ITAT dismissed the appeals as the tax effect was less than Rs 10 lakhs
ITAT dismissed the appeals as the tax effect was less than Rs 10 lakhs
Revenue filed appeals before ITAT against different orders of CIT(A) against the orders of assessment framed u/s 153C (of Income Tax Act, 1961)/144/153A/143(3). In all the appeals, the tax effect was less than Rs.10,00,000. ITAT dismissed the appeals and held them to be not maintainable, being contrary to CBDT circular No. 21/2015, which stated that appeals wherein the tax effect is less than Rs 10 lakhs are not mainatable before ITAT.
1. The assessee firm was engaged in the business of Kacha Arhtia/Commission Agent, deriving income from Dami, which is charged @ 2.5% on the total sales of food grain items sold through it. The AO made an addition of Rs.3,91,560/- on account of disallowance of interest u/s 36(1)(iii) (of Income Tax Act, 1961), as the assessee firm was alleged to have advanced interest free loans and advances out of borrowed funds.
2. CIT(A) restricted the addition to Rs.1,14,123/- holding that the assessee firm was not justified in charging interest only @ 8% from the agriculturists, as it had paid interest @ 12% on unsecured loans/advances taken by it.
3. On appeal, the ITAT held as under:
4. In "Shivganga Builders (P.) Ltd. vs. ACIT". 123 ITD 105 (Ahd.), it was held that the interest on theborrowed funds paid by an assessee is an allowable expenditure when borrowed fund is utilized for the purpose of the business of the assessee and the department is not empowered to decide when assessee is to borrow and when it should not borrow, as these are matters which are required to be decided by the assessee as a businessman; that the assessee may make an imprudent business decision, but the same itself does not empower the revenue to disallow a legitimate and bona fide expenditure. It is pertinent to note that in this decision, the matter was remitted to the file of the AO for decision afresh, since the necessary facts to decide the issue were not available on record. In the case at hand, however, all the facts are on record. To reiterate , the ld. CIT(A) has not disputed that the loans were advanced by the assessee firm to the agriculturists as a matter of commercial expediency, since the agricultural produce is a pre-requisite condition of the assessee's business.
10. In view of the above, the grievance of the assessee is found to be justified and as such, it is accepted. The order of the ld. CIT(A) is reversed. The addition is deleted.”
Case Reference-[Before Shri N.V.Vasudevan, JM & Shri M.Balaganesh, AM ] DCIT, Central Circle-XXV, v Shri Jugal Kajaria (HUF)
IN THE INCOME TAX APPELLATE TRIBUNAL "C" BENCH: KOLKATA
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