2009 (9) TMI 988 - AT - Income Tax

Summary

Issues involved: The judgment involves the deletion of interest expenditure by the Commissioner of Income Tax(Appeals) in various Assessment Years and the addition made by the Assessing Officer on account of unexplained cash seized from Mumbai Central Railway Station.

Deletion of Interest Expenditure:
In the Assessment Years 2001-02 to 2005-06, the Revenue appealed against the deletion of interest expenditure totaling different amounts in each year. The Assessing Officer disallowed the interest claimed by the assessee due to substantial cash in hand not used for business purposes. The Commissioner of Income Tax(Appeals) held that the cash balance was necessary for the business of transporting parcels and cash, ensuring timely deliveries under unforeseen circumstances. The Commissioner found the disallowance unjustified as the cash balance was maintained for business purposes, and the borrowed funds were utilized for business, deleting the disallowance under section 36(1)(iii) of the Income Tax Act.

Addition of Unexplained Cash:
Regarding the addition of unexplained cash seized from Mumbai Central Railway Station, the Assessing Officer added Rs. 20 lakhs to the income of the assessee, questioning the transfer of cash between branches. The Commissioner of Income Tax(Appeals) overturned this addition, noting that the cash belonged to the Mumbai branch, was being transferred to the Ahmedabad branch, and was supported by evidence and entries in the Mumbai branch's books. The Commissioner held that the decision to transfer cash between branches was the prerogative of the assessee, and there was no requirement to transfer only to the head office. The addition was deleted as the cash was part of the accumulated balance and no defects were found in the Mumbai branch's accounts.

Conclusion:
The Appellate Tribunal upheld the decisions of the Commissioner of Income Tax(Appeals) in both issues, dismissing the appeals filed by the Revenue. The judgment emphasized the business necessity of maintaining cash balances for timely operations and the prerogative of the assessee in managing inter-branch cash transfers.