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Income Tax Appellate Tribunal, BENCH “A”, KOLKATA
Before: Shri Mahavir Singh, JM & Shri M.Balaganesh, AM]
Per Shri M.Balaganesh, AM
This appeal of the assessee arises out of the order of the Learned CIT(A)-XII, Kolkata in Appeal No.470/CIT(A)-XII/12(2)/10-11 for the Asst Year 2008-09 passed against the order of assessment framed by the Learned AO u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the ‘Act’).
The first issue to be decided in this appeal is as to whether the ld. AO is justified in disallowing a sum of Rs.19,74,100/- on unsecured loans taken from different parties and claimed the same as deduction. The ld. AO also observed that the assessee has maintained bank balance of Rs.7,46,79,717/- which includes fixed deposits for margin money for Rs.2,36,72,077/- and fixed deposit for overdraft account of Rs.2,98,45,715/-which were marked as lien with the bank for margin money maintenance as required from time to time. The ld. AO observed that when the assessee has got sufficient own funds there was no need to make any borrowings warranting payment of interest. Accordingly he disallowed the interest claim of Rs,19,74,100/- in the assessment. The same was upheld by the ld.CIT(A) on first appeal.
We have heard the rival submissions. We find that the assessee company is enlisted as TCM of NCDEX and MCX and engaged in the business of sale and purchase of R.S.Credit Pvt. Ltd. A.Y.2008-09 commodities in the concerned exchange for its different clients. Accordingly security deposits as well as margin money were required to be maintained from time to time on the transactions of its clients. It is not in dispute that the assessee had made borrowings in the form of unsecured loans from different parties and utilized the same for the purpose of its business. The only grievance of the AO is that when the assessee has got sufficient own funds there was no need to make any borrowings warranting payment of interest. We find that the fixed deposits kept by the assessee were lien marked in favour of the bank and others as margin money and the same could not be utilized obviously for the purpose of regular business transactions. It is not the case of the revenue that the borrowed funds have been utilized for non business purposes by the assessee. Once the borrowing has been accepted to be utilized for business purposes the allowance of interest payment thereon becomes automatic. We place reliance in this regard on the decision of the Hon’ble Jurisdictional High Court in the case of Caldern Pharmaceuticals Ltd vs CIT reported in 265 ITR 244 (Cal). In view of the aforesaid findings and the judicial pronouncement mentioned herein above we have no hesitation in directing the AO to allow the claim of interest of Rs.19,74,100/-.
The next issue to be decided in this appeal is as to whether the ld. AO is justified in disallowing the bank commission paid of Rs.1,72,372/- in the facts and circumstances of the case.
The ld.AO observed that the assessee has claimed deduction towards bank commission of Rs.4,11,979/- and out of that he observed that a sum of Rs.1,72,342/- was not reflected in the bank account in the assessment year under appeal and accordingly proceeded to disallow the same. The assessee tried to explain that the same represents bank commission paid during the financial year 2006-07 relevant to A.Y.2007-08 and was shown as pre-paid expenses in the balance sheet as on 31.3.2007 and from the said pre-paid expenses account, this sum of Rs.1,72,342/- was charged off as revenue expenditure during the assessment year under appeal. On appeal the ld. CIT(A) however failed to appreciate the contention of the assessee and upheld the order of the ld. AO on this issue.
R.S.Credit Pvt. Ltd. A.Y.2008-09 6. We have heard the rival submissions and perused the materials available on record. We find that from the facts stated herein above that the revenue had made this addition without appreciating the normal accounting norms. It is not in dispute that the assessee has actually paid the bank commission during the financial year 2006-07 relevant to A.Y.2007-08 and for the period attributable beyond the relevant financial year, the assessee classified the same under the head ‘pre-paid expenses’ and had duly reflected the same in the asset side of the balance sheet. During the assessment year under appeal, the amount lying in the pre-paid expenses has been charged off to the revenue as the same pertains to the period relevant to the assessment year under appeal. We find lot of force in the claim of the assessee in this regard and hence we have no hesitation in directing the ld. AO to allow the claim of the assessee towards payment of bank commission in the sum of Rs.1,72,342/-.
In the result the appeal of the assessee is allowed. Order pronounced in the court on 06.05.2016.