Mega Automobiles Pvt. Ltd. Vs ACIT (ITAT Surat)
The appeal was filed against the order of the National Faceless Appeal Centre (NFAC), Delhi, for Assessment Year 2017–18. The assessee challenged multiple additions and disallowances confirmed partly by the Commissioner of Income Tax (Appeals).
The assessee had filed its return declaring total income of Rs. 51.51 lakh. During assessment, the Assessing Officer (AO) made several additions and disallowances aggregating to Rs. 43.90 lakh. These included: (i) disallowance of interest under section 36(1)(iii) amounting to Rs. 9.60 lakh, (ii) addition of Rs. 2.73 lakh due to difference between income reflected in Form 26AS and the Profit and Loss Account, (iii) disallowance of Rs. 30.83 lakh under section 40A(3) for cash expenditure, and (iv) disallowance of Rs. 73,605 under section 40(a)(ia) for non-deduction of tax at source on training expenses.
On the issue of disallowance of interest under section 36(1)(iii), the assessee contended that loans and advances were given out of interest-free funds. It was pointed out that the opening balance of Rs. 80 lakh included advances given earlier, out of which Rs. 35 lakh was recovered during the year, leaving a balance of Rs. 45 lakh. The Tribunal observed that the assessee had sufficient own funds, as reflected in its financial statements, and the loan was genuinely given from interest-free sources. Accordingly, the disallowance of Rs. 9.60 lakh was held to be unjustified and was deleted.
