LADHURAM TOSHNIWAL AND SONS ELECTRICALS PVT. LTD.,KOLKATA V. ACIT, CEN. CIR. 4(4) , KOLKATA

ITA 659/KOL/2024

AI Insights

The case involves Ladhuram Toshniwal & Sons Pvt. Ltd., which appealed against the order of the Commissioner of Income Tax (Appeals)-27, Kolkata, concerning the assessment year 2018-19. The primary contention was the addition of Rs. 35,88,850/- as interest on unsecured loans, which the Assessing Officer (AO) and the CIT(A) had sustained. The Tribunal examined whether the unsecured loans were used for business purposes or personal/capital uses. The Tribunal concluded that the loans were used for business purposes, leading to the allowance of the appeal and deletion of the contested addition.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 469700 (ITAT-KOLKATA)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-03-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2018-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Commercial expediency; TDS
• Section: 143(3); 142(1); 143(2)

Judgement Text

"आयकर अपीलȣय अͬधकरण, कोलकाता पीठ “ए’’, कोलकाता IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH: KOLKATA Įी राजेश क ुमार, लेखा सटèय एवं Įी Ĥदȣप क ुमार चौबे, ÛयाǓयक सदèय क े सम¢ [Before Shri Rajesh Kumar, Accountant Member &Shri Pradip Kumar Choubey, Judicial Member] I.T.A. No. 659/Kol/2024 Assessment Year: 2018-19 Ladhuram Toshniwal & Sons Pvt. Ltd. (PAN: AABCL 4778 L) Vs. ACIT, CC-4(4), Kolkata Appellant / ) अपीलाथȸ ( Respondent / Ĥ×यथȸ Date of Hearing / सुनवाई कȧ Ǔतͬथ 12.02.2025 Date of Pronouncement/ आदेश उɮघोषणा कȧ Ǔतͬथ 17.03.2025 For the assessee / Ǔनधा[ǐरती कȧ ओर से Shri Vikash Surana, A.R For the revenue / राजèव कȧ ओर से Shri Subhro Das, Addl. CIT Sr. D.R ORDER / आदेश Per Pradip Kumar Choubey, JM: This is the appeal preferred by the assessee against order of Commissioner of Income Tax (Appeal)- 27, Kolkata (hereinafter referred to as the Ld. CIT(A)] dated 27.02.2024 for AY 2018-19. 2. Brief facts of the case of the assessee are that the assessee filed its return of income for AY 2018-19 declaring total income of Rs. 99,27,760/-. The case of the 2 I.T.A. No. 659/Kol/2024 Assessment Year: 2018-19 Ladhuram Toshniwal & Sons Electrical Pvt. Ltd. assessee was selected for scrutiny. Notices u/s 143(2) and 142(1) of the act were issued. The assessee furnished details in response to the quarry made by the AO. The AO going over the details and explanations submitted by the assessee passed an assessment order u/s 143(3) determining total income at Rs. 1,49,36,6100/- by making two additions: i) interest on unsecured loan u/s 36(1)(iii) of Rs. 35,88,,850/- and ii) disallowance of rent paid u/s 40a(2)(b) of Rs. 5,20,000/- 3. Aggrieved by the said order the assessee preferred an appeal before the Ld. CIT(A) wherein the addition u/s 36(1)(iii) of Rs. 35,88,850/- has been sustained but the addition of Rs. 5,20,000/- u/s 40a(2)(b) was directed to be deleted. Being aggrieved and dissatisfied the assessee preferred an appeal before us. 4. The Ld. Counsel of the assessee challenges the very impugned order thereby submitting that the Ld. CIT(A) erred in confirming the addition to the extent of Rs. 35,88,850/- on the ground that debtors were evidenced through unsecured loan, when the fact remains that the entire unsecured loans were utilized for business work-in- progress only out of commercial expediency. The Ld. Counsel submits that the AO did not specifically pinpoint any personal/ capital usage of fund received from unsecured loans. The Ld. Counsel of the assessee has submitted a chart regarding interest on unsecured loan, outstanding unsecured loan and a chart of increase in sundry debtors in comparison to preceding years. The ld. A.R prays that the addition u/s 36(1)(iii) by the AO on account of interest of unsecured loan confirmed by the Ld. CIT(A) are bad in law and liable to be deleted. 5. Contrary to that the Ld. D.R supports the impugned order. 6. Upon hearing the submission of the counsel of the respective parties, we have perused the order of Ld. CIT(A) and find that the assessee company was a wholesale trader of electrical goods. The AO as well as Ld. CIT(A) has held that the assessee has received fresh unsecured loan to the tune of Rs. 24.39 crores during the year and the fund were utilized in setting sundry creditors of Rs. 14.01 and created new debtor of Rs. 4.80 crores. We have gone through the PB filed by the assessee and find that the balance 3 I.T.A. No. 659/Kol/2024 Assessment Year: 2018-19 Ladhuram Toshniwal & Sons Electrical Pvt. Ltd. sheet of the assessee goes to reveal that the outstanding unsecured loan on 31.03.2018 was Rs. 49,58,71,929/-. We further find that on perusal of comparison chart filed by the assessee with regard to the sundry debtors, it appears to us that there was an increase in sundry debtors come to Rs. 4,79,87,017/-. The relevant portion of the same is reproduced here in below:- 4 I.T.A. No. 659/Kol/2024 Assessment Year: 2018-19 Ladhuram Toshniwal & Sons Electrical Pvt. Ltd. 5 I.T.A. No. 659/Kol/2024 Assessment Year: 2018-19 Ladhuram Toshniwal & Sons Electrical Pvt. Ltd. 6 I.T.A. No. 659/Kol/2024 Assessment Year: 2018-19 Ladhuram Toshniwal & Sons Electrical Pvt. Ltd. 7. In this context, we have gone through the decision of Hon’ble Apex Court in the case of India Cement Ltd. vs. CIT reported in [1966] 60 ITR 52 (SC) and find that the Hon’ble Supreme Court has held that the loan obtained cannot be treated as an asset or debtor for enduring the benefit of business of the assessee. The loan is a liability and has to be repaid. Looking at the data we find that sales have increased by around 21% although the debtors increase was only to the extent of 16%. 8. After careful discussion and going over the charts, we come to the conclusion that entire unsecured loan has been utilized for the purpose of business. No fund used for any capital investment. We do not find that any of the loan fund utilized by the assessee for any personal purposes. We find substance in the argument of the ld. Counsel that the AO could not specifically pin point any personal/capital usage of fund received towards unsecured loans and the reason for decrease in trade payables is due to the buying capacity of the assessee with better terms which led to better gross profit / margin as compared to preceding year. It is further pertinent to mention herein that the disallowance of interest on which due TDS duly deducted, disallowance thus on guesswork. We come to the conclusion that the addition of Rs. 35,88,850/- u/s 36(1)(iii) of the Act is directed to be deleted. Accordingly, we allow the appeal of the assessee. In the result, the appeal filed by the assessee is allowed. Order is pronounced in the open court on 17th March, 2025 Sd/- Sd/- (Rajesh Kumar/राजेश क ुमार) (Pradip Kumar Choubey /Ĥदȣप क ुमार चौबे) Accountant Member/लेखा सदèय Judicial Member/ÛयाǓयक सदèय Dated: 17th March, 2025 SM, Sr. PS 7 I.T.A. No. 659/Kol/2024 Assessment Year: 2018-19 Ladhuram Toshniwal & Sons Electrical Pvt. Ltd. Copy of the order forwarded to: 1. Appellant- Ladhuram Toshniwall & Sons Electricals Pvt. Ltd., 11, Pollock Street, Kolkata-GPO-700001. 2. Respondent – ACIT, CC-4(4), Kolkata 3. Ld. CIT(A)-27, Kolkata 4. Ld. Pr. CIT- , Kolkata 5. DR, Kolkata Benches, Kolkata (sent through e-mail) True Copy By Order Assistant Registrar ITAT, Kolkata Benches, Kolkata "