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Asstt Commissioner Of Income Tax Versus Vadilal Dairy International Ltd

2015 (7) TMI 397 - ITAT AHMEDABAD

Disallowance of interest expenses holding advances granted by the assessee to be not out of commercial expediency - CIT(A) deleted the interest - Held that:- CIT(A), while granting relief to the assessee, has noted that the assessee has given interest free advances to those parties with whom the assessee was having regular business transactions and some of them were suppliers of raw-material and packing material and the advance was made for purchase of material. He also noticed that most of the .....

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e on account of interest was made by the Assessing Officer in earlier years and after examining the various loans and advances in the light of the ratio laid down by the Hon'ble Apex Court in the case of S.A. Builder Ltd. (2006 (12) TMI 82 - SUPREME COURT ) has given a categorical finding that the loans and advances given by the assessee were for business purposes. Before us, the Revenue has not brought any material on record to controvert the findings of the ld. CIT(A). Thus no reason to interf .....

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ent Years 2001-02 and 2002-03 respectively. 2. Before us, both the parties submitted that in both these appeals the common ground of appeal taken by the Revenue is that the CIT(A) erred in law and on facts in deleting the disallowance of ₹ 40,26,706/- in the Assessment Year 2001-02 and ₹ 33,65,950/- in the Assessment Year 2002- 03, made by the Assessing Officer on account of disallowance of interest. It was further submitted that since the facts & circumstances of cases in both t .....

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engaged in the business of manufacturing of Ice-cream by the trade name 'Vadilal'. The assesseecompany filed its original Return of Income for Assessment Year 2001-02 declaring loss of ₹ 1,12,77,669/-. The assessment was framed u/s 143(3) vide order dated 26.02.2004 and total income was determined at ₹ 59,56,858/- by inter alia disallowing interest of ₹ 1,54,72,055/-. Aggrieved by the order of the Assessing Officer, the assessee carried the matter before the ld. CIT(A) .....

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r to decide the issue afresh keeping in mind the guidelines laid down by the Hon'ble Supreme Court in the case of S.A. Builder Ltd. Vs. CIT(A), [2007] 288 ITR 1 (SC). Pursuant to the aforesaid directions of the Hon'ble Tribunal, the Assessing Officer vide order dated 16.11.2009, passed u/s 143(3) r.w.s. 254 of the Income-tax Act, noted that the assessee had advanced interest free loans to sister concerns in spite of pending term loans and working capital loans on which the assessee was i .....

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to the assessee. He, thus, disallowed the claim of interest and assessed the total loss at ₹ 72,47,965/-. 5. Aggrieved by the aforesaid order of the Assessing Officer, the assessee carried the matter before the ld. CIT(A) who vide order dated 20.07.2011 allowed the appeal of the assessee by holding as under:- "3.5 Decision: I have carefully perused the assessment order, the submissions given by the appellant, the order of the ITAT through which the matter was set aside to the file of .....

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inished goods. Some deposits are kept with various government / semi government authorities for getting electric connection, telephone connection, registration with sales tax authorities etc. Similarly, there is some balance with the excise authorities which was the advance payment of excise duty to be adjusted on clearance of goods. It is noticed that most of the advances were given in earlier years and there are few transactions during the current years. The Hon'ble ITAT had set aside the .....

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e revenue cannot justifiably claim to put itself in the arm-chair of businessman or in the position of the Board of Directors and assume the role to decide how much is the reasonable expenditure having regard to the circumstances of the case. No businessman can be compelled to maximize its profit. In the case of the appellant, the appellant is a loss making company and had approached BIFR for declaring it as a sick company. The company had no liquid funds for its day to day business transactions .....

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A. Builders, I am of the view that the loans and advances given by the appellant are for business purposes and no disallowance can be made by the A. O. by saying that interest bearing funds have been advanced as interest free loans. The addition made by the A. O. is accordingly deleted." 6. Aggrieved by the aforesaid order of the ld. CIT(A), the Revenue is now in appeal before the us. 7. Before us, the ld. Departmental Representative pointed out to the various observations of the Assessing .....

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