TaxTMI 
TaxTMI 
2010 (4) TMI 387
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.... circumstances of the case, the Income-tax Appellate Tribunal was justified in deleting the addition of Rs. 15,44,750 being disallowance out of interest equivalent to the amount of interest receivable by the respondent on interest free loan in view of section 36(1)(iii) of the Income-tax Act ?" 2. Briefly stated the facts of the case, as projected in the impugned order, are that the assessee is engaged in manufacturing of different types of equipment and spare parts mainly for steel and power sector, railways and cement plants and execution of turnkey projects. The assessee filed its return of income for the assessment year under consideration declaring a total income of Rs. 2,64,42,974. The Assessing Officer (AO) on examination of the acc....
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....family. No evidence has been brought on record to prove that the amounts borrowed by the assessee were not utilized by the assessee for its own business but were diverted as advance to members of the Hindu undivided family free of interest. On the contrary, the assessee explained that there is credit balance of Rs.1,80,25,443 in the account of the Hindu undivided family with the firm for which no interest is being paid and since the above two persons are members of the Hindu undivided family, the firm has given interest free advance to them because of substantial credit balance in the account of the firm and accordingly, disallowance of Rs. 15,44,750 has been deleted. 4. Shri Rajeev Shrivastava, learned counsel for the appellant/Revenue ve....
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....of Rs. 15,44,750 equivalent to the amount of interest payable by the assessee on interest free loan is just and proper. 5. Reliance is placed in the matter of Tirupati Trading Co. v. CIT [2000] 242 ITR 13 (Cal) ; [2000] 158 CTR 167 ; [2000] 108 Taxman 75. 6. On the other hand, Shri Moolchand Jain, learned counsel appearing on behalf of the respondent/assessee would argue that from a perusal of the balance-sheet for the relevant assessment year filed as annexure R/11, it would be evident that there is sufficient fund of the partner in the opening balance and sufficient profit has been earned during the year, out of which the said amount has been given and it is not the case of diversion of borrowed funds. The Tribunal on due examination of....
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....nd that the assessee has claimed interest on borrowed cash amount of Rs. 8,60,000 and on the same date that has been advanced to M/s. Puspak Commercial Co. Ltd. free of interest. The assessee's case before the Tribunal was that it was not interest free loan to M/s. Puspak Commercial Co. but it was an advance against a flat booked by the assessee in a building, however, when the building did not come up, the asses-see withdrew the amount. Rejecting the explanation, it was held that the loan so advanced only to accommodate the party as the assessee and the party had intimate connections and it was not for the purposes of business of the assessee. The Tribunal, considering that no evidence except oral claim that the flat was booked for the pur....