The Tax Publishers2020 TaxPub(DT) 5227 (Sur-Trib)

INCOME TAX ACT, 1961

Section 5

Addition made by CIT(A) on account of notional interest was required to be deleted as there is no concept of notional income and that no addition can be made on presumption basis that assessee would have earned notional interest on surplus available with them.

Income - Accrual - Notional interest on presumption basis -

Assessee filed appeal against the order of CIT(A) making addition of interest income on notional basis holding that if undisclosed income declared by assessee would have been available in the books of account of assessee, notional interest of approximately 14% of average interest rate of such available unaccounted on money”, the assessee would have earned interest. Held: There is no concept of notional income and that no addition can be made on presumption basis that assessee would have earned notional interest on surplus available with them. If interest free funds are available, it is the choice of businessman/assessee to arrange his business affairs. In case of CIT v. Arihant Avenue Credit Ltd. (2013) 36 Taxmann.com 14 (Guj-HC) : 2013 TaxPub(DT) 2225 (Guj-HC) also it was held that no addition on account of notional interest is warranted. Thus, addition made by CIT(A) was deleted.

Followed:CIT v. Arihant Avenue Credit Ltd. (2013) 36 Taxmann.com 14 (Guj) : 2013 TaxPub(DT) 2225 (Guj-HC)

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2013-14



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