TaxTMI 
TaxTMI 
TaxTMI 
2025 (7) TMI 1291
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....ively. Since common issues are involved in these appeals and are related to the same assessee group, they are heard together and one consolidated order is being passed for the sake of convenience and brevity. 2. We take up ITA No.288/Hyd/2025 as lead appeal. The assessee has raised the following grounds of appeal : 1) The order of the Ld. CIT(A) is erroneous on the facts of the case and contrary to the provisions of law, in so far as it is prejudicial to the appellant 2) On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in upholding the disallowance of interest on delayed payment of GST of Rs.1,03,44,404/- made u/s 37(1) of the Act. 3) On the facts and circumstances of the case, the Ld. CIT(A) erred in holdi....
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....ds and the admission of proportionate interest expenditure as additional income is only with a view to avoid litigation. 8) The Ld. CIT(A) erred in law in disregarding the settled legal position that where interest free funds are available to the assessee and the same were sufficient to meet its investments, the presumption is that the investments were made from interest free funds available with the assessee and burden was on revenue to show that investments were made out of borrowed funds. 9) Any other factual & legal ground or grounds that may be urged at the time of hearing of the appeal. 3. Brief facts of the case are that MSN Pharmachem Private Limited ("the assessee") is a company engaged in the business of manufacturing of drug....
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....responding GST to the Government account. Consequently, the GST Department raised a demand on the assessee and levied interest of Rs. 1,03,44,404/- under Section 50(3) of the GST Act, which the assessee duly paid. The Ld. AO treated the said interest as penal in nature and disallowed the same. The Ld. CIT(A) without considering the submission of the assessee, upheld the action of the Ld. AO. The Ld. AR argued that the interest under Section 50(3) of the GST Act is compensatory in nature and arises on account of mismatch or excess availment of input tax credit, not due to any deliberate evasion or default. It was pointed out that Section 50(3) of the GST Act nowhere states the levy to be penal in nature. The Ld. AR placed reliance on judicia....
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....ST Act which reads as follows: "50(3): A taxable person who makes an undue or excess claim of input tax credit under sub-section (10) of section 42 or undue or excess reduction in output tax liability under sub-section (10) of section 43, shall pay interest on such undue or excess claim or on such undue or excess reduction, as the case may be, at such rate not exceeding twenty-four per cent, as may be notified by the Government on the recommendations of the Council." 6.4 On perusal of the above provision, we find that Section 50(3) of the GST Act provides for interest on wrongful availment and utilisation of credit, but nowhere does it indicate that such interest is penal. We have also gone through the decision of Hon'ble Supreme Court i....
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....nd accordingly, no disallowance could be made under Section 36(1)(iii) of the Act. The Ld. AR relied upon the judgment of the Hon'ble Supreme Court in the case of CIT v. Reliance Industries Ltd. (2019) 102 taxmann.com 52 (SC), where the Court held that if interest-free funds are available with the assessee sufficient to cover the advances, a presumption arises that such advances have been made out of interest-free funds. The Ld. AR submitted that, the Ld. AO has simply relied on a statement of one Mr. MSN Reddy, who allegedly stated that advances were made from borrowed funds. However, no factual finding or fund flow analysis has been made to establish any direct nexus between borrowed funds and interest-free advances. 7.1 Per contra, Ld. ....