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08-01-2019, Chadha Super Cars, Section 14A, 250(6), Tribunal Chandigarh

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2 months 1 week ago #8327 by amit
Section - 14A, 250(6), 36(1) (iii)
Order Date - 08-01-2019
Favouring - Assessee
Court - Tribunal Chandigarh
Appellant - Chadha Super Cars Pvt. Limited
Respondent - ACIT
Justice - SANJAY GARG, JM & ANNAPURNA GUPTA, AM
Citation - 119Taxpundit123
Appeal No. - ITA No.100/Chd/2017
Asstt. Year - 2012-13

Order

PER : Annapurna Gupta

The present appeal has been filed by the assessee against the order of the Commissioner of Income Tax (Appeals)-2, Ludhiana (in short ‘CIT(A)’ dated 19.11.2016 passed u/s 250(6) of the Income Tax At, 1961 (hereinafter referred to as ‘Act’).

2. Ground Nos.1 and 2 raised by the assessee relate to disallowance of interest u/s 36(1)(iii) of the Act and read as under:

“1. That the Learned Commissioner of Income Tax (Appeals)-2, Ludhiana has erred :n sustaining the addition of Rs.48,329/- made u/s 36 (1) (iii) of the Income Tax Act, 1961 by the Ld. Assistant Commissioner of Income Tax Circle-V, Ludhiana on account of amount advanced to M/s Nikkamal Jewellers for purchase of Coins, requiring for Diwali Pooja without considering the reply filed by the assessee during the course of assessment proceedings as well as during the course of appellate proceedings and without considering the facts of the case, Therefore, addition of Rs.48,329/- made by the Ld. Assistant Commissioner of Income Tax Circle-V, Ludhiana on account of amount advanced to M/s Nikkamal Jewellers and sustained by the Learned Commissioner of Income Tax (Appeals)-2, Ludhiana is illegal, unwarranted, uncalled for and may be deleted.

2. That the Learned Commissioner of Income Tax (Appeals)-2, Ludhiana has erred in sustaining the disallowance of Interest of Rs.4,69,863/- made u/s 36 (1) (iii) of the Income Tax Act, 1961 by the Ld. Assistant Commissioner of Income Tax Circle-V, Ludhiana on account of loans given to various parties and interest charged from them at 9% and the Ld. Assessing Officer estimating that the Interest to be charged from parties @ 12% and making the addition at 3% on loans advanced to various parties without considering the reply filed by the assessee during the course of assessment proceedings as well as during the course of
appellate proceedings and without considering the facts of the case whereas, loans to the various parties were advanced out of the "Current Account" against the sale proceeds of the business were credited Therefore, disallowance of interest of Rs.4,69,863/- made by the Ld. Assistant Commissioner of Income Tax Circle-V, Ludhiana on account of loans advanced to various parties and sustained by the Learned Commissioner of Income Tax (Appeals)-2, Ludhiana is illegal, unwarranted, uncalled for and may be deleted.”

3. Briefly stated, the A.O. noted that the assessee had made advances to one M/s Nikkamal Jewellers Pvt. Ltd. amounting to Rs.10 lacs which had remained outstanding during the year for a period of 147 days. The A.O. asked the assessee to explain why proportionate disallowance of interest be not made on the said interest free advance, to which the assessee replied that the advances had been madeon account of purchase of gold coins for the purpose of pooja for Diwali and had been given, therefore, in the ordinary course of business. The A.O. was not satisfied with the explanation of the assessee and accordingly made disallowance of proportionate interest @ 12% on the impugned advance which came to Rs.48,329/-.

The A.O. further noted that the assessee had made advance to many other parties and charged interest @ 9% as under:

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