Ms. Ruchi Jain Vs Assessing Officer

Parties Involved

Facts Summary

The assessee, Ms. Ruchi Jain, filed her return for A.Y. 2012-13 declaring an income of Rs. 1,52,44,610/- from the business of manufacturing and export of handloom goods. The original assessment was completed on 30.01.2015 at an income of Rs. 2,51,40,900/- after making an addition of Rs. 98,55,991/- on various issues. The case was reopened u/s 147 on the ground that the assessee had not charged any interest from M/s Jainsons Exports in respect of a debit balance of Rs. 7,34,84,005/- as on 01.04.2011, which was reduced to Rs. 6,30,14,348/- as on 31.03.2012. On the other hand, interest of Rs. 1,88,21,742/- was paid on borrowings to the banks. Accordingly, the Assessing Officer disallowed the sum of Rs. 75,61,721/- out of interest paid u/s 36(1)(iii) of the Act and completed the re-assessment u/s 143(3) r.w.s 147 vide order dated 29.11.2019 at an income of Rs. 2,61,23,261/-. Aggrieved, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals)/ National Faceless Appeal Centre, New Delhi, which was dismissed. Further aggrieved, the assessee is in appeal before the Tribunal.…

Legal Issues

• 1. Whether the disallowance of interest amounting to Rs 75,61,721 under Section 36(1)(iii) of the Income Tax Act, 1961 was justified.
• 2. Whether sufficient interest-free funds were available with the assessee to justify the non-charging of interest on the receivable amount from Jainsons Exports.
• 3. Whether the amount receivable from Jainsons Exports was in the nature of an interest-free loan and not a business receivable.

Judgment Outcome

Decided in favour of Assessee.

Precedents Relied Upon

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