Case Law Details
Guardian Nutrition & Health Supplements Pvt. Limited Vs ACIT (ITAT Delhi)
Brief facts of the case are that assessee is engaged in the business of rental trading of pharmaceutical products. In the present case, Assessing Officer (AO) made proportionate disallowance of interest on ad hoc basis after noting that assessee had both interest bearing funds and interest free funds at his disposal.
We note that the disallowance has been made on ad hoc basis on the plank that interest bearing funds have been diverted. This was done by the AO despite noting that assessee had interest bearing funds as well as interest free funds. It is settled law that if assessee has sufficient interest free funds the right of attribution lies with the assessee and AO cannot insist upon one to one nexus between the funds. This view is duly corroborated by Hon’ble Mumbai High Court in the case of CIT vs. Reliance Utilities & Power Ltd. 313 ITR 340 and CIT vs. HDFC Bank Ltd. 366 ITR 505.
This aspect needs to be considered by the AO in making the disallowance which has not been done. In our considered opinion, the matter needs to be remitted back to AO. AO is directed to decide the issue afresh.
FULL TEXT OF THE ORDER OF ITAT DELHI
Please become a Premium member. If you are already a Premium member, login here to access the full content.
