Case Number: ITA 1170/DEL/2020
Appellant: Jindal Fittings Ltd., New Delhi
Respondent: DCIT Circle-13(2), New Delhi
Assessment Year: 2017-18
Result: Appeal allowed regarding the addition under Section 68 and disallowance of interest paid on loans
Case Filed On: 2020-06-15
Order Type: Final Tribunal Order
Date of Order: 2020-09-28
Pronounced On: 2020-09-28
The case involves an appeal filed by Jindal Fittings Ltd., New Delhi, against the Deputy Commissioner of Income Tax (DCIT) Circle-13(2), New Delhi, for the assessment year 2017-18. The appeal challenges the decision of the Commissioner of Income-tax (Appeals) [CIT(A)]-V, New Delhi, dated 18.05.2020, regarding the additions made under Section 68 of the Income Tax Act, 1961, and the disallowance of interest paid on loans.
Jindal Fittings Ltd. filed an appeal against the order passed by the CIT(A) concerning the additions made under Section 68 of the Income Tax Act due to unexplained cash credits and the disallowance of interest expenses incurred on loans taken from associated companies. The appellant contended that the additions were not justified and should be reversed.
The case was heard by the Income Tax Appellate Tribunal (ITAT) Delhi Bench ‘C’, New Delhi, on 05.08.2020. The bench comprised Shri Amit Shukla, Judicial Member, and Dr. B.R.R. Kumar, Accountant Member. The appellant was represented by Shri V.K. Bindal, CA, and Ms. Rinki Sharma, CA, while the respondent was represented by Ms. Sunita Singh, CIT DR.
The ITAT reviewed the case and noted that the issue of addition under Section 68 of the Income Tax Act stands covered by previous judicial precedents. The Tribunal examined the evidence submitted by the appellant, which included confirmations from the lenders, bank statements, PAN and acknowledgment receipts for filing returns of income by the lender companies, audited financial statements, and other relevant documents.
The ITAT found that the appellant had successfully discharged the onus of proving the identity, creditworthiness of the lenders, and the genuineness of the transactions. The lenders were found to be regular taxpayers with substantial financial standings, and the loans were given through proper banking channels. The Tribunal also noted that the disallowance of interest paid on these loans was not justified as the loans were genuine and used for business purposes.
The ITAT’s decision to allow the appeal of Jindal Fittings Ltd. is a significant ruling that reinforces the principle that additions under Section 68 and disallowances of interest expenses must be based on concrete evidence and not merely on suspicion. This ruling provides clarity and relief to taxpayers facing similar disallowances and ensures a fair application of tax laws.
This case highlights the importance of adhering to judicial precedents and ensuring that additions and disallowances are made only in accordance with established legal principles. The ITAT’s decision reinforces the need for a fair and consistent application of tax laws, providing taxpayers with a clear understanding of their obligations and rights.
The dismissal of the additions under Section 68 and the disallowance of interest expenses serves as a reminder to tax authorities to consider the broader context of compliance with statutory obligations. The ruling underscores the necessity of interpreting tax provisions in a manner that aligns with the intent of the law and supports taxpayer compliance. This decision will likely influence future cases involving similar issues, promoting a consistent and equitable approach to tax assessments.
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH “C” NEW DELHI
BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER & DR. B.R.R. KUMAR, ACCOUNTANT MEMBER
ITA. Nos.1170/DEL/2020
Assessment Year 2017-18
Jindal Fittings Ltd., 28, Najafgarh Road, New Delhi. v. DCIT Circle-13(2), New Delhi. PAN: AACCJ5987E
(Appellant) (Respondent)
Appellant by: Shri V.K. Bindal, CA, Ms. Rinki Sharma, CA
Respondent by: Ms. Sunita Singh, CIT DR
Date of hearing: 05.08.2020
Date of pronouncement: 28.09.2020
PER AMIT SHUKLA, J.M.:
The aforesaid appeal has been filed by Jindal Fittings Ltd. against the appellate order dated 18.05.2020 passed by the Ld. Commissioner of Income Tax (Appeals)-V, New Delhi for the quantum of assessment passed under Section 143(3) of the Income Tax Act for the Assessment Year 2017-18.
In all the appeals, common grounds and issues are involved with a similar set of facts; hence they were heard together and are being disposed of by way of this consolidated order. These appeals pertain to the Jindal group of companies wherein the assessees have challenged the additions made under Section 68 of the Income Tax Act by the Assessing Officer and the disallowance of the interest paid on the said loans made by the CIT(A) by way of enhancement. The chart of additions made in the hands of the respective assessees are as under:
Particulars and appeal no. | Amount of addition for loans (Rs) | Loan taken from Glebe Trading (P) Ltd. (Rs) | Loan taken from Danta Enterprises (P) Ltd.(Rs) | Disallowance of Interest (Rs) |
---|---|---|---|---|
Jindal ITF Ltd. ITA/1172/D/2020 | 167,98,00,000 | 151,83,70,000 | 16,15,00,000 | 9,96,04,252 |
Jindal Fittings Ltd. ITA/1170/D/2020 | 103,89,25,000 | 103,89,25,000 | NIL | 2,43,24,560 |
Jindal Quality Tubular Ltd ITA/1171/D/2020 | 20,52,00,000 | 20,52,00,000 | NIL | 3,37,315 |
JITF Urban Infrastructure Services Ltd. ITA/1173/D/2020 | 196,50,00,000 | 196,50,00,000 | NIL | 11,03,15,540 |
Since these appeals involve common issues of additions under Section 68 of the Act and loans taken from the same lender NBFC companies belonging to the same group of the assessees, i.e., Jindal Group, and since the loans were taken by Jindal ITF Ltd. (ITA/1172/D/2020) from both the lenders, therefore, this appeal is being taken up as a lead case and the findings given therein will apply mutatis mutandis in the other appeals also.
The Tribunal noted that the appellant submitted various documents to prove the identity, creditworthiness, and genuineness of the transactions. These included confirmations from the lenders, bank statements, PAN, and acknowledgment receipts for filing returns of income, audited financial statements, incorporation certificates, and various forms filed with the Registrar of Companies (ROC).
The Tribunal found that the lender companies had substantial financial standings, with investments in listed equity shares of group companies, having a market value of thousands of crores of rupees. The lenders had borrowed funds from reputed NBFCs by pledging these shares and then lent the same to their associated concerns, including the appellant, at a higher rate of interest. The entire loan transactions were through proper banking channels, and the loans were used for business purposes by the appellant.
Based on these findings, the Tribunal concluded that the appellant had successfully discharged the onus under Section 68 of the Income Tax Act. The addition made under Section 68 of the Act and the disallowance of interest paid on loans were not justified. The Tribunal allowed the appeal, deleting the addition of Rs. 103,89,25,000/- made under Section 68 and the disallowance of interest of Rs. 2,43,24,560/-.
This ruling reaffirms the principle that tax authorities must base their additions and disallowances on concrete evidence rather than mere suspicion. The decision provides clarity and relief to taxpayers facing similar issues, ensuring a fair and consistent application of tax laws.
Order pronounced in the open Court on 28th September, 2020.
Sd/- Sd/-
[B.R.R. KUMAR] [AMIT SHUKLA]
ACCOUNTANT MEMBER JUDICIAL MEMBER
DATED: 28.09.2020
Kavita Arora, Sr. PS
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT(A)
4. CIT
5. DR
Assistant Registrar
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