2018 (6) TMI 1850 - HC - Income Tax

Disallowance on interest free loans and advances - ITAT deleted disallowance - HELD THAT - On perusal of the documentary evidences that the Assessee was already having a huge interest free funds available with it and that even the amount of loans and advances were utilized for the business purpose, more particularly in fixed assets and capital work in progress and thereafter that the Tribunal has deleted the disallowance and interest free loans and advances, it cannot be said that the learned Tribunal has committed any error to call for any interference by this Court. View taken by the learned Tribunal deleting the dis-allowance on interest free loans and advances confirmed. No specific question of law arises. Addition u/s 68 - loan and advances taken from one Bhupendrabhai J. Patel by cheque - HELD THAT - Said loan and advances was not taken by the Assessee in the year under consideration. Under the circumstances when there was no unsecured loan during the year under consideration, the learned Tribunal has rightly observed and held that the provisions of Section 68 shall not be applicable. Even otherwise it is required to be noted that even the said loan was adjusted by the Assessee subsequently by allotment of Rs. 51,000/- shares of Rs. 100/- each - when the learned Tribunal has deleted the addition of Rs. 51,00,000/-, the same cannot be said to be erroneous. We confirm the deletion of the addition. Assessee appeal allowed.

Summary

Issues Involved:
The judgment involves the disallowance of interest-free loans and advances, the addition made under Section 68 of the Income Tax Act, and the decisions of the Income Tax Appellate Tribunal for different Assessment Years.

Disallowed Interest-Free Loans and Advances (A.Y. 2012-2013):
The appellant challenged the disallowance of interest on interest-free loans and advances totaling Rs. 49,79,253 made by the Assessing Officer. The CIT (A) upheld the disallowance, but the ITAT allowed the appeal, noting the availability of interest-free funds with the assessee and the utilization of loans for business purposes, specifically in fixed assets and capital work in progress. The Tribunal found no error in deleting the disallowance, as the funds exceeded the advances and were utilized appropriately.

Additional Ground - Section 68 Addition (A.Y. 2012-2013):
Regarding the addition of Rs. 51,00,000 under Section 68 of the Act, the Tribunal observed that the loan was not taken in the relevant year and was subsequently adjusted by the allotment of shares. As there was no unsecured loan during the assessment year, the Tribunal rightly held that Section 68 was not applicable. The Court confirmed the deletion of the Rs. 51,00,000 addition, as the loan adjustment was in compliance with the law.

Disallowed Interest-Free Loans and Advances (A.Y. 2013-2014):
In a similar case for A.Y. 2013-2014, the ITAT also deleted the disallowance of Rs. 43,59,961 on interest-free loans and advances. The Tribunal found in favor of the assessee, considering the availability of interest-free funds and the appropriate utilization of loans for business purposes.

Conclusion:
The High Court upheld the decisions of the ITAT in both appeals, dismissing the challenges raised by the Revenue. The Court found no substantial question of law in the Tribunal's rulings on the disallowance of interest-free loans and advances and the deletion of the Section 68 addition. Consequently, both appeals were dismissed.