2016 (5) TMI 1370

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....n of the assessee vide order dated 11.12.2015 and appeal of the assessee was fixed for hearing on merit. 3. We have heard ld. Representatives of both the parties and perused the material available on record. 4. The ld. counsel for the assessee did not press ground Nos. 3 and 4 of the appeal. Same are, therefore, dismissed being not pressed. 5. On ground Nos. 1 and 2, assessee challenged the disallowance of part of proportionate interest u/s 36(1)(iii) of the Act. 6. Brief facts are that Assessing Officer noted that assessee had advanced interest free loan of Rs. 1.28 Cr to its sister concern M/s DLF International Ltd. The Assessing Officer also noted that assessee had incurred an interest expenditure of Rs. 63.93 lacs. The Asses....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....nternational Ltd. was, infact, a business advance, therefore, proportionate disallowance of interest on this advance for the period from 02.11.2004 to 31.03.2005 is not justified. The ld. CIT(Appeals), however, held that since there is a delay in supply of the goods to the assessee, therefore, assessee is entitled to charge interest and accordingly, directed to charge interest from January,2005 to March,2005 and partly allowed this ground of appeal of the assessee. His findings in para 3.3 of the impugned order are reproduced as under: "3.3 I have carefully considered the appellant's submissions and perused the documents filed by the appellant. As per the agreement between the appellant and M/s DFL International Ltd. the appell....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....le system of account and any income due to the appellant for the year under reference should be accounted for during the year itself. In these circumstances, I hold that the income on account of interest on advance given to M/s DFL International Ltd. from January, 2005 to March, 2005 is taxable in the current year itself. Even if no interest was charged by the appellant for the period Jan 2005 to March 2005 in the subsequent year also, it would be case of income foregone and the same would be chargeable to tax in the current year. The AO is directed to compute the proportionate interest for this period and restrict the addition accordingly. These grounds of appeal are accordingly partly allowed."  9. After considering rival submissi....