TaxTMI 
TaxTMI 
2018 (11) TMI 858
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....t of interest payment. 2. The assessee is an Individual and engaged in the wholesale trading of mobile phones and accessories in the name of M/s. Shriji Telelink. The assessee firm filed its return of income on 6th January, 2013 declaring total income of Rs. 8,58,680/-. During the scrutiny assessment, the AO noted that the assessee has given loans/advances of Rs. 1,00,96,320/- free of interest whereas the assessee has incurred interest expenditure of Rs. 8,75,543/-. The assessee though explained before the AO that these advances were given in the course of business of the assessee as the amount of Rs. 25 lacs was given as security to M/s. More Mobile & Support Pvt. Ltd. whereas an amount of Rs. 74,96,320/- was given as an advance for purchase of mobiles which was subsequently purchased by the assessee. As regards the amount of Rs. 1,00,000/- given to Dr. Pushpendra Garg, the assessee explained that assessee's own interest free funds were sufficient to advance the amount of Rs. 1,00,000/-. Since the assessee did not produce his books of accounts before the AO, accordingly, the AO disallowed the entire claim of interest of Rs. 8,75,543/-. On appeal, the ld. CIT (A) has deleted ....
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.... Rs. 1,00,000/-. Therefore, no disallowance is called for on account of interest expenditure when the borrowed fund was used exclusively for the business purpose. He has supported the order of ld. CIT (A). 4. We have considered the rival submissions as well as the relevant material on record. The assessee has shown the advances to three persons/parties as under :- i) Security (More Mobiel and Support) Rs. 25,00,000/- ii) The Mobile Store Services Ltd. Rs. 74,96,320/- iii) Dr. Pushpendra Garg Rs. 1,00,000/- Rs. 1,00,96,320/- The AO disallowed the interest claim of Rs. 8,75,543/- on the ground that the assessee has taken loan on one hand and given interest free advances to these parties. We note that the assessee had duly explained the nature of advances given by the assessee to these three parties. The first amount of Rs. 25,00,000/- was given to M/s. More Mobile & Support Pvt. Ltd. as a security for doing the business with the said company as the assessee is a wholesale trader in mobiles and accessories. The said amount has been shown by the assessee in the Balance Sheet as security deposit and, therefore, once the said amount....
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....de to this company were interest free loans, appears to be unfair, more so since he has not brought any positive evidence to prove his conclusion and relied only on lack of copy of accounts & address details for this purpose. Thus, the VAT returns & existence of the company in corporate records shows that the transactions were genuine business transactions. Further, the Auditors have duly certified these balances approving in various schedules of the Balance Sheet of the assessee. Hon'ble Supreme Court of India in Hero Cycles (P) Ltd. v. Commissioner of Income-tax (Central), Ludhiana in 63 taxmann.com 308 (SC) Whether once it is established that there is nexus between expenditure and purpose of business (which need not necessarily be business of assessee itself), revenue cannot justifiably claim to put itself in arm-chair of businessman or in position of Board of Directors and assume role to decide how much is reasonable expenditure having regard to circumstances of case - Held, yes - Assessee filed its return claim deduction of interest paid on borrowed sums from Bank under section 36(1)(iii) - Assessing Officer finding that assessee had used bo....
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....r concern was by way of commercial expediency. 30. It has been repeatedly held by this court that the expression "for the purpose of business" is wider in scope than the expression " for the purpose of earning profits" vide CIT v. Malayalam Plantations Ltd. [1964 53 ITR 140 (SC), CIT v. Birla Cotton Spinning and Weaviong Mills Ltd.[1971 82 ITR 166 (SC)], etc. " 13. In the process, the Court also agreed that the view taken by the Delhi High Court in CIT v. Dalmia Cement (P) Ltd. [2002] 254 ITR 377/121 Taxman 706 wherein the High Court had held that once it is established that there is nexus between the expenditure and the purpose of business (which need not necessarily be the business of the assessee itself), the Revenue cannot justifiably claim to put itself in the arm-chair of the businessman or in the position of the Board of Directors and assume the role to decide how much is reasonable expenditure having regard to the circvumstances of the case. It further held that no businessman can be compelled to maximize his profit and that the income tax authorities must put themselves in the shoes of the assessee and see how a prudent businessman would act. The....
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....editworthiness as they have also produced the return of income. This enquiry was conducted by the AO himself and despite all these loan creditors have confirmed the transaction of giving loans to the assessee through banking channel, the AO made the disallowance. The ld. A/R has referred to the relevant documents in the paper book and submitted that all these documents were part of the assessment record and produced by the loan creditors in response to the notice issued by the AO. The ld. A/R has submitted that as per the record all these materials were available with the AO from pages 19 to 49 of the paper book. All the six creditors have produced their confirmations, return of income, bank statement, balance sheet extracts which proved that the claim of the assessee is genuine. These documents were produced by the creditors on their own in response to the enquiry conducted by the AO. Therefore, once the creditors have submitted the relevant evidence as well as confirmations, the ld. CIT (A) has rightly deleted the addition made by the AO. 7. We have considered the rival submissions as well as the relevant material on record. We note that all the six creditors have produced the....
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....Rs. 4,00,000/- iii) M/s. Sujas Health Care Rs. 3,50,000/- iv) Shiv Kumar Trading Co. Rs. 13,00,000/- v) Shri Girraj Trading Co. Rs. 15,00,000/- vi) M/s. Vinayak Enterprises Rs. 15,00,000/- Rs. 70,50,000/- The assessee submitted initially that the business had closed down since past two years. However, during the assessment proceedings, the following documents were submitted to the AO. a) Confirmation of accounts with PAN details from all the lenders. b) Transaction details showing all loans were acquired through Banking channels. c) TDS deduction details whenever interest was paid on these loans and the quarterly statement was duly submitted to the department mentioning TDS deduction from interest paid to these parties and the PAN details in case of Sh. Rambabu Gupta proprietor M/s. Giriraj Trading, Sh. Shiv Kumar Gupta prop. Shiv Kumar trading Co., Mahendra Kumar Garg (Divyansh Telelink) & Devendra Kumar Garg (Vinayak Enterprises). d) From a perusal of the other details filed by the assessee's A/R in the course of the assessment proceedings it is also seen that - Sh. Ra....
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....thing adverse and different from the claims made by the assessee, subsequently after bringing the discrepancies in the assessee's claims and his own investigation and confronting the results to the assessee and getting his version, made the addition u/s 68 as per the intention of the law in this regard. Since he failed to do so in the cases of all the lenders, the addition made by him in respect of these cases of unsecured loans treated as cash credits, cannot be upheld both on the facts as well as on legal precedents as discussed above. Thus the addition of Rs. 70,50,000/- made u/s 68 is directed to be deleted and this Ground of appeal is allowed." Thus it is clear that the ld. CIT (A) has examined the evidences available on the assessment record and found that the AO was having all the relevant details and supporting evidence during the assessment proceedings as called for under section 133(6) of the Act. On examination of these details and evidence as submitted by the six creditors, we find that the claim of the assessee was duly supported by the evidence produced by the creditors who having confirmed the transactions and also produced the evidence regarding....