Girraj Cold Storage Pvt. Ltd. Vs ITO (ITAT Agra)
ITAT Agra held that addition towards interest paid on CC is liable to be deleted since interest free advance given to potato growers (farmers) were out of the business expediency. Accordingly, addition deleted and appeal allowed.
Facts- During reassessment proceedings, AO observed that the assessee has given interest free advances to the potato growers during the year under consideration of Rs.1,70,04,076/- ,whereas it has raised interest bearing loans from the bank and interest paid on such loan has been debited in the profit and loss account. AO observed that the assessee has paid interest on CC account amounting to Rs. 10,33,374/-, which is debited to the profit and loss account and the same was added as income in the hands of the assessee.
CIT(A) dismissed the appeal of the assessee. Being aggrieved, the present appeal is filed.
Conclusion- Held that in the instant case, the business expediency in granting interest free advances out of interest bearing funds was not accepted by authorities below. In my considered view based on records available, the addition of Rs. 10,33,374/- as was made by the authorities below is not sustainable as I accept the contention of the assessee that granting of interest free advances to potato growers in order totie the farmers for keeping their crop with the cold storage of the assessee ,so that the assessee can earn rent from the potatoes kept by the farmers in the cold storage of the assessee , is out of business expediency as stated by the assessee. The assessee has furnished list of 549 persons who have kept 169054 packets of potatoes with the assessee, wherein rent of Rs. 77,76,480/- was earned by the assessee , and duly offered to tax. No defect is pointed out by any of the authorities. Accordingly, the addition made by the Assessing Officer is directed to be deleted.
