TaxTMI 
TaxTMI 
2016 (1) TMI 1360
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....ssessing Officer are contrary to the law and as such the additions made are ought to be deleted. 2.a The learned Commissioner of Income-tax (Appeals) erred in upholding the order of learned Assessing Officer disallowing a sum of Rs. 35,93,937/- out of interest expenditure on the ground that appellant had given interest free loans and advances. It is submitted that the interest expenditure is incurred wholly and exclusively for the purpose of business of the appellant and as such no disallowance is called for. The conclusion arrived at by the learned Commissioner of Income-tax (Appeals) and by the learned Assessing Officer is erroneous, contrary to the facts based on the presumptions and conjectures and as such the disallowance made is ought to be deleted. 2.b The learned Commissioner of Income-tax (Appeals) erred in upholding the order of learned Assessing Officer disallowing a sum of Rs. 17,60,084/- out of interest expenditure on the ground that appellant had given interest free loans and advances . It is submitted that the interest expenditure is incurred wholly and exclusively for the purpose of business of the appellant and as such no disallowance is called for. The concl....
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....rest free security. 2.3. Aggrieved by the order of AO the matter was carried before the FAA but the FAA upheld the order of AO by following the order of his predecessor CIT(A) for the assessment year 2007-08. 2.4. The ld counsel for the assessee submitted that the case of the assessee was covered in its favour by the order of tribunal in its own case in ITA No.286/Mum/2014 for the assessment year 2007-08 in which a similar issued had been decided in favour of the assessee to which the ld DR did not raise any objection. 2.5. We have heard the rival submissions and perused the materials on records. From the order of Tribunal in ITA No.286/Mum/2014 for the assessment year 2007-08 we find the identical issue on the basis of which the FAA upheld the order of AO was decided in favour of the assesse, the relevant paras are reproduced below. The relevant paras 7,8 & 9 are reproduced below:- 7. "We have carefully perused the orders of the authorities below and the relevant material placed before us. We have also considered the decision of the Hon'ble High Court of Bombay (supra). We have also gone through the remand report and also report of the Inspector. The enquiry report submitted b....
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....peal of the assessee. The AO is directed accordingly. 3. The issue raised in the 2nd ground of appeal relates to confirmation of additions of Rs. 35,93,937/- and Rs. 17,60,084/- which was made by the AO by disallowing interest expenses on ground that the assessee advanced interest free loans out of interest bearing funds. 3.1. The brief facts are that the assessee had taken a secured loan of Rs. 2,98,78,458/- from City Bank and unsecured loans of Rs. 1,31,59,000/- from 52 loan creditors and paid interest on the secured and unsecured loan of Rs. 35,93,937/- and Rs. 17,60,084/- respectively. The assessee had advanced loan to M/S MSN Enterprises of Rs. 5,67,95,010/- on which no interest was received derived during the year. 3.2. The AO upon finding that the assessee had advanced a sum of Rs. 5,67,95,010/- to M/S MNS Enterprises on which no interest was credited in the P & L a/c whereas it had raised interest bearing funds both secured and unsecured and accordingly a show cause notice was given to the assessee for making the disallowance of Rs. 53,54,021/- (Rs. 35,93,937/-+Rs. 17,60,084/-).The AO ultimately disallowed the interest claimed of Rs. 53,54,021/- by rejecting the reply of....
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....eserves to be deleted. In so far as the proportionate disallowance of interest on the debit balance of the partners is concerned, the same has to be considered in the light of the partnership deed and as the partnership deed is silent on charging of such interest, we do not find any reason for such disallowances. We, accordingly direct the AO to delete the addition of Rs. 17,14,747/-. Ground No. 2 is accordingly allowed. 17. In the result, the appeal filed by the assessee is allowed. We, therefore, delete the additions of Rs. 53,54,021/- by following the decision of the coordinate bench and allow the appeal of the assessee. The AO is directed accordingly. 4. The assessee has raised following grounds of appeal in ITA No.3728/M/2015 are as under: "1. The Learned Commissioner of Income-tax (Appeals) erred in upholding the order of learned Assessing Officer estimating annual value of profit at Rs. 36,10,420/- instead of Rs. 27,62,500/- by adding notion interest on interest free security deposit resulting into an addition of Rs. 8,47,920/-. It is submitted that the notion interest on interest free security deposit cannot be taken as a determined factor to arrive at the 'fair re....