TaxTMI 
TaxTMI 
2025 (8) TMI 578
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....024. The impugned order was emanated from the order of the Learned National e-Assessment Centre, Delhi (hereinafter, 'Ld.AO') order passed under section 143(3) read with section 144B of the Act, date of order 22/05/2021. 2. The assessee has taken the following grounds: - "1. On the facts and circumstances of the case and in law the Principal CIT has erred in initiating proceedings us. 263 of the Income Tax Act, 1961 by wrongly assuming Jurisdiction u/s. 263 hence, the order passed is bad in law and void-ab initio. 2. Without prejudice to the ground No.1, the learned Principal CTT has erred in passing the revisionary order u/s. 263 of Income Tax Act in spite of the fact that the learned assessing officer had made adequat....
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....rable interest was written off in the financial year 2023-24. The principal amount of the loan remains outstanding, and the entire loan continues to be recorded in the books of accounts. The assessee relied on the Supreme Court's ruling in PCIT vs. ECT Investments and Holdings Pvt. Ltd., which upheld the Hon'ble Bombay High Court's judgment (2020)117 taxmann.com 123(Bom)). The ruling stated that deferred interest on borrowed capital provided to a subsidiary due to business exigency is not taxable under Section 36(1)(iii) of the Act. Based on this precedent, the Ld. AR argued that no interest was charged to the Indian subsidiary. During assessment proceedings, the Ld. AO issued a notice under Section 142(1) of the Act, to which....
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....g disclosure in Clause 13(f) of the Tax Audit Report in relation to ICDS IV - Revenue Recognition: "The Assessee has deferred the recognition of interest income of Rs. 158.37 Lakhs, due to uncertainties involved in ultimate collection of the outstanding amounts." In this regard, the assessee was asked vide notice u/s 142(1) dated 10.12.2020 to provide A.Y. 2018-19 documentary evidences in support of this position and also provide a detailed note explaining the deferment of revenue recognition in compliance with the provisions of ICDS IV. The assessee vide reply dated 12.01.2021 submitted that the loan was given to the subsidiary company, EKC Industries (Tianjin) Co. Ltd. Since the principal amount was not recoverable from ....
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.... 8.4 From a perusal of the provisions of Para 8 of ICDS IV and the above CBDT Circular, it is clear that the recognition of income on account of interest cannot be deferred. The interest income has to be recognized on time basis. Therefore, the interest income of Rs. 158.37 lakhs which has been deferred for recognition by the assessee is being added to the income of the assessee for the year under consideration. 8.5 Since, this unit is satisfied that the assessee has under reported its income, penalty proceedings u/s 270A of the Income Tax Act, 1961 is being initiated separately. (Addition of Rs. 1,58,37,000/-)" 5. In further argument, the Ld.AR stated that the assessee had paid the amount as loan to the subsidia....
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....der held that since the factual findings taken by the ITAT, there is no error in the Tribunal which allowed the appeal of the assessee. 7. In the case of PCIT vs. Cartier Leaflin (P.) Ltd. [(2023) 146 taxmann.com 281 (SC)], it was held that if the Ld. AO has adopted a plausible view, there is no justification for invoking Section 263 to revise the assessment order. This ruling applies even if it is alleged that the AO did not examine certain aspects, such as the books of account or the share trading transactions conducted by the assessee through demat accounts, during the assessment proceedings. A similar position was upheld by the co-ordinate bench "D" of the ITAT, Mumbai, in the case of Rolta Shares & Stocks Pvt. Ltd. vs. DCIT (ITA ....
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....n of Rs. 1,58,37,000/- was made. This demonstrates that the Ld. AO duly applied his mind to the matter and took a considered view while accepting the assessee's explanation regarding the interest on loans to subsidiaries. Therefore, the issue was adequately addressed, leaving no grounds for invoking the provisions of Section 263 of the Act. In arriving at this conclusion, we respectfully rely on the judgments in Cartier Leaflin (P.) Ltd. (supra) and Pramod Kumar Tekriwal (supra), as well as the decision of the co-ordinate bench of the ITAT, Mumbai, in Rolta Shares & Stocks Pvt. Ltd. (supra). Moreover, we note that the assessee had sufficient own funds to extend loans to its subsidiaries. It is a settled principle that interest need no....