Case Law Details
Mecords India Limited Vs ITO (ITAT Mumbai)
ITAT states that, it was not disputed that the borrowings were made in earlier years and no disallowance of interest was made in earlier years with regard to the said borrowings and utilization thereon. Further, it was found that the amounts advanced by assessee to a party named ‘Neeta Mehta’ alone increased during the relevant year and in case of amounts advanced to all other parties except ‘Neeta Mehta’, the closing balance only reduced when compared to the opening balance, thus there could not be any disallowance of interest on the opening balance of loans advanced to the said parties as the borrowings and utilization thereon were accepted as meant for business purposes in earlier years. Further, with regard to loan given to ‘Neeta Mehta’, it was found that the assessee was having sufficient own funds in the form of current year profits before depreciation, therefore, it could be reasonably presumed that the amounts to Neeta Mehta were advanced interest free out of own funds available with the assessee and hence, there could not be any disallowance of interest under section 36(1)(iii) on a proportionate basis even for the same.
FULL TEXT OF THE ITAT JUDGEMENT
This appeal in ITA No.1013/Mum/2016 for A.Y.2010-11 arises out of the order by the ld. Commissioner of Income Tax (Appeals)-22, Mumbai in appeal No.CIT(A)22/IT/345/2014-15 dated 11/01/2016 (ld. CIT(A) in short) against the order of assessment passed u/s.143(3) of the Income Tax Act, 1961 (hereinafter referred to as Act) dated 07/03/2014 by the ld. Income Tax Officer-10(2)4, Mumbai (hereinafter referred to as ld. AO).
2. The only issue to be decided in this appeal is as to whether the ld CITA was justified in confirming the disallowance of interest u/s 36(1)(iii) of the Act on a proportionate basis in the facts and circumstances of the case.
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