WARANA INDUSRIES LTD,KOLHAPUR V. ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE - 1, , KOLHAPUR

ITA 1285/PUN/2019

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Warana Industries Ltd. appealed against the order of the CIT(A)-1, Kolhapur, which sustained several additions made by the Assessing Officer under section 143(3) of the Income Tax Act, 1961. The additions included disallowances of interest on unsecured loans, foreign exchange loss, interest paid to Tatyasahebkore Warana Sahakarisakhar Karkhana Ltd., and disallowance of foreign tour expenses of a director. The Tribunal decided to restore the issues of disallowance of interest and the interest payable on loan to the Assessing Officer for fresh examination, considering the factual complexities and the need for verification of certain claims and submissions made by the assessee.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 830957 (ITAT-PUNE)
• Duration Of Justice: 6 year(s) 5 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-01-2026
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: misc
• Appeal Filed On: 21-08-2019
• Other Referred Cases: S.A. Builders Ltd. Vs. CIT & Anr, PCIT vs. Sesa Resources Ltd., CIT vs. Reliance Industries Ltd., PCIT vs. Reebok India Company, M/s. Garuda Plant Product Ltd. Vs. DCIT, HDFC Bank Ltd vs. DCIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANISH MEHTA
• Keywords: Opportunity of being heard; Tax effect; TDS
• Section: 143(3); 40(a)(ia)

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH “B”, PUNE BEFORE SHRI R. K. PANDA, VICE PRESIDENT AND Ms. ASTHA CHANDRA, JUDICIAL MEMBER ITA No.1285/PUN/2019 Assessment Year : 2014-15 Warana Industries Ltd. GAT No.795, Tatyasaheb Kore Nagar, Chikurde Road, A/P Warnanagar, Tal. Panhala, Kolhapur – 416113 Vs. ACIT, Circle – 1, Kolhapur PAN : AAACW1694H (Appellant) (Respondent) CO No.39/PUN/2022 Assessment Year : 2014-15 Warana Industries Ltd. GAT No.795, Tatyasaheb Kore Nagar, Chikurde Road, A/P Warnanagar, Tal. Panhala, Kolhapur – 416113 Vs. DCIT, Circle – 1, Kolhapur PAN : AAACW1694H (Cross Objector) (Respondent) Assessee by : None (written submissions filed) Department by : Shri Manish Mehta, Addl.CIT Date of hearing : 20-01-2026 Date of pronouncement : 22-01-2026 O R D E R PER R.K. PANDA, VP : ITA No.1285/PUN/2019 filed by the assessee is directed against the order dated 25.07.2019 of the Ld. CIT(A)-1, Kolhapur relating to assessment year 2014- 15. The Cross Objection filed by the assessee is against the appeal filed by the Revenue in ITA No.1612/PUN/2019. For the sake of convenience, the appeal as Printed from counselvise.com 2 ITA No.1285/PUN/2019 CO No.39/PUN/2022 well the CO filed by the assessee were heard together and are being disposed of by this common order. 2. It is pertinent to mention here that ITA No.1612/PUN/2019 and the CO No.39/PUN/2022 were dismissed by the Tribunal vide order dated 06.10.2022. The appeal filed by the Revenue was dismissed on account of low tax effect. Subsequently the assessee filed an MA on the ground that certain grounds in the CO were not adjudicated. Subsequently the Tribunal vide MA No.357/PUN/2022, order dated 19.04.2024 for assessment year 2014-15 recalled the CO to be fixed for hearing along with ITA No.1285/PUN/2019. Therefore, the CO filed by the assessee is a recalled matter. 3. Facts of the case, in brief, are that the assessee is a limited company engaged in the business of importing second hand dairy machinery which is supplied to its customers after refurnishing the same. It also trades in cattle feed, collection and supply of milk and milk products. The assessee filed its original return of income declaring total income of Rs.1,02,42,870/- on 30.11.2014. Subsequently the assessee revised its return on 31.03.2016 declaring total income of Rs.86,13,230/-. The Assessing Officer completed the assessment u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) on 26.12.2017 determining the total income of the assessee at Rs.5,55,69,830/- wherein he made the following additions: Printed from counselvise.com 3 ITA No.1285/PUN/2019 CO No.39/PUN/2022 a) Disallowance of interest u/s 36(1)(iii) @ 12% of unsecured loans of Rs.34,64,30,987/- Rs.4,15,71,718/- b) Disallowance on account of foreign exchange loss Rs.24,18,235/- c) Interest paid to Tatyasahebkore Warana Sahakarisakhar Karkhana Ltd. Rs.20,38,256/- d) Disallowance of foreign tour expenses of the director Smt. Surekha S. Gulave to USA Rs.9,28,290/- 4. So far as the disallowance of interest of Rs.4,15,71,718/- is concerned, the Ld. CIT(A) sustained an amount of Rs.27,01,163/- disallowed by the Assessing Officer u/s 36(1)(iii) of the Act by observing as under: Printed from counselvise.com 4 ITA No.1285/PUN/2019 CO No.39/PUN/2022 5. Similarly the addition of Rs.20,38,356/- paid to Tatyasahebkore Warana Sahakarisakhar Karkhana Ltd was also sustained by the Ld. CIT(A) by observing as under: 6. Aggrieved with such order of the Ld. CIT(A) the assessee is in appeal before the Tribunal by raising the following grounds: 1. a) In view of the facts and circumstances of the case and Legal aspects, Commissioner of Income Tax (Appeals) has erred in confirming the addition of Rs.27,01,163/-. Same may please be deleted. 1. b) Commissioner of Income Tax Appeals, has failed to appreciate the Submission and evidence that though the payment is made from Pledge Printed from counselvise.com 5 ITA No.1285/PUN/2019 CO No.39/PUN/2022 Loan Account. Said payment is for payment outstanding and not Interest Free Advance. Appellant prays for cancellation of disallowance made of Rs.27,01,163/-. 1.c) Without Prejudice, CIT(A) has erred in disallowing Interest u/s 36(1) (iii) of Rs.27,01,163/- inspite of the fact that appellant company has Interest Free Funds. 2. CIT(A) has erred in disallowing Interest of Rs.20,38,356/- paid to Tatyasaheb Kore WARANA SAHAKARI SAKHAR KARKHANA LTD. Alleging expenditure for earlier year without appreciating that same was arisen and accrued liability for the Assessment Year 2014-15. 3. Appellant prays to add, after, amend, take additional ground/s and/or withdraw the ground/s, during appeal proceedings. Appellant prays to allow the same. 7. None appeared on behalf of the assessee. However, written submissions have been filed with a request to consider the same. Accordingly this appeal is being decided on the basis of the written submissions and after hearing the Ld. DR. 8. So far as the disallowance of Rs.27,01,163/- is concerned, the assessee has filed the following written submissions: Printed from counselvise.com 6 ITA No.1285/PUN/2019 CO No.39/PUN/2022 Printed from counselvise.com 7 ITA No.1285/PUN/2019 CO No.39/PUN/2022 Printed from counselvise.com 8 ITA No.1285/PUN/2019 CO No.39/PUN/2022 9. So far as the disallowance of interest of Rs.20,38,356/- is concerned, the assessee has filed the following written submissions: Printed from counselvise.com 9 ITA No.1285/PUN/2019 CO No.39/PUN/2022 Printed from counselvise.com 10 ITA No.1285/PUN/2019 CO No.39/PUN/2022 10. The assessee in the written submissions has also relied on the following decisions: i) S.A. Builders Ltd. Vs. CIT & Anr (2007) 288 ITR 1 (SC) ii) PCIT vs. Sesa Resources Ltd. (2018) 404 ITR 707 (Bom) iii) CIT vs. Reliance Industries Ltd. (2019) 102 taxmann.com 52 (SC) iv) PCIT vs. Reebok India Company (2018) 103 CCH 28 (Del) v) M/s. Garuda Plant Product Ltd. Vs. DCIT vide ITA Nos.1539/PUN/2016 and 2966/PUN/2016 order dated 27.06.2019 for assessment years 2012-13 and 2013-14 vi) HDFC Bank Ltd vs. DCIT 366 ITR 505 11. The Ld. DR on the other hand heavily relied on the order of the Ld. CIT(A). 12. We have perused the written submissions filed by the Ld. Counsel for the assessee and heard the Ld. DR. So far as the first issue i.e. disallowance of interest to the tune of Rs.27,01,163/- is concerned, it is the case of the assessee that the same is paid against their credit balance / payable account or advance for purchases and therefore, no such disallowance and provision of section 36(1)(iii) of the Act are attracted. It is also the alternate submission of the assessee that the company has adequate interest-free funds i.e. Capital + Free Reserves and interest free advance from the customers which is more than the amount paid to Warana Dudh Sangh. Further, it is also the case of the assessee that in the books of the company there are 4 to 5 different accounts of Sangh in the Ledger which was due to maintenance of books at factory as well as Head Office. It has also been Printed from counselvise.com 11 ITA No.1285/PUN/2019 CO No.39/PUN/2022 mentioned in the written submission that as on 01.04.2013 in the books of the assessee, the account shows credit balance of Rs.13,44,17,500/- payable to Sangh and no interest has been paid for assessment year 2013-14 on such credit balance as the same is mainly advance received from Sangh for sale of dairy machinery. Similarly, as on 06.12.2013, the credit balance standing to Sangh Account in the books was also Rs.10,71,70,752/- for which the repayment by the company started from January 2014 to March, 2014. Further, it is the case of the assessee that account payable to Sangh which turned to be debit balance of Rs.8,88,487.50 because of net difference of sale of machinery and purchase of machinery. Since these are all factual aspects to be verified at the level of the Assessing Officer, therefore, considering the totality of the facts of the case and in the interest of justice, we deem it proper to restore the first issue to the file of the Assessing Officer with a direction to adjudicate the issue afresh and in accordance with law and after giving due opportunity of being heard to the assessee. 13. So far as the second issue raised in the grounds of appeal is concerned, the same relates to the interest payable on loan from Tatyasahebkore Warana Sahakarisakhar Karkhana Ltd. It is the case of the assessee that interest for assessment year 2013-14 amounting to Rs.20,38,356/- was not debited to the Profit and Loss Account in the financial year 2012-13 i.e. assessment year 2013-14 nor any tax was deducted. During the current year the assessee has paid the amount and due tax has been deducted and therefore, in view of the provisions of section 40(a)(ia) of the Act which allows the deduction on actual payment of TDS Printed from counselvise.com 12 ITA No.1285/PUN/2019 CO No.39/PUN/2022 irrespective of the year to which the expenditure belongs to no disallowance is called for. Since this also needs verification at the level of the Assessing Officer as to whether the assessee has debited such interest in assessment year 2013-14 or not and whether the provisions of section 40(a)(ia) of the Act are attracted or not on account of deduction of TDS on actual payment during this year, therefore, considering the totality of the facts of the case and in the interest of justice, we deem it proper to restore the second issue also to the file of the Assessing Officer with a direction to decide the same afresh and in accordance with law and after giving due opportunity of being heard to the assessee. The grounds raised by the assessee are accordingly allowed for statistical purposes. CO No.39/PUN/2022 14. The first issue raised by the assessee in the CO is regarding the maintainability of the appeal filed by the Revenue on account of low tax effect. This issue has already been taken care of by the Tribunal while dismissing the appeal filed by the Revenue. Therefore, the first issue raised in the CO is dismissed as infructuous. 15. So far as the remaining grounds are concerned, these are identical to the grounds raised by the assessee in its appeal vide ITA No.1285/PUN/2019. Since we have already adjudicated the grounds raised by the assessee and restored the Printed from counselvise.com 13 ITA No.1285/PUN/2019 CO No.39/PUN/2022 issues to the file of the Assessing Officer, therefore, the grounds raised in the CO become infructuous. Accordingly, the same are dismissed. 16. In the result, the appeal filed by the assessee is allowed for statistical purposes and the Cross Objection filed by the assessee is dismissed. Order pronounced in the open Court on 22nd January, 2026. Sd/- Sd/- (ASTHA CHANDRA) (R. K. PANDA) JUDICIAL MEMBER VICE PRESIDENT पुणे Pune; दिन ांक Dated : 22nd January, 2026 GCVSR आदेश की प्रतितिति अग्रेतिि/Copy of the Order is forwarded to: 1. अपील र्थी / The Appellant; 2. प्रत्यर्थी / The Respondent 3. 4. The concerned Pr.CIT, Pune DR, ITAT, ‘B’ Bench, Pune 5. ग र्ड फ ईल / Guard file. आदेशानुसार/ BY ORDER, // True Copy // Assistant Registrar आयकर अपीलीय अदिकरण ,पुणे / ITAT, Pune Printed from counselvise.com 14 ITA No.1285/PUN/2019 CO No.39/PUN/2022 S.No. Details Date Initials Designation 1 Draft dictated on 21.01.2026 Sr. PS/PS 2 Draft placed before author 22.01.2026 Sr. PS/PS 3 Draft proposed & placed before the Second Member JM/AM 4 Draft discussed/approved by Second Member AM/AM 5 Approved Draft comes to the Sr. PS/PS Sr. PS/PS 6 Kept for pronouncement on Sr. PS/PS 7 Date of uploading of Order Sr. PS/PS 8 File sent to Bench Clerk Sr. PS/PS 9 Date on which the file goes to the Office Superintendent 10 Date on which file goes to the A.R. 11 Date of Dispatch of order Printed from counselvise.com "