ASSISSTANT COMMISSIONER OF INCOME TAX, CIRCLE-1, EXEMPTION, CHANDIGARH, CHANDIGARH V. PATIALA URBAN PLANNING AND DEVELOPMENT AUTHORITY, PATIALA

ITA 112/CHANDI/2024

AI Insights

The case involves the Income Tax Department (Revenue) appealing against the decision of the CIT(A) which had deleted a substantial addition made by the Assessing Officer (AO) to the assessee's income. The AO had added Rs.8,78,42,211 as notional interest that should have been charged on loans given by the assessee, Patiala Urban Planning and Development Authority (PUDA), to various entities including the Municipal Corporation of Patiala. The CIT(A) found that the assessee had sufficient surplus funds to cover these advances, thus no disallowance was necessary. The Tribunal upheld the CIT(A)'s decision, dismissing the Revenue's appeal.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 35571 (ITAT-CHANDIGARH)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-03-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2014-2015
• Other Referred Cases: CIT Vs Reliance Industries, Civil Appeal No. 37 of 2019, CIT Vs Reliance Utilities reported in 313 ITR page No. 340
• Laws Referred To: Section 36(1)(iii) of the Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KUSUM BA NSAL
• Assessee Lawyers: SUDHIR SEHGAL
• Keywords: Notional interest

Judgement Text

"आयकर अपील य अ धकरण,च\u0010डीगढ़ \u0014यायपीठ, च\u0010डीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, ‘B’ CHANDIGARH BEFORE SHRI RAJPAL YADAV, VICE PRESIDENT AND SHRI MANOJ KUMAR AGGARWAL, ACCOUNTANT MEMBER आयकर अपील सं./ ITA No. 112/CHD/2024 नधा\u0011रण वष\u0011 / Assessment Year: 2014-15 The ACIT (Exemptions), Circle-1, Chandigarh. Vs Patiala Urban Planning and Development Authority, Patiala. \u0016थायी लेखा सं./PAN NO: AAALP0095J अपीलाथ\u001a/Appellant \u001b यथ\u001a/Respondent Assessee by : Shri Sudhir Sehgal, Advocate Revenue by : Smt. Kusum Bansal, CIT DR Date of Hearing : 19.03.2025 Date of Pronouncement : 26.03.2025 VIRTUAL HEARING O R D E R PER RAJPAL YADAV, VP The Revenue is in appeal before the Tribunal against the order of the ld. Commissioner of Income Tax (Appeals) [in short ‘the CIT (A)’] dated 14.12.2023 passed for assessment year 2014-15. 2. The solitary grievance of the Revenue is that ld. CIT(A) has erred in deleting the addition of Rs.8,78,42,211/- which ITA No.112/CHD/2024 A.Y.2014-15 2 was added by the AO with the aid of Section 36(1)(iii) of the Act. 2. With the assistance of ld. Representative, we have gone through the record carefully. The assessee has given loans to Municipal Corporation, Patiala, Punjab Municipal Infrastructure Development Company and PUDA. The assessee did not charge interest on these loans. The ld. AO has worked out notional interest which ought to have been charged by the assessee at 12% on these loans. Accordingly, he made the disallowance of Rs.8,78,42,211/-. 3. On appeal, ld. CIT(A) has deleted the disallowance by observing that the assessee has more surplus funds than the interest free advances given by it. The ld. CIT(A) has relied upon the judgement of Hon'ble Supreme Court in the case of CIT Vs Reliance Industries, Civil Appeal No. 37 of 2019 wherein Hon'ble Supreme Court has upheld the judgement of Hon'ble Bombay High Court in CIT Vs Reliance Utilities reported in 313 ITR page No. 340. The judgement of Hon'ble Supreme Court is reported in 410 ITR 466. We find that ld. CIT(A) has took note of the details of available funds with the ITA No.112/CHD/2024 A.Y.2014-15 3 assessee as well as how the funds have been advanced. It emerges out from the record that as on 31.03.2013 the assessee has advanced Rs.77.98 Cr to its two concerns namely, Municipal Corporation, Patiala and Punjab Municipal Infrastructure Development Company. During the accounting year relevant for assessment year 2014-15, it has only advanced Rs.22 lacs to PUDA. No disallowance was made in the immediately preceding year. The fresh advances were made out of surplus funds available with the assessee. Therefore, in view of the position of law propounded by the Hon'ble Supreme Court in the case of CIT Vs Reliance Utilities 313 ITR Page 340, no disallowance could have been made. The CIT(A) has rightly appreciated the facts and circumstances and has rightly deleted the additions. We do not find any merit in this appeal. It is dismissed. 4. In the result, the appeal of the Revenue is dismissed. Order pronounced on 26.03.2025. Sd/- Sd/- (MANOJ KUMAR AGGARWAL) (RAJPAL YADAV) ACCOUNTANT MEMBER VICE PRESIDENT “Poonam” ITA No.112/CHD/2024 A.Y.2014-15 4 आदेश क\u0002 \u0003ितिलिप अ ेिषत/ Copy of the order forwarded to : 1. अपीलाथ\u000f/ The Appellant 2. \u0003\u0010यथ\u000f/ The Respondent 3. आयकर आयु\u0014/ CIT 4. िवभागीय \u0003ितिनिध, आयकर अपीलीय आिधकरण, च\u0018डीगढ़/ DR, ITAT, CHANDIGARH 5. गाड फाईल/ Guard File आदेशानुसार/ By order, सहायक पंजीकार/ Assistant Registrar "