ITA No. 2195/PN/2012, (Assessment Year: 2005-2006). Case: ACIT Vs M/s. Purti Constructions. ITAT (Income Tax Appellate Tribunal)

Case NumberITA No. 2195/PN/2012, (Assessment Year: 2005-2006)
CounselFor Appellant: Shri Mayur Kisnadwala and For Respondents: Shri P.L. Pathade
JudgesShailendra Kumar Yadav, Member (J) and R.K. Panda, Member (A)
IssueIncome Tax Act
Judgement DateMarch 27, 2014
CourtITAT (Income Tax Appellate Tribunal)


Shailendra Kumar Yadav, Member (J), (ITAT Pune 'A' Bench)

  1. This appeal has been filed by the revenue against the order of Commissioner of Income Tax (Appeal)-II, [short CIT(A)] Nashik, dated 31.08.2012 for A.Y. 2005-06 on the following grounds.

  2. On the facts and in the circumstances of the case CIT (A) erred in deleting the additions of Rs. 18,93,291/- made by the AO.

  3. On the facts and circumstances of the case, the CIT(A) has erred in treating that the interest free advance of Rs. 1,29,18,876/- was used by assessee for the purpose of renovation of the rooms, restaurant being run by the assessee and has a close business nexus and commercial expediency.

  4. On the facts and circumstances of the case, the CIT(A) has erred in treating that the AO is not justified in disallowing Rs. 18,93,291/- holding that the interest free advance was given out of borrowed funds to its sister concern.

  5. The order of the CIT(A) be vacated and that of the A.O. be restored.

  6. The appellant requests for admission of an additional ground of appeal or additional evidences if required to support his case.

  7. The appellant craves, leaves to add, alter, amend, or delete any of the above grounds of appeal.

    The assessee is engaged in the business of construction and running a health club, a restaurant and ice cream parlor. The assessee has filed the return of income on 29.10.2005 declaring the total taxable income at Nil after setting off brought forward business loss of ` 70,09,791/-. The company has borrowed funds for business. The interest payment on loan was charged by the assessee company to profit and loss account for the year. An amount of ` 1,29,18,876/- has been advanced to Bastiram Sarda Charitable Trust. The assessee has incurred an expense of ` 65,56,979/- on account of interest on borrowed capital. Out of it ` 18,93,291/- has been paid to relatives and sister concern. The Assessing Officer has disallowed the part of the interest inter alia, stating that it is attributable to loans to a sister concern viz. Bastiram Sarda Charitable Trust. Accordingly, an amount of ` 18,93,291/- out of total interest expenditure was disallowed. The Trust has given its property on rent to company for which, the former has received an interest free advance from latter. The Trust is charging a rent of ` 60,000/- per month. The entire income has been set off against carried forward losses. In this background, the Assessing Officer disallowed the interest of ` 18,93,291...

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