Hon'ble Prakash Krishna,J.
The present appeal has been filed under Section 260A of the Income Tax Act (hereinafter referred to as 'the Act') and is directed against the order dated 27.12.2011 passed by the Income Tax Appellate Tribunal Lucknow Bench 'A' Lucknow (hereinafter referred to as 'the Tribunal') in I.T.A. No. 264/Lkw/11 for the assessment year 2007-08.
The assessee-Company is Non Banking Finance Company. The dispute relates to the assessment year 2007-08. During the assessment proceedings, it was noted by the Assessing Officer that the assessee has advanced interest free loans to four persons. It has not charged any interest from them. An explanation was called for and the assessee submitted that the advances have been made out of paid up capital and reserve. It was submitted that the advances were not made out of borrowed capital. The said explanation was not found satisfactory by the Assessing Officer who added notional interest income @ 9% per annum and framed the assessment order. The matter was carried in appeal before the C.I.T. (A)-II, Kanpur who by the order dated 15.02.2011 allowed the appeal and deleted the addition of notional interest income. The said order was carried further in appeal by the revenue before the Tribunal who by the order under appeal has dismissed the appeal.
In the memo of appeal, the following substantial questions of law have been sought to be raised:
1) Whether on the facts and circumstances of the case, was the Tribunal legally correct on merits to hold that there is neither any receipt of real income by the assessee nor is there any enforceable right under which income can be said to be accrued to the assessee.
2) Whether on the facts and circumstances of the case, was the Tribunal legally justified in holding that there was no infirmity in the CIT (A)'s order deleting the addition when admittedly the assessee has not been able to show or establish any commercial expediency for making the interest-free advances or loans.
3) Whether there was any material before the Tribunal to take the view and to hold that there was notional income or deemed income by the assessee when in fact, the advances were given to closely associated group companies on interest free basis although it had charged interest from M/s Deva Built Tech. Pvt. Ltd. and no compelling circumstances or business compulsions were shown by the assessee for giving such interest free loans and advances."
Sri Shambhu Chopra, learned counsel for the department submits that there being no finding that money was advanced due to business expediency, the Tribunal was not justified in confirming the order passed by the C.I.T. (A) deleting the addition of interest income on the loan amounts. Strong reliance was placed by him on the Apex Court decision in S.A. Builders Ltd. v. Commissioner of Income-tax (Appeals) and another, (2007) 288 ITR 1.
We have given careful consideration to the aforesaid submission of the learned counsel for the appellant. It is not the case of the department that advances were made by the assessee-Company out of borrowed capital. The Tribunal has found that bonafide of the assessee's Company in not charging the interest has not been disputed by the revenue. The matter of charing interest is a matter of contract between the parties. An income is chargeable to tax when it actually accrues to an assessee. Here it is not a case of any income actually accrued to the assessee. The department has sought to levy the tax as deemed income of the assessee on the ground that the assessee should have charged interest on the loan amount.
We are of the opinion that there is no statutory obligation on the assesse that the assessee must charge interest on the advance amounts. The decision relied upon by the learned counsel for the department is distinguishable on the facts of the present case, as it relates to charge of interest on the borrowed capital. It is not so here. In view of the above, the aforesaid decision is not applicable to the facts of the present case. In view of the findings recorded by the Tribunal in para-9.4 of its order, we do not find any substantial question of law is involved in the appeal.
The appeal is dismissed, summarily.
(Prakash Krishna,J) (Ashok Bhushan,J) Order Date :- 7.5.2012 MK/