ACIT Vs Prayag Polytech Pvt. Ltd. (ITAT Delhi)
ITAT Held that there is no such condition in section 68 that loan can only be advanced out of the taxable income of the current year. The requirement of section 68 are 3 i.e. identity, creditworthiness and genuineness. In the present case admittedly there is no doubt about the identity. As regards the creditworthiness the AO has gone with the presumption that it is only the current year taxable income which can establish the creditworthiness. This presumption of the AO is in-correct. The creditworthiness can be established by showing the source from where the money has been paid. Such money can be paid out of its net worth, out of the loan raised by it or out of income earned by it. The source can be any of such means or mixed of these.
The Income Tax Appellate Tribunal (ITAT) Delhi has dismissed an appeal by the Assistant Commissioner of Income Tax (ACIT) and allowed the cross-appeal by Prayag Polytech Pvt. Ltd., effectively deleting additions made under Section 68 of the Income Tax Act, 1961, concerning unsecured loans. The Tribunal’s decision empha-sizes that the assessee had sufficiently discharged its onus to prove the identity, creditworthiness of lenders, and genuineness of transactions, even when the lenders’ current year’s taxable income was less than the loan amount or when companies shared premises within a group.
