ACIT vs. Uniways Agri Commodities Pvt.Ltd ITA No. 596/Ind/2015 & CO 16/Ind/2016 IN INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE Before Shri D.T. Garasia, JM & Shri O.P. Meena, AM ITA No.596/Ind/2015 A.Y.2011-12 ACIT 4(1) Bhopal ::: Appellant Vs M/s Uniways Agri Commodities Pvt.Ltd Bhopal PAN AABCU 0306P ::: Respondent CO No. 16/Ind/2016 Arising out of ITA No.596/Ind/2015 M/s Uniways Agri Commodities Pvt.Ltd Bhopal ::: Objector Vs ACIT 4(1) Bhopal ::: Respondent Appellant by Shri Mohd. Javed Respondent by Shri Anil Khabya Date of hearing 24.8.2016 Date of pronouncement 28.9.2016 1 ACIT vs. Uniways Agri Commodities Pvt.Ltd ITA No. 596/Ind/2015 & CO 16/Ind/2016 O R D E R PER SHRI D.T. GARASIA, JM revenue is in appeal whereas assessee is in cross objection against order of learned CIT(A), Bhopal-2, dated 6.5.2015. 2. In appeal only issue taken by revenue is that learned CIT(A) was not justified in restricting disallowance of interest expenses to Rs.55,39,718/- instead of Rs. 79,13,354/-. 3. brief facts of case are that Assessing Officer noticed from P&L account that assessee has debited Rs.4,01,26,015/- on account of interest expenses. It was also observed from balance sheet of assessee that assessee has given loans and advances amounting to Rs. 25,08,63,996/-. Assessing Officer required assessee to provide details of loans and advances given, interest charged on them, details of TDS and business 2 ACIT vs. Uniways Agri Commodities Pvt.Ltd ITA No. 596/Ind/2015 & CO 16/Ind/2016 purpose behind giving these loans and advances. In response assessee submitted details of loans and advances from which Assessing Officer noted that assessee has given interest free loans and advances of Rs.10,66,53,698/- to group companies. From this Assessing Officer inferred that on one hand assessee is taking loan and paying interest on same and on other, assessee is giving interest free loans and advances to group concerns. Assessing Officer, therefore, asked assessee as to why interest @ 12% on interest free loans and advances of Rs. 10,66,53,698/- should not be disallowed and added to total income of assessee in response to which assessee failed to furnish any explanation except giving amount of interest @ 12% on interest free loans and advances which comes to Rs. 79,13,354/- which is calculated on day to day balances. In this scenario, Assessing Officer added Rs.79,13,354/- to total income of assessee on 3 ACIT vs. Uniways Agri Commodities Pvt.Ltd ITA No. 596/Ind/2015 & CO 16/Ind/2016 account of disallowance of interest expenses. On appeal, learned CIT(A) restricted disallowance to Rs.55,39,718/-. learned CIT(A) observed as under :- 3.2 Appellant s submissions along with assessment order and records of A.O. have been considered carefully. There is no denying fact that during year under consideration appellant has engaged mainly in sale/purchase of shares and investments which are stated to be its ancillary objects only. Even its concerned subsidiary company i.e. Uniqueways Realters Pvt. Ltd. to whom major portion of such interest free advances been made, has declared income of Rs.41,53,863/- earned from dividend (Rs.6,28,815/-), rent (Rs.7,89,238/-), interest (Rs.26,92,602/-) and income on investments (Rs.43,207/-). Thus, no business activities have been carried out by its main subsidary company also to 4 ACIT vs. Uniways Agri Commodities Pvt.Ltd ITA No. 596/Ind/2015 & CO 16/Ind/2016 prove appellant s contention of commercial expediency. After perusal of entire material on records, disallowance of interest of Rs.55,39,718/- calculated on basis of interest free advances of Rs.9,95,29,915/- as per appellant s financial statement, is found sustainable and accordingly confirmed. 4. Before us, learned DR relied upon assessment order whereas learned counsel for assessee reiterated submissions made before authorities below. 5. After careful examination of material available on record in view of submissions of parties, we find that during year under consideration assessee is engaged mainly in sale/purchase of shares and investments which are stated to be its ancillary objects only. Even its concerned subsidiary company i.e. 5 ACIT vs. Uniways Agri Commodities Pvt.Ltd ITA No. 596/Ind/2015 & CO 16/Ind/2016 Uniqueways Realters Pvt. Ltd. to whom major portion of such interest free advances bad been made, has declared income of Rs. 41,53,863/- earned from dividend (Rs.6,28,815/-), rent (Rs.7,89,238/-), interest (Rs.26,92,602/-) and income on investments (Rs.43,207/-). Thus, no business activities have been carried out by its main subsidiary company also to prove assessee s contention of commercial expediency is not proved. We find that learned CIT(A) has calculated disallowance of interest @ 9% as assessee has borrowed major portion from M/s Sanwaria Agroils Limited. Therefore, on that basis, disallowance of interest was restricted to Rs.55,39,718/- only by learned CIT(A) whereas Assessing Officer has added Rs.79,13,354/- @ 12%. learned CIT(A) has granted partial relief i.e. only difference of rate of interest i.e. 12% to 9%. We find from order of learned CIT(A) that he has confirmed financial statement of assessee and granted relief. Therefore, our 6 ACIT vs. Uniways Agri Commodities Pvt.Ltd ITA No. 596/Ind/2015 & CO 16/Ind/2016 interference is not called. This ground of revenue is thus dismissed. 6. In view of our above findings, cross objection of assessee become infructuous and dismissed as such. 7. In result, appeal of revenue and cross objection of assessee stand dismissed. Pronounced in open Court on 24 August, 2016 Sd sd (O.P. MEENA) (D.T. GARASIA) ACCOUNTANTMEMBER JUDICIAL MEMBER 28 September, 2016 Dn/- 7 ACIT vs. Uniways Agri Commodities Pvt.Ltd ITA No. 596/Ind/2015 & CO 16/Ind/2016 8 ACIT 4(1), Bhopal v. M/s Uniways Agri Commodities Pvt. Ltd