TaxTMI 
TaxTMI 
2017 (11) TMI 1062
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....on of sufficient free funds in the shape of interest free unsecured loans in addition to capital, to make interest free advances. Thus appellant prays disallowance made may please be deleted. 3. On the facts and in the circumstances of the case and in law, Ld. CIT(A) erred in confirming the disallowance of Rs. 1,95,677/- made by AO u/s 40A(3) ignoring the fact that payments were made due to business exigencies and thus disallowance so made in not justified. Appellant prays that disallowance confirmed by Ld. CIT)A) may please be delete. 4. That the appellate craves the right to add, delete, amend or abandon the ground of this appeal at the time or before the actual hearing of the case. The assessee has also raised an additional ground that reads as under:- " On the facts and in the circumstances of the case and in law, Ld. CIT(A) erred in confirming the disallowance of Rs. 10,50,000/- made by Ld. AO, being sum advanced to a party for purchase of marble clocks (goods) in the ordinary course of business, who eventually neither supplied goods nor refunded the money. Thus loss has arisen to assessee is trading loss and deserves to be allowed u/s 37 of the I....
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....the assessment order and the submissions of the appellant. The assessee had claimed bad debts written off of Rs. 12,14,277/- which have not been allowed by the Assessing Officer as the debts were not business debts and they did not arise during the normal course of business. It was further held that the amounts had not been taken as revenue by the assessee during the previous year under consideration or any of the earlier previous years. The Assessing Officer further noted that the assessee failed to even prove that the in the case of advance given to Shri Budh Prakash Dayama, the person was a mine owner or marble trader and that the advance was given for the purchase of marble. In the present proceedings the Authorized Representative has filed a copy of Registered mining lease agreement dated 4.11.01 to show that the party was dealing in marbles. It was further explained that the advance was given through account payee cheque and for the purchase of marbles. However even in the present proceedings no details in the form of bank statement or ledger copy of the party have been filed. It is further seen that the amount was taken as an advance and has not been taken into acco....
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....ured loans Rs. 133.34 lacs Rs. 277.68 lacs It was thus submitted that assessee was having interest free funds much more than interest free advances made. However, Ld. AO disallowed the interest of Rs. 14,10,093.46 in respect of advances made to Jyoti Marbles and Taj Granites (P) Ltd. On appeal, Ld. CIT(A) allowed relief of interest disallowed to the extent of capital balance of assessee, however no relief was allowed in respect of interest free funds available with assessee in the shape of unsecured loans. In this regard, at the outset, detail of interest free unsecured loans is furnished as under: Sl. No. Name of Party Amount (in lacs) (i) Agarwal Real Home Dev Pvt. Ltd. 40.00 (ii) Ajay Pareek 4.71 (iii) Avon Diamond tools 8.33 (iv) Dinesh Engg. Works 16.50 (v) Geeta Sharma 42.00 (vi) Shree Dharma Marble & Granites 3.28 (vii) Smt. Rajni Pareek 18.52 133.34 This complete detail was provided before Ld. AO during assessment proceedings as well as before Ld. CIT(A) during appellate proceedings. No doubt whatsoever was raised by l....
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....ee has sufficient funds other than borrowed money- Income Tax Act,1961,s.36(1)(iii). CIT v. Prem Heavy Engineering Works (P). Ltd. [2006] 285 ITR 554 (All.) Business Expenditure- Interest on borrowed capital- Advances made by assessee to sister concerns interest free sufficient funds available with assessee in form of interest free-advances from customers, share capital surplus and reserve to make advances- Interest on borrowings not to be disallowed- Income Tax Act,1961, s. 36(1)(iii). 378 ITR 128 CIT Vs. Modi Rubber Ltd. (Delhi) Appeal to High Court - Substantial question of law - Interest on borrowed capital - Assessee having at its disposal its own and borrowed funds - Loans advanced interest free to sister concerns - To be taken to have come from own funds - Tribunal taking plausible view on facts - No question of law arises - Income Tax Act, 1961, ss. 36(1)(iii), 260A. In view of above, it is requested that interest on borrowed capital claimed by assessee, deserves to be allowed." 4.2 Ld. D/R opposed the submissions, and supported the order of the Assessing Officer. 4.3 We have heard the rival contentions. The Ld. CIT(A) has ....
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.... 182 (All.) and another Judgment of the Hon'ble Allahabad High court in the case of CIT vs. Prem Heavy Engineering Works (P.) Ltd. [2006] 285 ITR 554 (All.) We have considered the submissions of the Ld. Counsel for the assessee and the case laws relied by him. The Revenue has not disputed the fact that the assessee is having unsecured interest free advances. Under these facts, the Assessing Officer ought not to have made disallowance of interest. Accordingly, we hereby direct the AO to delete the disallowance. The Ground no. 2 and 2.1 of assessee's appeal are allowed. 5. Ground no. 3, is against confirming the disallowance of Rs. 1,95,677/- made by invoking the provision of Section 40A(3) of the Act. 5.1 Ld. Counsel for the assessee submitted that the authorities below failed to appreciate the fact in right perspective. He submitted that these payments are not out of free will and violation of assessee. It was in fact, out of business exigencies as the instalments of EMI at few instances cheque were disowned, the finance company force the assessee to make payment by cash and not accepting any other mode of payment. In support of this, Ld. Counsel for the assessee place rel....