TaxTMI 
TaxTMI 
TaxTMI 
2017 (1) TMI 724
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....ng common grounds of appeal have been raised by the Revenue in the memo of appeal (only difference in the amount) filed with the Income-tax Appellate Tribunal, Mumbai (hereinafter called "the Tribunal"):- "1. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of Rs. 60,78,950/- (for A.Y. 2011-12 Rs. 48,63,183/-) made in respect of disallowance of interest on account of interest fee advances given to M/s Menghraj Sons. 2. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of Rs. 60,78,950/- (for A.Y. 2011- 12 Rs. 48,63,183/-) without appreciating the fact that the assessee had diverted interest bearing borrowed funds to its sister concern M/s. Menghraj Sons without getting any additional benefit. 3. On the facts and circumstances of the case and in law, the Ld. CIT(A) was not justified in deleting the addition of Rs. 60.78,950/- (for A.Y. 2011-12 Rs. 48,63,183/-) by holding that the advance made by the assessee to its sister concern M/s. Menghraj Sons was as a result of business transaction. 4 For these and other reasons it is submitted that the order of the CIT(A) may be set-asid....
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....o the extent of Rs. 60,78,950/- was disallowed as not incurred for the purpose of the assessee's business disallowed by the AO vide assessment order dated 28/03/2013 passed u/s. 143(3) of the Act. 4. Aggrieved by the assessment order dated 28/03/2013 passed by the A.O. u/s 143(3) of the Act, the assessee filed first appeal before the ld. CIT(A). 5. Before the ld. CIT(A) the assessee submitted that the assessee appointed M/s. Menghraj Sons as consignment agent vide agreement for consignment agency on 10th August 2004 and since then was effecting part of its sales through the said consignment agent and due to continuous increase in debtors on account of sales through the said consignment agent, the assessee terminated the consignment agency agreement with M/s Menghraj Sons w.e.f. 1st May 2009. The outstanding amount due from the said consignment agent as on 1st May, 2009 on account of sales effected through them was Rs. 4,74,89,808.76. It was submitted that during the year the assessee has incurred net loss of Rs. 26.40 lakhs as compared to Profit of Rs. 20.75 lakhs in financial year 2008-09. It was submitted that the entire debit balance in the said account is on account of sales ....
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....he sister concern out of the borrowed funds, however, the A.O. has not established any direct nexus between the funds borrowed and the interest free advances given to the sister concern except stating the funds have been advanced interest free without appreciating the facts on record. Thus, it was observed by learned CIT(A) that the assessee had direct business connections with the sister concern M/s Menghraj Sons and the funds outstanding in their account were on account of sales effected by them during the preceding year as well as during the year under consideration. Thus the outstanding receivable from Menghraj Sons cannot be treated as the interest free advances and hence the learned CIT(A) held that proportionate disallowance of interest to the tune of Rs. 60,78,950/- cannot be made , vide appellate orders dated 29-05-2014. 6. Aggrieved by the appellate order dated 29-05-2014 passed by the ld. CIT(A), the Revenue is in appeal before the tribunal. 7. The ld. D.R. submitted that the assessee is engaged in the business of printing and manufacturing of packing materials and playing cards. Interest of Rs. 79.05 lakhs was paid by the assessee to various parties which is 4.6% of t....
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.... perused the material available on record . We have observed that the assessee is engaged in the business of printing and manufacturing of packing materials and playing cards. We have observed that M/s Menghraj Sons is the consignment agent for the products of the assessee since 2004 vide agreement for consignment dated 10th August, 2004 and this agreement was terminated by the assessee w.e.f. 1st May, 2009 and as on this date, the outstanding amount from M/s. Menghraj Sons was Rs. 4,74,89,808/- on account of the sales effected through them in the previous year as well as in the current year. The assessee has sold goods through M/s Menghraj Sons against which payments are due. It was the duty of the M/s Menghraj Sons to collect the amount from debtors and pay the assessee . The outstanding as on 01-05-2009 was Rs. 4.75 crores which was reduced to Rs. 4.05 crores as at 31-3-2010 . The amount outstanding payable by M/s Menghraj & Sons to the assessee firm was further reduced to Rs. 3.44 lacs as on 31st March, 2014.Thus the outstanding balance as at the beginning of the year as well as at the end of the year represents the sales transaction of goods of the assessee firm through M/s Me....