Briefly stated the facts necessary for adjudication of the
controversy at hand are : during the scrutiny proceedings, the
Assessing Officer noticed that the assessee has taken cash credit
loan from Federal Bank and advanced the same as interest free loan
to Hotel Sea Pearls Orissa Pvt. Ltd.. Assessee paid an amount of
Rs.2,50,19,121/- to Hotel Sea Pearls as an advance but has not
charged any interest despite the fact that the assessee had itself paid
interest to the Federal Bank on the loan taken by them and thereby
disallowed the interest amounting to Rs.36,97,718/- and made
addition thereof to the total income of the assessee.
Assessee carried the matter by way of filing an appeal before
the ld. CIT (A) who has deleted the addition by allowing the
appeal. Feeling aggrieved, the Revenue has come up before the
Tribunal by filing the present appeal.
Assessee has not preferred to put in appearance despite
issuance of the notice of 01.03.2017 and consequently, we
proceeded to decide the present appeal with the assistance of the ld.
DR as well as on the basis of documents available on the file.
3 ITA No.155/CTK./2015
We have heard the ld. Departmental Representative for the
revenue to the appeal, gone through the documents relied upon and
orders passed by the revenue authorities below in the light of the
facts and circumstances of the case.
Undisputedly, the assessee has taken cash credit loan from
Federal Bank during the year under assessment and has advanced
the loan to Hotel Sea Pearls as under :-
Date Particulars Debit Days Int. Disallowed 31.03.2010 Federal Bank Ltd. 2,60,30,575 31 3,09,514 01.05.2010 Federal Bank Ltd. 2,61,05,575 14 1,40,183 15.05.2010 Federal Bank Ltd. 2,61,55,575 2 20,064 17.05.2010 Federal Bank Ltd. 2,61,95,575 2 20,095 19.05.2010 Federal Bank Ltd. 2,66,35,575 38 3,88,223 26.06.2010 Federal Bank Ltd. 2,66,35,575 19 1,94,111 15.07.2010 Federal Bank Ltd. 2,64,35,575 11 1,11,536 26.07.2010 Federal Bank Ltd. 2,64,39,475 23 2,33,247 18.08.2010 Federal Bank Ltd. 2,63,39,475 13 1,31,337 31.08.2010 Federal Bank Ltd. 2,62,14,475 3 30,165 03.09.2010 Federal Bank Ltd. 2,63,39,475 119 12,02,235 31.12.2010 Federal Bank Ltd. 2,66,69,121 77 7,87,652 18.03.2010 Federal Bank Ltd. 2,62,19,121 7 70,397 25.03.2010 Federal Bank Ltd. 2,56,19,121 6 59,959 Total 36,97,718
It is also not in dispute that the assessee has debited the
interest amount of Rs.2,37,31,348/- from its P&L account. It is
4 ITA No.155/CTK./2015
also not in dispute that Hotel Sea Pearls is a sister concern of the
assessee.
In the backdrop of the aforesaid undisputed facts and
circumstances of the case, the sole question arises for
determination in this case is :-
“as to whether ld. CIT (A) has erred in deleting the addition of Rs.36,97,718/- made by the AO u/s 36(1)(iii) of the Income-tax Act, 1961?”
When the assessee has advanced interest free loan to Hotel
Sea Pearls, its sister concern, with objective of diversifying its
business into hotel industry, the business interest of the assessee as
well as its sister concern Hotel Sea Pearls has become same.
Moreover, the funds available with the assessee are to be used by
the assessee to the best of its business acumen and the Revenue
cannot direct the assessee to utilize the funds available in a
particular manner. Even otherwise, it is not the case of the
Revenue that the funds available with the assessee have been
siphoned of for the activities other than the business activities.
Furthermore, the assessee was having non-interest bearing funds to
the tune of Rs.16,00,00,000/- which is far more than the amounts
advances to Hotel Sea Pearls. So, we are of the considered view
that advancing interest free loans to a sister concern by the assessee
is a business expediency and in the given circumstances, interest
5 ITA No.155/CTK./2015
cannot be disallowed as has been done by the AO u/s 36(1)(iii) of
the Act.
In view of what has been discussed above, finding no
illegality or perversity in the impugned order passed by the ld. CIT
(A), the present appeal filed by the Revenue stands dismissed. Order pronounced in open court on this 29th day of May, 2017.
Sd/- sd/- (N.S. SAINI) (KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated the 29th day of May, 2017 TS
Copy of the order forwarded to: 1.Appellant - DCIT, Circle 1 (1), Bhubaneswar. 2.Respondent - M/s. A.K. Das & Associates Ltd., Plot No.H – 1, Satya Nagar, Bhubaneswar. 3.CIT 4.CIT (A), Bhubaneswar. 5.DR(ITAT), Cuttack. 6.Guard File //True Copy//
BY ORDER
SR. PRIVATE SECRETARY, ITAT, CUTTACK