The Income Tax Appellate Tribunal (ITAT) Delhi bench held that no addition should be made if the assessee has sufficient interest free fund to provide interest free loans. Therefore the bench dismissed the revenue’s appeal.
Assessee V C Solutions Pvt. Ltd. had received loan & advances o f Rs.91,06,12 ,956/- and paid an interest of Rs.1,52,05,890/-.
During the assessment proceedings AO held that the assessee has given loans & advances to other related parties but not charged interest while the entire interest has been debited in the P&L account. Further the AO found that the assessee has given interest free loans to the tune of Rs.31,48,67 ,900/-.
Therefore the AO disallowed the proportionate interest of Rs.52,57,829/- taking into consideration, the interest free loan given by the assessee.
Aggrieved by the assessment order, the assessee filed an appeal before the Commissioner of Income Tax-Appeals [CIT(A)] who deleted the addition made by the assessing officer. Therefore the revenue filed another appeal before the tribunal.
During the appeal proceedings the tribunal observed that CIT(A) deleted the addition on the grounds that the assessee had sufficient interest free funds in their possession to provide interest free loans. Also assessee had interest free funds at their disposal to provide interest free loans.
After considering the facts submitted by both parties, the two member bench of N.K.Billaiya (Accountant Member) and Kul Bharat (Judicial Member) deleted the addition made by the AO in respect of interest free loan given by the assessee.
V. K. Agarwal, counsel appeared for the assessee. P. Barnwal, counsel appeared for revenue.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
