Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2016 (4) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2016 (4) TMI 958 - AT - Income TaxDisallowance u/s 36(1)(iii) - of interest paid to the bank on C/C account - Held that:- It is an undisputed fact that loan was given way back in 1990 and that too out of surplus funds and therefore, there was no nexus between loan advanced and interest paid. Therefore, no disallowance could have been made u/s 36(1)(iii) of the Act. As regards argument of learned DR that why this amount was not written off in the year 2004-05 itself we find that the order of Registrar of Co-operative Society placed at (PB-8) is for appointment of a liquidator whereby the liquidator takes charge of any sick society. The assessee may be in the hope of recovering part of its dues from the liquidator had not written off in its books. However, the fact remains that the said loan was given way back in 1990-91 and at that point of time there was temporary availability of funds as is mentioned in the resolution itself and therefore loan was given out of surplus funds. The incurring of expenditure on account of interest on funds used for making payments to Cane growers cannot be said to be for non business purposes only on the basis that the assessee was not able to recover its dues from a loanee to whom loan was given out of its surplus funds in earlier years. The Hon'ble Punjab & Haryana High Court in the case of CIT vs. Suraj Dev Dada (2014 (5) TMI 625 - PUNJAB & HARYANA HIGH COURT ) has held that where the recovery of principal amount was difficult the addition on account of notional interest on account of loan to said company cannot be made u/s 36(1)(iii) of the Act. In view of the above, entire facts and circumstances we hold that there was no nexus between interest paid and loans made by assessee and therefore, the disallowance made by Assessing Officer and partly confirmed by learned CIT(A) is not justified. - Decided in favour of assessee Charging of penal interest - Held that:- From the nature of penal interest charged by the Bank from assessee it is found that the charges are "compensatory" in nature as assessee has not violated any law but the extra payment has been made for lower valuation of stocks pledge with Bank. Therefore, we hold that the penal interest was in the nature of compensatory payment and allowable u/s 37(1) - Decided in favour of assessee
|