Tribunal upholds deletion of interest addition for interest-free loans in Assessment Year 2007-08.

Deputy Commissioner of Income Tax, Central Circle-2 (1), Pune Versus A2Z Online Services Pvt. Ltd.,

Deputy Commissioner of Income Tax, Central Circle-2 (1), Pune Versus A2Z Online Services Pvt. Ltd., - TMI Issues Involved:
Challenge to deletion of addition of interest attributable to interest free loans by the CIT(A) in the Assessment Year 2007-08.

Detailed Analysis:

Issue 1: Deletion of Addition of Interest on Interest Free Loans
- The Revenue challenged the CIT(A)'s deletion of the addition of Rs. 27,90,697 made by the Assessing Officer on account of interest attributable to interest free loans given by the assessee.
- The Assessing Officer noted that the assessee had taken both interest-bearing and interest-free loans during the year and had also advanced loans to others, which were both interest-bearing and interest-free.
- The Assessing Officer sought an explanation from the assessee regarding the interest attributable to interest-free loans, which the assessee argued was paid for business purposes and there was no nexus between interest-bearing funds and interest-free advances.
- The Assessing Officer was not satisfied with the explanation provided by the assessee, as the funds flow statement for each loan was not furnished, leading to the addition of Rs. 27,90,697 as interest attributable to interest-free loans.
- The CIT(A) considered the arguments and decisions from the preceding assessment year and deleted the disallowance made by the Assessing Officer.
- The Tribunal, based on the decision in the assessee's own case for the preceding assessment year, upheld the CIT(A)'s order, dismissing the Revenue's appeal.
- The Tribunal emphasized the availability of interest-free funds and loans, the absence of diversion of interest-bearing loans for non-business purposes, and the correctness of the CIT(A)'s findings, leading to the dismissal of the Revenue's appeal.

Conclusion:
The Tribunal upheld the CIT(A)'s decision to delete the addition of interest attributable to interest-free loans, based on the availability of funds, absence of diversion for non-business purposes, and the decision in the assessee's own case from the preceding assessment year. The Revenue's appeal was dismissed, affirming the CIT(A)'s order.