TaxTMI 
TaxTMI 
2017 (2) TMI 331
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....e-tax (Appeals), by which he had upheld the addition of Rs. 5,68,698 which the assessee had paid to the bank on account of interest. 3. The brief facts of case as noted in the assessment order are that the case of the assessee was reopened on the basis that the assessee had not charged any interest on advance made to the partner of the firm, Sh. Ajay Kumar, whereas the assessee was paying interest to Punjab National Bank. During the assessment proceedings, the Assessing Officer held that the assessee had advanced Rs. 1,00,00,000 to the partner without charging of interest. He held that there would have not been expenditure of Rs. 5,68,968 paid to the bank as interest if the assessee had not advanced interest-free loan to the partner and,....
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.... therefore, he disallowed an amount of Rs. 5,68,698 which was paid by the assessee as bank interest. 5. Aggrieved the assessee filed an appeal before the learned Commissioner of Income-tax (Appeals) and submitted various submissions and also submitted that the capital of the firm was more than one crore in the financial years 2006-07 to 2009-10 which was more than the amount of advance of Rs. 1,00,00,000. It was also submitted that the proposed land was to become the property of the assessee and Mr. Ajay Mahajan was acting only on behalf of the firm, however, the learned Commissioner of Income-tax (Appeals) dismissed the appeal of the assessee and, therefore, the assessee is in appeal before us. 6. At the outset, the learned authorise....
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....gainst the alleged loan of Rs. 1,00,00,000. The hon'ble Punjab and Haryana High Court in the case of Gurdas Garg v. CIT (Appeals) [2016] 6 ITR-OL 101 (P&H) has decided the following question of law in favour of assessee. For the sake of convenience the question framed by the hon'ble court and its adjudication are reproduced below (pages 103, 108). Question No. 2 "(II) Whether the Tribunal rightly upheld the addition of an amount of Rs. 7,76,043 made on account of the appellant not charging interest from his debtors." Re : Question No. 2 "The appellant had admittedly advanced an aggregate amount of Rs. 97,79,200 between the period April 1, 2008, and December 4, 2008. The amounts were repaid in the year 2009. T....
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....tended that the interest-free advances exceeded the interest-free funds available with the appellant. Nor was it established that a particular advance received was in turn advanced by the assessee interest-free." In the circumstances, the order of the Tribunal upholding the addition is also set aside. Therefore, keeping in view the above judgment of the hon'ble High Court we are of the opinion that the disallowance in this case was not warranted as the interest-free capital was more than the alleged amount of loan. 10. Further, we find that in the present year the assessee had not advanced any loan and rather this amount is brought forward from the assessment year 2008-09. This fact is also verifiable from the order of the lear....