TaxTMI 
TaxTMI 
2014 (2) TMI 316
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....e assessee charged interest @ 9-12%. On being asked the assessee submitted that the assessee had adequate own funds which were more than the amounts advanced and thus there was no case for the disallowance. The AO on the other hand observed that amounts advanced had arisen out of interest bearing fund @ 18% and thus he disallowed the interest of Rs.5,78,670/- on proportionate basis. 4. In appeal before the CIT(A), the assessee placed reliance on the decision in the case of 'CIT Vs. Reliance Utilities' 313 ITR 340 (Bom) and it was also submitted that a similar addition was deleted by ITAT in A.Y. 2005-06. It was also contended that there was mistake in calculating the interest disallowance as the same was based on net interest basis instead of the gross interest and thus the interest expenditure of Rs.1,20,631/- had been wrongly disallowed. 5. The ld. CIT(A) observed that the assessee had failed to establish direct nexus between interest free funds and business purpose in relation to the interest free advances, of which the burden to prove was on the assessee. All the funds of the assessee had been in a common pool and the assessee had not shown that the interest free advances....
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....d be out of the interest free fund generated or available with the company if the interest free funds were sufficient to meet the investments. However, on the other hand the contention of the ld. D.R. has been that such a presumption would arise only if on the date of investment, assessee had its own/interest free funds available with it. He has further contended that since the assessee has not provided any fund flow statement to prove that sufficient interest free funds were available with it on the date of investment, hence the presumption of investment made by the assessee out of its own funds would not be applicable in the case in hand. On the other hand the ld. A.R. has further submitted that short term loans were advanced by the Assessee HUF to the family members out of own funds. Moreover, it was up to assessee to decide as how to conduct its business and the revenue cannot dictate terms to the assessee for the conduct of the business. 7. We have heard the ld. Representatives of the parties and have also gone through the record. We may observe that the Hon'ble Bombay High Court in the case of 'CIT vs. Reliance Utilities and Power Ltd.'(Supra) has observed that if....
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.... of loan/ investment was made by the assessee from his own funds, though in anticipation of the availability of its own funds within a short period of time. The principle underlying this proposition is that a businessman has to circulate his money according to the day to day requirements and the likely inflow and outflow of money in the near future is taken into consideration while making investment. Under such circumstances, disallowance can not be made on the entire interest expenditure but a very reasonable proportionate disallowance can be made and even in certain cases can be ignored due to the shortness of the period between the date of advancement/expenditure and date of availability of own funds. It can be explained by the assessee to the Assessing Officer from the Balance Sheet of the financial year under consideration as well from that of the previous years as to whether sufficient own funds were available to the assessee during the financial year or that the interest free funds were generated during the course of the year even if the assesse could not prove the availability of own funds on the particular date of investment/advancement/expenditure. 10. Though in the in....
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..... Moller and Maersk/AS-Denmark; Payments made to them were also governed by Double Taxation Agreement between India and Denmark. Further from the definition of "profits from operations of ships" as per Article 9 of the Treaty between India and Denmark, it revealed that it includes profits derived from use, maintenance or rental of containers. In view of the same, the storage/demurrage charges paid to Maersk India Ltd. and SAF Marine would be outside the purview of taxation. In respect of payments made to K.K. Associates and Classic Freight, the assessee had deducted tax at source, which through oversight was not brought to the notice of the Assessing Officer. 15. However, the learned CIT(A) did not consider the documents and details supplied by the assessee at appellate stage citing Rule 46A of the I.T. Rules and further observed that the evidence under Rule 46A can only be accepted if, the AO had refused to accept the said evidence or the assessee was prevented by sufficient cause from producing the evidence before the AO. 16. We have heard the rival submissions put forth by the learned representatives of both the parties and gone through the relevant material available on r....