TaxTMI 
TaxTMI 
2018 (3) TMI 147
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....tal income of the appellant. 2. That the Ld. CIT(A) has erred in law and on facts in confirming the addition, ignoring the fact that the ld. AO failed to prove a one to one correlation between the amount of interest free advances given by the appellant and the amount of borrowed funds. 3. That the Ld. CIT(A) has erred in law and on facts in confirming the addition on account of notional interest ignoring the fact that the appellant had sufficient surplus in his Capital Account to give interest free loan and the advances were not out of borrowed funds. 4. That the Ld. CIT(A) has erred in law in not following the ratio of the judgement by the High Court of Madhya Pradesh in the case of R. D. Joshi & Co. vs. CIT, (20....
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....f which are as follows :- Proprietor's Capital on 1.4.2009: Fitwell Corporation Rs. 94,01,170/- Star Software Rs. 69,97,760/- TOTAL Rs. Advances given to Alieyamma Jacob: Opening balance Rs. 15,70,000/- Advances given during the Rs. 45,50,000/- year Rs.61,20,000/- It is not in dispute that appellant had a capital balance in books of account and audited statements, more than the interest free advances given by him. The ld. AO in his order and also the CIT(A) in his order has not brought anything in record to show that money so advanced was out of the borrowed funds. In case of R.D.Joshi & Co. vs. CIT, (2001) 118 Taxman 394 (MP High Court) has held that "where no such ne....
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....ree advance. 3. In view of judgments of High Courts including Jurisdictional High Court and Hon'ble Supreme court, such disallowances are unsustainable and Your Honour is kindly requested to delete the disallowance of interest and appeal of appellant may please be allowed in full." 4. On the contrary, the Ld. Departmental Representative opposed the submissions. 5. We have considered the facts, rival submissions and perused the material available on record. The Ld. CIT(A) has confirmed this addition by observing as under :- "4.4 I have considered the findings recorded by the Id. AO as per the assessment order, the submissions made by the Id. AR and the facts of the case on record. The !d. AO made a disallowance of....
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....s been established. Hence, proportionate disallowance out of the interest expenses is required to be made, Reliance in this regard is placed on the decision of Hon'ble Delhi High Court in the case of Elmer Havell Electrics 277 ITR 549 and in the case of V.1. Baby & Co. 254 ITR 248 (Ken.) The decisions cited by the appellant are distinguishable both on ' facts and law as in all those cases the assessee were able to show nexus between the business and the advances given, which has not been done in this case. Hence the decisions relied upto by the ld. AO are not applicable to this case. Thus, the addition of Rs. 6,39,274/- made by the ld. AO is confirmed. Accordingly, the ground no, 4 is partly allowed." 6. The Ld. Counsel for the a....