I.T.O.,Ward-3(1), Kolkata Vs M/s Brahmdeo Sinha & Co. Hardcoke (P) Ltd., Kolkata

The Income Tax Appellate Tribunal heard an appeal from the Income Tax Officer regarding the disallowance of interest on a loan provided by M/s. Brahmdeo Sinha & Co. to a related company, M/s. Brahma Refractories Pvt. Ltd. The Assessing Officer disallowed interest amounting to Rs. 14,90,864, arguing the loan was interest-free and funded by borrowed money. However, the CIT(A) allowed the assessee's appeal, leading to the current appeal by the revenue.

IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH: KOLKATA
[Before Shri P.M. Jagtap, Vice President (KZ) &Shri A. T. Varkey, JM]

ITA No.1481/Kol/2019
Assessment Year: 2013-14

Income Tax Officer, Ward-3(1),Kolkata
Appellant

Vs

M/s. Brahmdeo Sinha & Co. (Hard Coke) Pvt. Ltd.
(PAN: AACCB6632J)
Respondent

Date of Hearing (virtual) : 05.10.2020
Date of Pronouncement : 14.10.2020
For the Appellant : Shri JayantaKhanra, JCIT, CIT, DR
For the Respondent : Shri Subash Agarwal, Advocate

ORDER

Per A. T. Varkey, JM:

This is an appeal preferred by the revenue against the order of Ld. CIT(A)-12, Kolkata dated 20-03-2019 for Assessment Year 2013-14.

2. Ground no. 1 of the revenue appeal is against the action of the Ld. CIT(A) in deleting the disallowance of Rs.14,90,864/- made by the AO towards the payment of interest on loan.

3. Brief facts of the case are that the AO noted that the assessee company has given loan to M/s. Brahma Refractories Pvt. Ltd. (in short M/s. BRPL) amounting to Rs.1,24,,23,868/- which according to the AO is a related company. According to the AO,the loan was given without interest whereas from a perusal of the P&L Account it appears that the assessee company had incurred interest expenditure of Rs.45,89,999/-. Thereafter,the AO issued show cause notice to the assessee directing it to explain as to why proportionate interest should not be disallowed. According to AO, the assessee pursuant to the show cause notice submitted that this amount was an advance given to sister concern M/s BRPL for purchase of refractory materials which was required for execution of an agreement with M/s. Tata Metaliks. According to the assessee, since the agreement with M/s Tata Metaliks did not materialise, the advanced amount was refunded by it next year back to assessee. According to the AO, even though he asked the assessee to submit documentary evidence in support of its claim, the assessee/AR failed to file any documentary evidence, therefore, the AO concluded that assessee company provided loan to the related company without any interest from the borrowed fund. Therefore, he disallowed @ 12% on the loan amount given to M/s BRPL to the tune of Rs.1,24,23,868/- which comes to Rs.14,90,864/- from the interest expenditure claimed by the assessee o the borrowed fund. Aggrieved, the assessee preferred an appeal before the Ld. CIT(A), who was pleased to allow the ground of appeal of the assessee on this issue. Aggrieved, the revenue is in appeal before us.

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