TaxTMI 
TaxTMI 
2014 (1) TMI 1275
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....o the income earning investment by way of windmill, whereas the assessee in its appeal i.e. ITA No.3335/M/2013, is objecting the confirming the remaining addition made by the AO out of total addition of Rs.20,90,752/-. 3. Brief facts of the case are that the assessee filed return of income on 1-12-2003 by which an interest expenditure of Rs.22,55,640/- was claimed. In original assessment made under Section 143(3) vide order dated 28-3-2006, the AO had disallowed the entire interest expenditure of Rs.22,55,640/- alleging that loans on which interest was paid, were diverted to group companies free of interest. On appeal, learned CIT(A) vide his order dated 31-5-2006 allowed the deduction for above interest except on a loan of Rs.10 lacs util....
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....25 lakhs has been shown as inflation in the project cost. Therefore, he disallowed a sum of Rs.1,44,645/- out of total interest paid on this amount of Rs.16,14,343/- to Allahabad Bank. 5. In respect to loan taken from Satara Sahakari Bank Limited at Rs.1.25 crores, learned CIT(A) found that this loan has not been used by the assessee for its business purpose. The CIT(A) noted that a cash of about Rs.14 lakhs in hand of the assessee was maintained in Satara Sahakari Bank and not used by the assessee. The CIT(A) further noted that the assessee has repaid Rs.45 lakhs to Himco (I) Ltd., which was taken as share application and similarly certain amount has been repaid by the assessee, which was taken earlier. Accordingly, he observed that there....
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....n 31-12-2002 on which interest has been paid at Rs.4,53,984/-. Further a disallowance of Rs.1,87,313/- was made by the AO on account of interest paid to share holders on loans taken in earlier year. After perusing the material on record, I found that the loan of Rs.2 crores was paid directly to the creditor Vestas RRB India Limited against their invoices towards supply of wind mill. This is undisputed fact that the amount of loan taken from Allahabad Bank was paid directly by the bank to the creditor M/s Vestas RRB India Limited. Therefore, in my considered view, there was no occasion to hold that the assessee is inflated the cost of project by Rs.25 lakhs or charging less interest from the sister concern at the rate of 14%, against 15% int....
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....financing activity. In past, loans were taken for financing purpose and in this year the loan taken from Satara Sahakari Bank was utilized for repaying the old creditors. Therefore, it cannot be said that the same was not for the business purpose. Accordingly, I delete the disallowance of Rs.4,53,984/-, confirmed by the CIT(A), except the interest on the amount of Rs.10 lakhs invested by the assessee in Bombay Amusement Park Pvt. Limited for purchase of shares. 11. Remaining issue remains in respect of interest disallowed by the AO at Rs.1,87,313/-. The AO has disallowed for the reason that the funds were utilized for non business purpose. The contention of the assessee was not found favourable to the AO that the interest was paid to share....