THE PR. COMMISSIONER OF INCOME TAX (CENTRAL), LUDHIANA Vs. M/S MALHOTRA BOOK DEPOT, MBD HOUSE, RAILWAY ROAD, JALANDHAR

JUDGEMENT

(1.) This order shall dispose of ITA Nos. 31 and 82 of 2017 as according to the learned counsel for the appellant-revenue, the issue involved in both the appeals is identical. However, the facts are being extracted from ITA No. 31 of 2017.

(2.) ITA No. 31 of 2017 has been preferred by the appellant-revenue under Section 260A of the Income Tax Act, 1961 (in short, "the Act") against the order dated 29.06.2016, Annexure A.III, passed by the Income Tax Appellate Tribunal, Amritsar Bench. Amritsar (in short, "the Tribunal") in ITA No. 196(Asr)/2015, for the assessment year 2010-11, claiming following substantial questions of law:-

(3.) A few facts relevant for the decision of the controversy involved as narrated in the appeal may be noticed. The assessee is engaged in the business of publication of help and guide books. During the course of assessment proceedings, it was noticed by the Assessing Officer that during the relevant assessment year, the assessee had an amount of Rs. 20,32,60,000/- as investments in various related concerns but had received any interest or return thereon. According to the assessee, interest free advances had been made to the related parties in view of the larger interest of the group. The Assessing Officer observed that after making advances, the assessee had applied for interest linked loans and was bearing the interest burden. The assessee failed to provide specific information as to how advances of interest free loans served its business interests. The Assessing Officer observed that if the assessee had excess surplus funds, what was the need to take interest bearing loans. Thus, proportionate interest expenditure to the tune of Rs. 54,10,225/- was disallowed by the Assessing Officer and was added to the income of the assessee vide order dated 18.03.2013, Annexure A.I. Aggrieved by the order, the assessee filed an appeal before the Commissioner of Income Tax (Appeals) [CIT(A)]. Vide order dated 27.02.2015, Annexure A.II, the CIT(A) confirmed the disallowance of interest expenditure made by the Assessing Officer. The CIT(A) observed that the assessee had even attempted to show that the investments in sister concerns served any business purpose. The assessee claimed that the investments had been made from self owned funds and from interest bearing funds. It was recorded by the CIT(A) that the advancing of interest free funds to assessee concerns had to be justified to be a business necessity which had been done by the assessee. Thus, the disallowance of interest expenditure made by the Assessing Officer was confirmed by the CIT(A) vide order dated 27.02.2015, Annexure A.II. Not satisfied with the order, the assessee filed an appeal before the Tribunal. Vide order dated 29.06.2016, Annexure A.III, the Tribunal allowed the appeal filed by the assessee, deleting the addition of Rs. 54,10,225/- on account of disallowance of interest expenditure. Hence, the instant appeals by the revenue.