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2019 (7) TMI 1904 - AT - Income TaxDisallowance of interest - Interest free advances to sister concerns - commercial expediency - HELD THAT:- Authorities are under obligation to examine the purpose for which the assessee advanced the money to its sister- concern and what the sister concern did with this money, in order to decide whether it was for commercial expediency. Further the commercial expediency has wide amplitude which may not have been incurred on any legal obligation but still it is allowable as business expenditure if the same is established to be incurred on the grounds of commercial expediency - once it is established that there was nexus between the expenditure and the purpose of the business, the Revenue cannot justifiable claim to put itself in the armchair of the businessman and to assume the role to decide how much is reasonable expenditure having regard to the circumstances of the case. The authorities must not look at the matter from their own view point but has to see that of prudent business man. In assessee case trade advances which are in the nature of commercial transactions would not fall within the ambit of word 'advance', hence as per circular cannot be subjected to any disallowance/addition. It is not in dispute that the assessee has filed the confirmation from M/s. Bhagwati Lacto Vegetarian Export Pvt. Ltd. with regard to the business dealing with the assessee and having received funds as security amount against the paddies stored for milling in assessee's premises during the F.Y.2009-10, which were milled in subsequent F.Y.2010-11 and also paid qua job work of paddy. The company also certified that it also deals with the purchase and sale of rice with the assessee frequently in subsequent years. The assessee has also produced milling agreement dated 15.11.2009 which is relevant for the Asst. year: 2010-11 as of the instant case, wherein specifically the terms and conditions have been set out for milling of the paddy and the Department did not doubt either the confirmation from M/s Bhagwati Lacto Vegetarian Export Pvt. Ltd. to the effect that they had the business dealing with the assessee nor the milling agreement submitted by the assessee before the authorities below - for period starting October 2009, addition towards the interest made on the basis of advanced/security amount paid to M/s. Bhagwati Lacto Vegetarian Export Pvt. Ltd. is liable to be deleted. Advance given to the M/s. Rahul Udyog we are not convinced that the assessee had any commercial expediency for paying the security amount therefore, we are not inclined to entertain the Assessee's claim of business expediency qua M/s. Rahul Udyog and thus the decision of the Ld CIT(A) qua addition on account of M/s. Rahul Udyog is sustained. No disallowance of interest u//s 36(1)(iii) can be made for opening balances - See M/S PMS DIESELS VERSUS ADDL. C.I.T. [2017 (12) TMI 1041 - ITAT AMRITSAR] Addition of freight paid to truck operators - CIT(A) has affirmed the view of the Assessing Officer by observing that bills of Truck Freight has been raised by the Truck Union and freight has been paid in cash to a single entity which is in violation of provision of section 40A(3) - HELD THAT:- Revenue Department determined that the bills have been raised by the Truck Union whereas the assessee has claimed that the payments have been made to individual Truck Operators as per their billties and Truck Numbers, so there is no question of aggregating the figures of freight payable to Truck operator individually. Further despite submitting the billties of Truck, showing truck numbers and payments to them separately, the Assessing Officer has wrongly added the amount. Hence, considering the peculiar facts and circumstances and the rival contention/claim of the assessee and the Revenue Department, we are inclined to remand the instant issue qua freight charges, to the file of the Assessing Officer to decide afresh.
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