Case Law Details
ITO Vs Max Ventures Investment Holdings Pvt. Ltd. (ITAT Delhi)
An addition can be made u/s 69B of the Act where during any financial year the assessee has made investments or is found to be the owner of any bullion, jewellery or other valuable article, which exceeds the amount recorded on this count in the books of account maintained by the assessee for any source of income, and where the assessee offers no explanation about such amount or the explanation of the assessee is found to be not satisfactory by the AO. However, in the present case, addition has been made on account of notional interest. It is not the case of the AO that the loan advanced to the sister concern was not recorded in the books of accounts. It is not also the case of the AO that interest expenditure claimed as deduction by the assessee should have been disallowed under the provision of section 36(1)(iii) of the Act. Thus, the fact remains that the AO has proceeded to bring to tax notional income without there being any machinery provisions in the Act. We are of the considered opinion that the assesee’s case is covered in its favour by the judgment of the Hon’ble Delhi High Court in the case of Shivnandan Buildcon (P.) Ltd. vs. CIT (supra) wherein the Hon’ble Delhi High Court had held that notional income on advances could not be brought to tax in absence of any specific provision of the Act. The order of the Hon’ble Delhi High Court in the case of Punjab Stainless Steel Inds Vs CIT (supra) does not come to the aid of the department because in that case the AO had made disallowance out of interest claimed as deduction u/s 36 (1)(iii) of the Act. Since there is no specific provision in the Income Tax Act for bringing to tax notional interest as income on loan/advances to sister concern, we are unable to agree with the submission of the Ld. CIT (DR) and, therefore, while upholding the findings of the Ld. CIT (A) on the issue, we dismiss this ground.
FULL TEXT OF THE ORDER OF ITAT DELHI
This appeal is preferred by the department against order dated 9.12.2016 passed by the Ld. Commissioner of Income Tax (Appeals)-3, Delhi {CIT (A)}. The appeal pertains to assessment year 2012-13.
2.0 Brief facts of the case are that the assessee company is engaged in the business of import export of machinery equipment and materials including technical consultancy for manufacturing electrical components. As per assessment order, the assessee company did not carry any business activity of sale/purchase during the year except for earning of interest income from other sources. The return of income was filed declaring an income of Rs. 36,200/-. During the course of assessment proceedings, the Assessing Officer (AO) noted that the assessee company had incurred a net loss of Rs. 8,45,87,299/-. The AO further noted that the assessee company had squared up an amount of Rs. 33,50,000/- during the year on account of advances given to M/s. Liquid Investment and Trading Company. The AO further noted that the said funds were advanced without charging any interest from the said party whereas interest had been charged from other parties. The AO proceeded to make an addition of Rs. 5,02,500/- being notional interest calculated @ 15% per annum as deemed income u/s 69B of the Income Tax Act, 1961 (hereinafter called ‘the Act’). The AO also noted that the assessee had received share application money against un-allotted shares to the tune of Rs. 87 crores. Although the said share application money was received in assessment year 2011-12, the AO was of the opinion that since the assessee had not issued the shares and the share application money was pending allotment, the same was unexplained share application money. A sum of Rs. 87 crores was added to the income of the assessee u/s 68 of the Act. The assessment was completed at an income of Rs. 87,05,38,700/-.
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