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TMI Blog2020 (5) TMI 453X X X X Extracts X X X X X X X X Extracts X X X X ..... year. Hence, we delete the proportionate disallowance of interest expense and allow the appeal of assessee. - Appeal of assessee is allowed. - ITA NO. 1014/MUM/2016 - - - Dated:- 28-1-2020 - Shri Mahavir Singh, Vice President And Shri Manoj Kumar Aggarwal, Accountant Member For the Appellant : Shri Vijay Mehta For the Respondent : Ms. Kavita P. Kaushik ORDER PER MAHAVIR SINGH, VICE PRESIDENT This appeal is filed by the assessee against order of CIT(A)-22, Mumbai dated 12.01.2016 for assessment year 2011-12 which in turn has arisen from order of Assessing Officer passed under Section 143(3) of the Income Tax Act, 1961 (in short the Act ) dated 12.03.2014. 2. The only issue in this appeal of assessee is against the order of CIT(A) confirming the action of Assessing Officer in disallowing proportionate expenses of interest without appreciating the facts of the case. For this, assessee has raised following ground no. 1 :- 1. On the facts and in the circumstances of the case and in law, the learned C.I.T.(A) erred in confirming the action of the A.O. in disallowing proportionate interest expense amounting to ₹ 94,23,665/- and that too without ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 81,31,360 13,91,465 ₹ 9,75,763/- Total 5,14,13,491 7,72,89,582 ₹ 94,23,665/- 4. Assessee produced complete books of account and details of loans given and loans taken from various parties including financial institutions and banks before the Assessing Officer. Assessee was also asked to prove the nexus between the availability of interest free funds and funds given to above parties noted in the chart. After going through the reply of assessee, the Assessing Officer noted that interest bearing funds were diverted towards non-interest bearing advances given by assessee to other parties. He also noted that interest bearing funds utilized for such investments on which interest is paid or payable should have been capitalized. Hence, he disallowed proportionate interest on such interest free advances of ₹ 94,23,665/- debited to the Profit Loss Account. Aggrieved, assessee preferred appeal before the CIT(A). The CIT(A) confirmed the action of Assessing Officer relying on earlier year s appeal order by obse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the sums advanced during those years; this could be, only on the assumption that those advances were not out of borrowed funds of the assessee. This finding during the previous years is the very basis of the deductions permitted during the past years, whether a specific finding was recorded or not. A departure from that finding in respect of the said amounts advanced during the previous year, would result in a contradictory finding; it will not be equitable to permit the revenue to take a different stand now, in respect of the amounts which were the subject-matter of previous years assessments; consistency and definiteness of approach by the revenue is necessary, in the matter of recognising the nature of an account maintained by the assessee so that the basis of a concluded assessment would not be ignored without actually reopening the assessment. The principle is similar to the cases where it has been held that a debt which had been treated by the revenue as a good debt in a particular year cannot subsequently be held by it to have become bad prior to that year. 6.1. It is not in dispute that the borrowings were made in earlier years and its utilization thereon in earlie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld AR submitted that the amounts advanced to Neeta M Mehta alone had increased during the year. We find that with regard to amounts advanced to all other parties except Neeta M Mehta, the closing balance had only reduced when compared to the opening balance and hence there cannot be any disallowance of interest on the opening balance of loans advanced to parties as per the ratio laid down by the Hon ble Karnataka High Court referred to supra. 6.2. We also find that similar decision was rendered by the Hon ble Gujarat High Court in the case of Virendra R Gandhi vs ACIT in Tax Appeal No. 20 of 2004 with Tax Appeal No. 124 of 2005 dated 27.11.2014. 6.3. With regard to loan given to Neeta M Mehta during the year, we find that during the year, the assessee had advanced only a sum of ₹ 15,52,273/-to the said party and we find that assessee is having sufficient own funds during the year in the form of current year profits before depreciation to the tune of ₹ 4.24 crores. Hence it could be reasonably presumed that the amounts to Neeta M Mehta were advanced interest free out of own funds available with the assessee in the form of current year profits itself. Hence ther ..... X X X X Extracts X X X X X X X X Extracts X X X X
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