M/s. Capricorn Lifestyle Pvt. Ltd. Vs. DCIT, Circle 1(1), Pune

Parties Involved

Facts Summary

The assessee, M/s. Capricorn Lifestyle Pvt. Ltd., is a private limited company that filed its return of income declaring a total income of Rs.67,11,697/- which was set off against brought forward losses, resulting in a declared taxable income of Nil. The case was selected for scrutiny under CASS to verify and examine the issues of a very low PBDIT ratio in a specific business code and turnover range where deficiency in the audit report was noted. The assessee claimed large business expenses, which were verified. The Assessing Officer noted that the assessee had paid Rs.14 crores to M/s. Anishka Developer Pvt. Ltd. as an interest-free loan/advance. The assessee had also debited interest cost of Rs.52,59,935/- on the loan availed from YES Bank. The Assessing Officer confronted the assessee regarding the interest-free advance given to the sister concern and made an addition of Rs.52,59,935/- by disallowing the interest expense. The CIT(A) / NFAC upheld the Assessing Officer's decision.…

Legal Issues

• 1. Disallowance of interest expenditure of Rs.52,59,935/- made by the Assessing Officer on the ground that the assessee has advanced interest-free funds to the sister concern, whereas the assessee is paying interest on borrowed funds to the bank.

Judgment Outcome

Decided in favour of Assessee.

Precedents Relied Upon

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