ACIT Vs Shoppers Stop Limited (ITAT Mumbai)
The Revenue appealed against the order of the Commissioner of Income Tax (Appeals), Mumbai, dated 07.08.2014, which partly allowed the assessee’s appeal for Assessment Year 2011–12 arising from an assessment under section 143(3) of the Income-tax Act, 1961. The assessment order dated 31.12.2013 had determined total income at ₹106.31 crore after making several additions, including disallowance under section 14A read with Rule 8D, addition of notional interest at 13.5% on funds advanced to a subsidiary, and disallowance of certain expenses and unpaid service tax liability.
Before the CIT(A), the assessee challenged the disallowance under section 14A and the addition of notional interest. The CIT(A) upheld the section 14A disallowance but deleted the addition of interest income of ₹3.09 crore. Both sides filed appeals before the Tribunal. The Revenue’s appeal was initially dismissed on the ground of low tax effect but was later recalled in February 2025 after it was found that the tax effect exceeded the prescribed limit.
On merits, the Tribunal noted that identical additions of notional interest on advances to the subsidiary had been deleted in earlier and later assessment years by coordinate benches. In those orders, the Tribunal held that where sufficient interest-free funds were available and no real income had accrued or been received, notional interest could not be taxed. The Tribunal also relied on principles relating to accrual of real income and presumption of use of interest-free funds.
