Subscription   Feedback   New User   Login      
Tax Management India .com
TMI - Tax Management India. Com
Articles Highlights TMI Notes SMS News Newsletters Calendar Imp. Links Database Experts Contact us More....
Extracts
Home List
← Previous Next →

Sunil Wire Agency Versus Asstt. Commissioner of Income Tax Circle–19 (3) , Mumbai

2017 (9) TMI 1217 - ITAT MUMBAI

Disallowance of net interest paid in the regular course of business and fully allowable u/s 36(1)(iii) - Held that:- Merely because the amount of ₹ 23.22 crore was shown under the head loans and advances it will not be proper to presume it to be a loan and not a contribution towards share capital without properly examining the facts and merely going by the nomenclature given in the financial statement. It is also evident from material placed before that in the past years the assessee has s .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ue back to the file of the Assessing Officer for fresh adjudication after due opportunity being heard to the assessee. Ground no.1 is allowed for statistical purposes. - Non giving credit for TDS on interest earned - Held that:- The assessee on 26th February 2014, has made a claim for allowing credit for TDS on the interest earned of ₹ 12,88,776. In this context, he has drawn our attention to the copy of the said letter placed at Page–73 of the paper book. In any case of the matter, du .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

PER SAKTIJIT DEY, J.M. Aforesaid appeal by the assessee is against the order dated 3rd May 2016, passed by the learned Commissioner (Appeals)-30, Mumbai, for the assessment year 2011-12. 2. Grounds raised by the assessee are reproduced below:- 1. On the facts and in the circumstances of the case and in law, the learned Commissioner (Appeals) erred in confirming disallowance of net interest of Rs. 31,51,334, paid in the regular course of business and fully allowable under section 36(1)(iii) of th .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

essee a partnership firm is engaged in trading of Stainless Steel Wire Rods. For the assessment year under consideration, the assessee filed its return of income on 23rd September 2011, declaring nil income. During the assessment proceedings, the Assessing Officer noticing that the assessee had debited interest expenditure of ₹ 31,51,334, called upon the assessee to furnish the details of interest account. On verifying he details furnished by the assessee, the Assessing Officer found that .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

efore, he called upon the assessee to explain why no interest was charged. In response, it was submitted by the assessee that the investment of ₹ 23,21,94,000, in the partnership firm was towards its share capital and by mistake it has been shown under the head loans and advances in the Balance Sheet. From the documents furnished by the assessee, the Assessing Officer observed that the assessee has entered as a partner in Ranka Kothari Kanugo Realtors with 5% shares. Whereas, it claimed to .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

g is also a part of assessee s business. It was submitted, the investment of ₹ 23.22 crore in the partnership firm being towards share capital it cannot be treated as loans and advances. Thus, the assessee submitted that no disallowance out of interest expenditure should be made. However, the Assessing Officer did not find merit in the submissions of the assessee. He observed, the business of the assessee is confined to trading in stainless steel wire rod and as per the partnership deed, t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

n the amount of ₹ 23.22 crore which worked out to ₹ 1,31,67,913. However, since the assessee has debited an amount of ₹ 31,51,334, towards interest expenditure, the Assessing Officer restricted the disallowance to that extent only. Being aggrieved of the aforesaid disallowance made by the Assessing Officer assessee preferred appeal before the learned Commissioner (Appeals). 4. The learned Commissioner (Appeals) agreed with the view expressed by the Assessing Officer sustained t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

er book. Learned Authorised Representative submitted, the assessee has been carrying on financing and investment activity from the earlier assessment years and the income earned is always shown under the head business and the interest expenditure is set-off against such income. In this context, he drew our attention to the financial statements for assessment year 2009-10 and subsequent years. Learned Authorised Representative submitted, in subsequent assessment year also, the interest income ear .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

to the Profit & Loss account. He submitted, the Assessing Officer, though, had disallowed the interest expenditure debited to Profit & Loss account, however, he has accepted assessee s claim of interest income as income under the head business income. Learned Authorised Representative submitted, in the relevant previous year, the assessee had entered as a partner in a new partnership business and has invested the sum of ₹ 23.21 crore towards its share capital. Therefore, the inves .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

for the purpose of business. He submitted, there is nothing on record to show that the assessee is in the business of lending and financing. He also submitted, the assessee and the partnership firm to which loans were advanced are related parties, hence, cannot be considered for the purpose of assessee s business. He submitted, while the assessee is paying interest @ 12% it has charged interest @ 9%. He, therefore, justified the disallowance of interest expenditure. 7. We have heard rival conte .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

interest of ₹ 2,04,79,269 and has debited net interest payment of ₹ 31,51,334 to the Profit & Loss account. Notably, the Assessing Officer has not made any change to the character of interest income or expenditure shown by the assessee under the head business. As observed earlier, the Assessing Officer has disallowed interest expenditure debited to the Profit & Loss account under section 36(1)(iii) holding that interest free advances of ₹ 23.21 crore to a partnership fi .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

may be a fact that the amount of ₹ 23.21 crore has been shown under the head loans and advances in the Balance Sheet, however, assessee s claim that it was towards contribution of share capital for entering into partnership business requires consideration. In fact, before the Assessing Officer though the assessee has submitted a partnership deed of Shree Ranka Kothari Kanugo Realtors and the Assessing Officer has recorded a finding of fact that the assessee has entered into such partnersh .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

inancial statement. Similarly, the observations of the Assessing Officer that assessee has never been involved in business of financing and investment appears to be a general observation without proper enquiry. It is also evident from material placed before us that in the past years the assessee has shown considerable interest income against which interest expenditure was set-off. It also appears that the assessee s claim has been accepted by the Department even in scrutiny assessments, as evide .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 

what is new what is new
  ↓     bird's eye view     ↓  


|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version