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2023 (11) TMI 1284 - AT - Income TaxDisallowance of 50% of the interest claim - AO found that the assessee is enjoying the cash credit limit and it is noticed that there is no change in the cash credit limit. So, there is no addition funds are raised - HELD THAT - Activities of the assessee are more requirement of lands for maintaining the livestock, chilling of milk, distribution. All are related to business. Further the opening and closing balance of cash credit limit does not reveal that there is no use of funds of the assessee. We respectfully relied on the order of Vardhman Polytex Ltd. 2012 (9) TMI 519 - SC ORDER The disallowance of 50% interest has no basis. The use of land purely business purpose. DR was not able to submit any contrary judgment against the assessee. So, the appeal order related this issue is setting aside. We quash the addition - ground no. 4 is allowed. Carry forward of loss - The carry forwarded loss is eligible for deduction subject rectification of preceding years. In point of verification and for calculation we remand back the issue to the file of the AO for allowing the carry forwarded loss of the assessee as per the law. Therefore, the ground 5 is duly remanded back to the file of the ld. AO for verification of the loss claimed by the assessee and the eligible carry forwarded loss should be allowed as per the law. Reasonable opportunity should be allowed to assessee in set aside proceeding.
Issues Involved:
1. Legality of the assessment order under sections 153C/143(3) of the Income-tax Act, 1961. 2. Compliance with mandatory conditions under sections 153B and 153D. 3. Disallowance of interest paid on the cash credit (CC) account amounting to Rs. 41,44,372. 4. Rejection of the claim for brought forward losses amounting to Rs. 1,59,20,750. Detailed Analysis: Issue 1: Legality of the Assessment Order under Sections 153C/143(3) The appellant did not press this issue during the proceedings. Therefore, the tribunal did not adjudicate on this ground. Issue 2: Compliance with Mandatory Conditions under Sections 153B and 153D Similar to Issue 1, this ground was not pressed by the appellant, and hence, the tribunal did not address this matter. Issue 3: Disallowance of Interest Paid on the Cash Credit Account The assessee contested the disallowance of 50% of the interest claimed on the cash credit limit, amounting to Rs. 41,44,372. The assessee argued that the interest expense was incurred for business purposes, specifically for maintaining livestock and processing milk, which are essential for the business operations. The tribunal examined the facts and noted that the assessee's business activities required significant land for maintaining livestock and milk processing. The tribunal also referred to the Supreme Court judgment in Vardhman Polytex Ltd. v. CIT, which held that interest on borrowed capital is deductible under section 36(1)(iii) even if the capital assets were not put to use in the relevant year. The tribunal found that the disallowance of 50% of the interest had no basis and quashed the addition of Rs. 41,44,372, allowing this ground in favor of the assessee. Issue 4: Rejection of the Claim for Brought Forward Losses The assessee claimed a carry forward loss of Rs. 1,59,20,750 from earlier assessment years (2012-13 to 2014-15) against the net profit of Rs. 2,60,02,235. The AO had rejected these losses, but the assessee argued that the ITAT had already adjudicated in favor of the assessee for the relevant years, making the losses eligible for carry forward. The tribunal noted that the ITAT had indeed allowed the appeals for the earlier years, thus making the losses eligible for deduction. However, for verification and calculation purposes, the tribunal remanded the issue back to the AO to allow the carry forward losses as per the law, providing a reasonable opportunity to the assessee in the set-aside proceedings. Other Grounds: - Ground 1, 2, and 3: Not pressed by the assessee. - Ground 6: General in nature and did not require specific adjudication. Conclusion: - Ground 4 (Disallowance of Interest): Allowed in favor of the assessee. - Ground 5 (Carry Forward Losses): Remanded back to the AO for verification and calculation. - Grounds 1, 2, 3: Not pressed. - Ground 6: General in nature. Result: The appeal of the assessee is allowed for statistical purposes.
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