2003 (1) TMI 647

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....ccount of disallowance out of interest expenditure claimed by the assessee. The assessee is an individual. He has received loans from outside parties and has advanced loans to sister concerns mainly M/s. Parag Construction Pvt. Ltd. and M/s. Chetan Consultants Pvt. Ltd., wherein the assessee was Managing Director or Director. The assessee has not charged interest from M/s. Chetan Consultants P. Ltd. on an amount of Rs. 1.50 crores. Accordingly the Assessing Officer disallowed the interest on the said amount. The assessee's advance balance as on 31-3-1990 was Rs. 3,45,16,906 with M/s. Chetan Consultants P. Ltd. The figure of advance to M/s. Chetan Consultants P. Ltd. of Rs. 1.50 crores as on 31-3-1991 has been shown by the assessee as lease ....

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....has relied on the decision in CIT v. V.I. Baby & Co. [2002] 254 ITR 248 (Ker.) and Indian Metals & Ferro Alloys Ltd. v. CIT [1992] 193 ITR 344 (Ori.). 4. The ld. Counsel for the assessee has opposed these arguments. He argued that the property in the form of plot at Malad valuing Rs. 5.68 crores was duly shown in the balance sheet as on 31-3-1991 by M/s. Chetan Consultants Pvt. Ltd. He argued that the part of loan with M/s. Chetan Consultants Pvt. Ltd. was converted into advance for lease deposits with them. He argued that ultimately it did not mature and has to be cancelled, is not relevant for the issue before us. On merits of the case he argued that the assessee has sufficient non interest bearing funds to advance the said lease depos....

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....lled by the assessee. In these facts we hold that the assessee could not bring any material on record to prove that the amount of Rs. 1.50 crores advanced to M/s. Chetan Consultants Pvt. Ltd. was for any business purpose and accordingly it cannot be said that the advance of Rs. 1.50 crores to M/s. Chetan Consultants Pvt. Ltd. was for business purpose or was on lease deposit with them. 7. However, from the copy of the balance sheet of the assessee as on 31‑3‑1990 and 31-3-1991 we find that the assessee's balance as on 31‑3‑1990 with M/s. Chetan Consultants Pvt. Ltd. is Rs. 3,45,16,906 and the total of non-interest bearing funds as on 31-3-1990 are Rs. 2,02,47,968 (capital Rs. 1,03,41,568 plus non interest bearing l....