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2021 (8) TMI 903 - AT - Income TaxAddition on account of proportionate interest - CIT(A) confirmed the disallowance made by the AO only on the ground that the assessee failed to establish the commercial expediency regarding the interest free loans made in the year under consideration - HELD THAT - DR vehemently argued the said decision of ITAT for A.Y. 2011-12 2017 (1) TMI 1758 - ITAT PUNE is not applicable for the year under consideration for the reason that the CIT(A) held clearly there is a change of facts compared to earlier years and the year under consideration. We note that the Co-ordinate Bench of Tribunal discussed the issue in detail wherein we find the facts and circumstances arose in A.Y. 2011-12 and in the year under consideration i.e. 2012-13 are identical. Respondent-Revenue did not bring on record any view contrary to the view taken by the Coordinate Bench of Tribunal in assessee's own case for A.Y. 2011-12 and in view of the same, we find the order of CIT(A) is not justified. The finding of Co-ordinate Bench of Tribunal rendered in A.Y. 2011-12 vide its order dated 27-01-2017 2017 (1) TMI 1758 - ITAT PUNE in assessee's own case is applicable to the facts and circumstances for A.Y. 2012-13. Thus, the addition made by the AO and confirmed by the CIT(A) is deleted and the grounds raised by the assessee are allowed.
Issues:
Whether the addition made by the AO on account of proportionate interest is justified. Analysis: The appeal was filed by the assessee against the order passed by the Commissioner of Income Tax (Appeals) for the assessment year 2012-13. The primary issue for consideration was the confirmation of the addition made by the AO on account of proportionate interest. The assessee, a company engaged in wholesale trading in country liquor, had declared a total income of ?44,40,940. The AO determined the income at ?60,46,782, making additions for proportionate interest and disallowance under section 14A r.w. Rule 8D of the Rules. The CIT(A) upheld the additions. The AO found that the assessee had invested in shares of its sister concern and given interest-free advances to the concern, leading to the disallowance of interest paid on borrowed funds. The assessee explained that the loans were given due to business exigency and strategic decisions. However, the AO disallowed an amount and added it to the total income of the assessee. The CIT(A) affirmed the disallowance, stating that the interest-free loans were not commercially expedient and that the business of the assessee differed from the concern to which the loans were given. The CIT(A) observed that the loans had been repaid substantially and fresh amounts were paid. The assessee argued that the decision of ITAT for the previous year was applicable, but the CIT(A) held otherwise. The Tribunal noted that the facts and circumstances for the years 2011-12 and 2012-13 were identical. The Tribunal found that the order of the CIT(A) was not justified and relied on the decision of the Co-ordinate Bench of Tribunal for the previous year, deleting the addition made by the AO and confirmed by the CIT(A). Consequently, the grounds raised by the assessee were allowed, and the appeal was allowed in favor of the assessee. In conclusion, the Tribunal set aside the addition made by the AO and confirmed by the CIT(A) regarding the proportionate interest, emphasizing the importance of commercial expediency and strategic business decisions in such cases. The Tribunal's decision was based on the consistency of facts and circumstances with the previous year's case, leading to the allowance of the appeal in favor of the assessee.
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