The Income Tax Appellate Tribunal (ITAT), Mumbai has held that unsecured loans are taken through banking channels from Directors / Shareholders and upholds deletion of addition under section 68 of the IT Act.
The assessee, M/s. More Marketing Pvt. Ltd., is engaged in the business of importers/traders of rubber, bearing, and steel hardware and also provides operations and maintenance services. The Assessing Officer disallowed the unsecured loans u/s. 68 of the Act since the assessee fails to submit any documentary evidence nor the parties confirmed the transactions.
The aggrieved assessee preferred an appeal before the CIT(A) and the assessee has filed grounds of appeal with the objection to the additions made by the Assessing Officer relating to unsecured loans and interest. The CIT(A) deleted the addition made by the Assessing Officer; aggrieved revenue is in appeal before ITAT.
The counsel for the assessee submitted that the unsecured loans are nothing but temporary loans taken from Directors and Shareholders and all these loans are taken through banking channels. The counsel further submitted that in A.Y. 2012-13 which was assessed u/s. 143(3) of the Act similar loans were outstanding and no addition was made u/s. 68 of the Act.
The Tribunal observed that all the loans are taken through banking channels from the Directors / Shareholders and all these people have filed their return of income. All these parties are related parties and they are not required to file any financial statements. However, they have filed ITR and bank statements to prove their genuineness and creditworthiness.
To prove creditworthiness, it is enough to show that they have the resources to pay the loan, and not necessarily that it should only be earned by the parties. If they can demonstrate that they have a source and means to arrange funds and obviously through the genuine source.
The Coram of Mr. Aby T. Varkey, Judicial Member, and Mr. S. Rifaur Rahman, Accountant Member has held that “we observe that CIT(A) has deleted additions with the finding that assessee has filed all the relevant information and gave the finding that loans are from the Shareholders / Directors and related concerns. Therefore, the relevant interest payment on the above said loans are considered to be genuine as well. Therefore, we do not find any reason to interfere with the findings of the CIT(A)”.
Mr. Shailesh Shah and Mr. Ram Krishna Kedia appeared on behalf of the assessee and the department.
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