2016 (12) TMI 362 - HC - Income Tax

High Court overturns Tribunal decision, allows interest payment in favor of assessee under Income Tax Act

M/s. Ratnesh Enterprises Pvt. Ltd. Versus The Assistant Commissioner of Income Tax Now Jurisdiction Vest with Income Tax Officer Ward 6 (2), Jaipur

M/s. Ratnesh Enterprises Pvt. Ltd. Versus The Assistant Commissioner of Income Tax Now Jurisdiction Vest with Income Tax Officer Ward 6 (2), Jaipur - TMI Issues:Challenge to Tribunal's judgment on interest paid to the bank under Sec. 36(1)(iii) & Sec. 37(1) - Whether finding is perverseRs. Failure to give specific finding on carry forward of unabsorbed business loss and depreciation.Analysis:Interest Paid to Bank Issue:The appellant challenged the Tribunal's decision reversing the CIT (Appeals) findings and allowing the department's appeal regarding the disallowance of interest paid to the bank under Sec. 36(1)(iii) and Sec. 37(1). The appellant provided evidence that the loan was taken and subsequently repaid through another party, justifying the non-appearance of the loan in the balance sheet. The CIT (Appeals) found the disallowance unjust and deleted the addition of Rs. 5,82,840. However, the Tribunal reversed this decision, claiming that the loan was not a loan but an investment. The High Court held that the Tribunal's reasoning was not based on the Assessing Officer's or CIT (Appeals) orders and was thus impermissible in law. The Court reinstated the CIT (Appeals) decision, stating that the interest payment on the loan should be allowed under Sec. 36(1)(iii) and Sec. 37(1) of the Income Tax Act.Failure to Determine Carry Forward Issue:The appellant also raised a concern about the lack of a specific finding on the carry forward of unabsorbed business loss and depreciation in the assessment order. The CIT (Appeals) did not address this issue, leading to the appellant's grievance. The High Court noted that the absence of a specific finding on this matter was unfair and directed the concerned authority to provide a clear determination regarding the carry forward of business loss and unabsorbed depreciation. This issue was separate from the interest payment dispute but was crucial for the appellant's tax assessment.In conclusion, the High Court allowed the appeal in favor of the assessee, setting aside the Tribunal's decision and reinstating the CIT (Appeals) order regarding the interest payment to the bank. Additionally, the Court directed the concerned authority to address the carry forward issue to ensure a fair assessment for the appellant.