2019 (5) TMI 2000

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....he Asst. Commissioner of Income Tax, Circle - 1(1)(2), Baroda for the Assessment Year 2013-14. 2. The assessee, a private limited company engaged in the business of manufacturing of various household plastic products and oral care products, filed its return of income on 30.09.2013 declaring total income at Rs.45,93,140/- upon scrutiny notice dated 01.09.2014 u/s 143(2) of the Act was issued followed by a notice u/s 142(1) dated 05.01.2015 along with a detailed questionnaire and served upon the assessee. The assessee has given interest free advances to its sister concern M/s. Amigo Dispensing Solutions Pvt. Ltd. for business purpose, which was from its borrowed funds. The same was provided with a clear intention of commercial purpose. The....

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....pensing Solutions P.Ltd. The AO has confronted the assessee to show as to why interest income of the interest free loans and advanced should not be disallowed. In response to the query of the AO, assessee filed a detailed reply wherein it took two fold pleas. In the first fold of contentions, it was submitted that advances were given to the sister concerns on account of business exigency and in the second fold, it was contended that the assessee has sufficient interest free funds, out of which, it could be construed that, these advances were given. The ld.AO did not accept these contentions of the assessee and made disallowance of Rs.9,42,268/- in the Asstt.Year 2010-11 and Rs.6,82,954/- in the Asstt.Year 2011-12. Appeal to the ld.CIT(A) di....

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....nstrated that on a particular date of accounting period it has availed interest free funds and it wants to characterize it as interest free advance out of this interest free fund, then the ld.AO cannot assume interest income by merely observing that loans were given before availability of interest free funds. We are in assessment years 2010-11 and 2011-12. From 1.4.2006, assessee has been showing excess interest free funds. Out of which it could be assumed that these advances were made. This plea of the assessee cannot be rejected merely by observing that loans were given before 1.4.2006. There is no logic in the stand point of the ld.CIT(A). Every year is an independent assessment year and even if the assessee has been charging interest on....