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TMI Blog2020 (3) TMI 1220X X X X Extracts X X X X X X X X Extracts X X X X ..... was utilized for the purpose of business of the assessee. This fact is not rebutted by the revenue, therefore, assessing officer is hereby directed to delete the addition. - Decided in favour of assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... e entire amount of addition of ₹ 7,62,433 as made by the Ld. A.O. D]. The Assessee had preferred an appeal before the Hon'ble ITAT against the said order passed by the Ld. CIT (A). That Hon'ble ITAT vide his order dt. 10.02.2016 has set aside the issue regarding disallowance of Interest paid of ₹ 5,53,024/- to the file of A.O. and has upheld the issue regarding disallowance of Depreciation of ₹ 2,09,409/-. The direction as given by the Hon'ble ITAT in Para 7 on inner Page No 5 is reproduced here under:- E]. That in pursuance to the directions of the Hon'ble ITAT, the Ld. A.O. has passed an order u/s 143(3)/254 dt. 22.12.2017 wherein he has maintained the disallowance of Interest paid of ₹ 5,53,024/- even when the assessee has sufficient amount of interest free funds towards purchase of Plant & Machinery. The Assessee has preferred an appeal before the Ld. CIT (A) against the said order passed by the Ld.A.O. u/s 143(3)/254. The Ld. CIT (A) vide his order dt. 07.01.2019 has dismissed the appeal filed by the assessee against the said order passed u/s 143(3)/254 dt. 22.12.2017 and maintained the disallowance as made by A.O. out of Interest paid of ₹ 5, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ture of Amount [Rs] 1 Inventory 15,75,13,127 2 Sundry Debtors 21,27,92,898 3 Cash and Bank 98,08,894 4 Loans & Advances Assets 5,60,78,387 Total 43,61,93,306 1.6] That on perusal of the above, your honour will find that entire amount of loan of ₹ 21,21,57,670/- was utilized for the purpose of business of the assessee. Hence, the assessing officer was not justified in disallowing an amount of ₹ 5,53,024/- out of Interest paid. 1.7.1] That when the assessee has justified the proper utilization of interest bearing funds and the department has failed to prove the contrary. In that case, no disallowance can be made U/s 36(1)(iii) of the Income Tax Act. For this preposition we rely on the following direct decisions:- S. No. Name of Decision Citation 01. Ram Kishan Oil Mills V/s CIT 56 ITR 186 (MP) 02. Birla Gwalior P limited V/s CIT 44 ITR 847 (MP) 03. D & H Secheron Electrodes Limited 142 ITR 529 (MP) 04. Regal Theatre V/s CIT 225 ITR 205 ( Delhi) 05. Sarvodaya Kela Group V/s ITO 25 ITC 409 (Indore Bench) 1.7.2] That Hon'ble Bombay High Court in the case of CIT vs Reliance Utilities & Power Limited as reported in 313 ITR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance of interest could be made under section 14A. " 1.7.4] That Hon'ble Apex Court in one of its latest order dt. 05.11.2015 in the case Of Hero Cycles V/s CIT has held that :- "Once it is established that there is nexus between the expenditure and the purpose of business (which need not necessarily be the business of the assessee itself), the Revenue cannot justifiably claim to put itself in the arm-chair of the businessman or in the position of the Board of Directors and assume the role to decide how much is reasonable expenditure having regard to the circumstances of the case. It further held that no businessman can be compelled to maximize his profit and that the income tax authorities must put themselves in the shoes of the assessee and see how a prudent businessman would act. The authorities must not look at the matter from their own view point but that of a prudent businessman." 1.7.5] Hon'ble ITAT Indore Bench vide its Order dt. 16.03.2017 in the case of Assessee herself for the A.Y. 2010-11 in ITA No. 58/IND/2015 has allowed the appeal on similar issue and deleted the entire amount of disallowance as made by the A.O. out of Interest Paid. The hon'ble ITAT in para 1.5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce Utilities & Power Ltd. (2009) 178 Taxman 135 (Bom) and the decision of CIT vs. Hero Cycles Ltd. (2010) 323 ITR 518 (P&H) and other judgements as cited above and decision in the case of M/s Narendra Industries ITA No. 644/IND/2015 dated 28.2.2017 of I.T.A.T., Indore, we are of the considered opinion that no disallowance of interest is warranted in this case. In view of these facts and circumstances, the disallowance of interest of ₹ 22,58,779/- made by the AO is deleted. Accordingly ground no. 1 of appeal is therefore, allowed. 1.8] That in the present case under appeal also the assessee has interest free funds in form of Own Capital and Current Liabilities which is in excess of investment made in the fixed assets by the assessee. Thus, the interest bearing funds have properly been utilized for the purpose of his business. Hence, the Assessing officer was not justified in disallowing an amount of ₹ 5,53,024/- made out of Interest paid. The disallowance so made by the Assessing officer and maintained by the Ld. CIT(A) is contrary to the facts of the case and settled position of law. 1.9] That in view of the above, it is submitted that disallowance of ₹ 5,53,0 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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