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2016 (5) TMI 538 - AT - Income TaxDisallowance of finance charges - addition of interest - CIT(A) deleted the addition - Held that - The Hon ble Bombay High Court in the case of CIT Vs. Reliance Utilities and Power Ltd. (2009 (1) TMI 4 - BOMBAY HIGH COURT ) has held that if there are funds available both interest free and overdrafts and or loans taken then a presumption would arise that interest free advances would be out of the interest free funds generated or available with the company if the interest free funds were sufficient to meet the investments. Since in the instant case it is very clear from the details furnished that the interest free advances received from sister concerns during the year at 2.78 crores far exceeds the interest free amounts advanced to sister concerns at 1.97 crores therefore in view of the decision of Hon ble Bombay High Court cited (Supra) and in view of various other decisions relied on by the Ld. Counsel for the assessee no disallowance of proportionate interest is called for - Decided against revenue Addition on account of difference in balance of creditors - CIT(A) deleted the addition - Held that - So far as the amounts appearing in the name of Advance Metal Corporation Pvt. Ltd. amounting to 69, 89, 667/- is concerned we find the Ld.CIT(A)deleted this amount on the ground that the assessee has already offered the above amount in his application before the Settlement Commission and has paid due taxes on the same. Since the Ld.CIT(A) on the basis of perusal of the order of the Settlement Commission on this issue has given a finding that assessee has already declared this amount before the Settlement Commission and paid the taxes and interest thereon therefore in absence of any contrary material brought to our notice by the Ld. Departmental Representative the order of the CIT(A) on this issue is upheld So far as the balance amount of 41, 90, 433/- is concerned we find the Ld.CIT(A) deleted an amount of 40, 65, 107/- and sustained an amount of 1, 25, 326/-. The amount 40, 65, 107/-consists of 4 items as per the Table given at para 25 of this order. From the details furnished before the Ld.CIT(A) we find the assessee has given the difference on account of opening balance at 6, 49, 223 19, 44, 849 amounting to 25, 94, 072/- whereas the CIT(A) has deleted an amount of 19, 15, 371/- on account of opening balance difference. We are unable to understand as to how the CIT(A) has deleted an amount of 19, 15, 371/- on account of opening balance difference where the assessee had given the details of opening balance at 25, 94, 072/- . Therefore to this extent the order of Ld.CIT(A) appears to be erroneous for which we deem it proper to restore this issue to the file of the AO with a direction to examine the issue of difference in the opening balance of 19, 15, 371/-. So far as other items are concerned we find the Ld.CIT(A) after proper appreciation of facts has deleted the amount of 9, 28, 855/- 7, 99, 925/- and 4, 20, 956/- on account of the respective heads. In absence of any contrary material brought to our notice against the finding given by the CIT(A) we do not find any infirmity - Decided partly in favour of revenue for statistical purposes.
Issues Involved:
1. Deletion of finance charges by CIT(A). 2. Deletion of amount on account of difference in balance of creditors by CIT(A). Issue-wise Detailed Analysis: 1. Deletion of Finance Charges by CIT(A) The revenue challenged the CIT(A)'s decision to delete finance charges of ?88,68,694/- made by the AO. The assessee, a partnership firm engaged in fabrication and dealing in MS and SS items, had debited ?1,02,33,109/- under finance charges in its profit and loss account for the assessment year 2009-10, compared to ?59,57,918/- in the preceding year. The AO noted an increase in finance charges despite a reduction in loan funds and concluded that the assessee had made interest-free advances to associate concerns, leading to a disallowance of ?88,68,694/-. Before CIT(A), the assessee argued that the finance charges were related to business operations and not advances to sister concerns. The CIT(A) accepted this, noting that interest-free advances received by the assessee exceeded those given, and relying on various judicial decisions, including CIT Vs. Reliance Utilities and Power Ltd., deleted the disallowance. The Tribunal upheld the CIT(A)'s order, noting that the interest-free advances received from sister concerns (?2,77,72,986/-) exceeded the interest-free advances given (?1,96,54,189/-). The Tribunal also referenced the decision of the Bombay High Court in Reliance Utilities and Power Ltd., which established a presumption that interest-free funds are used for interest-free advances if sufficient interest-free funds are available. 2. Deletion of Amount on Account of Difference in Balance of Creditors by CIT(A) The AO had added ?1,11,80,098/- to the assessee's income due to discrepancies between the balances in the assessee's books and those of the creditors. The CIT(A) deleted most of this addition, noting that ?69,89,667/- related to Advance Metal Corporation had already been declared and taxed through the Settlement Commission. For the remaining differences, the CIT(A) found that they were due to various reasons such as rate differences, clerical errors, and timing differences, and thus not subject to addition under Section 41(1) of the Income Tax Act. The Tribunal reviewed the CIT(A)'s findings and upheld the deletion of ?69,89,667/-, confirming that it had been settled with the Settlement Commission. However, the Tribunal found an error in the CIT(A)'s deletion of ?19,15,371/- on account of opening balance differences, as the assessee had reported a higher figure of ?25,94,072/-. This issue was remanded to the AO for re-examination. The Tribunal upheld the CIT(A)'s deletion of the remaining amounts (?9,28,855/-, ?7,99,925/-, and ?4,20,956/-) due to proper factual appreciation and lack of contrary evidence from the revenue. Conclusion The appeal filed by the revenue was partly allowed for statistical purposes, and the CO filed by the assessee was dismissed due to a delay in filing without a condonation petition. The Tribunal's order was pronounced on 07-04-2016.
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