TaxTMI 
TaxTMI 
2013 (10) TMI 287
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....filed by the assessee on October 31, 2007, declaring his total income at Rs.10,75,140/-. 1.2 On scrutiny assessment under Section 143(3) of the Act, the Assessing Officer observed that the assessee had taken a loan from Shri Jivraj Desai, Shri Rajni Desai and Shri Ramesh Desai, on which interest to the extent of Rs.1,04,24,279/- was paid. It was also noted by him that in the trading account of Rajiv Enterprises, the assessee claimed personal loan interest of Rs.744/-, bank interest of Rs.5,36,807/-, other interest of Rs.3,37,334/- and personal interest of Rs.32,72,252/-. A show-cause notice was issued by Assessing Officer on the ground that such interest expenses were not incurred for the purpose of business and, therefore, the assessee ....
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....easons for the same : "5. In the light of the above, the facts in the present case are required to be examined. The appellant is doing multiple business activities of financing, land dealing and hotel business, etc. For convenience purpose, the appellant has prepared two balance-sheets. One balance-sheet is in the name of Shri Rajesh J. Desai and another proprietor of M/s. Rajiv Enterprises, which is engaged in the business of financing. In the consolidated balance-sheet as on 31-03-2007, the proprietor's capital account shows a negative balance of Rs.5,67,70,387/-. However, the appellant has got interest free deposits of Rs.6.5 crores for Okab/ Sarkhej lands. The consolidated balance-sheet shows loan from Sarvod....
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....ivable (Partner) 1. Raj Enterprise Rs.4,07,126/- 2. Hotel Rajpath Rs. 1,52,600/- 3. Raj Developers Rs.51,345/- Rs.6,11,071/- Net Interest Payable Partner Rs.32,72,252/- 5.1 From the aforementioned discussion, it is apparent that the Assessing Officer has mis-directed himself, which disallowing the interest expenditure of Rs.1,16,01,527/-. The Assessing Officer has failed to take cognizance of fact that M/s.Rajiv Enterprises is also a proprietorship concern of the appellant, which is engaged in the business of financing. However, as discussed above, the appellant has charged interest @6% only on the total amount of Rs.5,59,50,402/- which it has advanced to a....
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....esent appeal is preferred under Section 260A of the Income-ttax Act, 1961 (hereinafter referred to as 'the Act') by the Revenue proposing the following substantial questions of law : "(A) Whether the ITAT erred in law in ignoring the vital fact that the assessee has negative capital and the entire investment, loans & advances either for business purpose or otherwise, were made out of borrowed funds and thereby committed perversity giving rise to a substantial question of law ? (B) Whether the ITAT erred in law not upholding the disallowance of the proportionate interest relatable to investment, loans or advance made for purpose other than business of the assessee which was made by the ....
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....erted by the Revenue that on every transaction entered into by the respondent-Assessee, he has charged the interest. The interest-free funds to the tune of Rs.6.5 crore were in the nature of advance receipt for the land and for all the borrowings, he has paid interest at the rate of 12% It is only in the case of sister concern M/s. RJD Impex Pvt. Ltd. that the interest is received at the rate of 6%. Wherever he is partner, he is paying interest as well. 3.2 As can be noted from the discussion of the Tribunal that the rate of interest for advancing the loan to the sister concern was 6% and borrowing in the majority cases was at 12%. As the Tribunal found the possibility of factual error, it had remitted the matter to the Assessing Officer....