TaxTMI 
TaxTMI 
2018 (1) TMI 1066
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.... relates to the disallowance of interest claim, is extracted here as under : "1. The Ld.CIT(A) erred in confirming the disallowance of interest of Rs. 1,55,65,609/- u/s.36(1)(iii) on the ground that the loan on which the interest was paid was utilized for non business purposes." 3. Briefly stated relevant facts are that the assessee entered into an MOU with Vishwaroop Infotech Pvt. Ltd. dated 16-09-2010 for purchase of land. According to which assessee was to buy land admeasuring 56870 sq.mtrs along with factory shed and dwelling places standing thereon located at Dhanori, Haveli Taluk, Pune District. Total consideration is Rs. 214 crores. According to the said MOU, which is placed at page 33 of the paper book, assessee borrowed....
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.... to him and the said amount was utilised for repaying the unsecured loans to the abovementioned shareholders who gave the unsecured loans amounting to Rs. 48 crores. 5. Ld. AR for the assessee brought our attention to the details of interest expenditure and interest income. Drawing our attention to the profit and loss account placed at page 15 of the paper book, Ld. AR submitted that the total interest income earned by the assessee as per Schedule 7 works out to Rs. 1,83,18,830/-. Per Contra, the financial expenditure incurred by the assessee as per Schedule 9 works out to Rs. 2,77,75,031/-. The interest expenditure is more than interest income as the assessee did not receive any interest as the said Rs. 25 crores of loans utilized for g....
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.... AO. According to him, they never existed during the assessment proceedings and the creation of these documents constitute an afterthought of the assessee only. On these facts, Ld. DR submitted that all interest paid by the assessee on the said loan amount of Rs. 25 crores taken from Indiabulls does not constitute a trade advance. As such, assessee failed to discharge the onus to prove that the same constitutes the trade advance. Therefore, relevant interest expenditure claim is not allowable and the provisions of section 36(1)(iii) of the Act does not help the assessee. 8. Before us, during rebuttal time, Ld. AR for the assessee filed the written submission in demonstrating the above facts and the arguments. For the sake of completeness....
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....that there was no written documents. Thirdly, the lower authorities have not appreciated that ultimately, the land was purchased by Bluerays in which the assessee company was a partner. It is not a case that the land deal did not materialize. Thus, considering the subsequent events of formation of the LLP and acquisition of land by the LLP, the bona fides of the assessee can be proved that the amount advanced to Vishwaroop was for purchase of land and it was not a mere advance. Accordingly, it is submitted that the amount advanced to Vishwaroop was for the business of the assessee and therefore, no disallowance of interest is warranted. 10. Without prejudice to the above contention, the assessee submits that the disallowance worked....
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.....O. has made a disallowance of Rs. 1,55,65,609/-. Thus, the assessee submits that if any disallowance is warranted, the same should be restricted to the net interest expenditure of Rs. 88,46,924/-." 9. We heard both the parties, both on the main arguments as well as alternate arguments. The issue raised by the assessee in Ground No.1 relates to confirming the disallowance of interest of Rs. 1,55,65,609/- u/s.36(1)(iii). This interest amount is attributable to the loan of Rs. 25.50 crores borrowed and given to M/s.Vishwaroop Infotech Pvt. Ltd. It is the case of the Revenue that the said interest claimed is attributable to the borrowed loans of Rs. 25 crores from Indiabulls which was never utilized for the business purposes, i.e. for acqui....
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....the provisions of section 36(1)(iii) of the Act and (2) the allowability of the differential amount of Rs. 88,46,924/-, i.e. difference between the interest debited and interest earned by the assessee. 12. Regarding the first issue, as discussed at length in the preceding paragraphs of this order, we find the assessee's arguments requires to be rejected considering assessee's failure to discharge the preliminary onus with regard to correctness of the borrowed sum of Rs. 25.50 crores to the Vishwaroop Infotech Pvt. Ltd., It is an admitted fact that assessee failed to submit evidences by way of said MOU and the Deed of Cancellation. The submission of these papers admittedly happened during the first appeal proceedings. Why these documents ....