Global Tradex Ltd Vs ACIT (ITAT Mumbai)
ITAT Mumbai held that addition is unjustified and liable to be deleted since adjustment was made in between interest paid and interest received thus the entire adjustment had no tax effect i.e. it is tax neutral.
Facts- Post completion of assessment, the notice u/s. 148 was issued for reopening of the impugned assessment order. The assessment was reopened on the ground that the assessee did not offer interest income amounting to Rs.2,74,22,331/- being the difference between the income on which TDS was deducted and claimed and the income offered by the assessee as interest. Finally, the assessment was completed u/s. 143(3) r.w.s. 147 of the Act and the interest amount to Rs.2,73,09,676/- was added to the total income of the assessee. CIT(A) upheld the impugned assessment order. Being aggrieved, the assessee has filed the present appeal.
Conclusion- Held that the assessee is a business entity. The assessee offered the fixed deposit for security purpose for enhancing loan security and bank guarantee. The assessee was paying interest related to the bank loan and also the bank charges. The adjustment was made in between the interest paid and interest received. If we find that the said adjustment was not done, this amount of Rs. 2,73,09,676/- will be adjusted in the P&L Account. So adjustment is tax neutral. On the one hand, the disallowance is made from interest received and on the other hand, the said amount is eligible for adjustment with the business income. So the entire adjustment has no tax effect on the assessee, i.e. it is tax neutral. We find that the said additions made by the Ld.AO amount to Rs. 2,73,09,676/- is unjustified and liable to be deleted. Accordingly, the impugned appeal order is set aside.
