TaxTMI 
TaxTMI 
2017 (2) TMI 1452
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....unt of interest payments on the ground that the borrowed funds have been diverted for non business purposes. 1.1. It was proved before the lower authorities that the assessee had sufficient capital and interest-free funds. No nexus has been proved; by the Ld. AO, that borrowed funds have been utilized for interest free advances. 1.2. The Ld. CIT (A) did not consider the cases cited before him. 2. The addition of Rs. 11,60,840/- may please be deleted or in the alternative restricted to reasonable figure. 3. The Ld. CIT(A) has erred in maintaining the addition of Rs. 86,346/- being the undervaluation of stock. The same may be deleted or in the alternative the AO may be directed to reduce the income in the s....
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....e finding of the AO. The contention of the assessee that it had sufficient interest-free funds available out of which interest-free funds advances were given was not found acceptable. 1.3. Being, aggrieved the assessee filed this appeal before the Tribunal. The Ld. A.R. submitted that the observation of the AO is not correct on the facts of the case. The Ld. A.R. submitted a table demonstrating that the assessee has substantial interest-free funds of Rs. 34,42,80,122/- (consisting of partners capital of Rs. 11,10,75,722/- and loans & deposit from relatives of Rs. 5,46,41,437/-) as against the interest bearing funds of Rs. 10,74,96,222/-. The Ld. A.R. has filed a table depicting the details of funds utilization of interest-free funds and ....
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....td. (2009) 313 ITR 340(Bom) wherein it was held that if there are fund available both interest free and interest bearing, then a presumption would arise that investment were out of interest free funds generated or available with the assessee. If the interest-free funds were sufficient to meet the investment no disallowance of interest paid on borrowed funds would be necessary. Once such presumption is established claim of interest was allowable. 1.3.3. The Ld. A.R. also placed reliance on the judgement of Hon`ble Supreme Court in the case of S. A. Builders vs. CIT (2007) (288 ITR 1) (SC) wherein it was held that where the assessee has made investment out of mixed funds for the commercial expediency then no disallowance could be made unde....
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....has failed to establish that interest free advances to above stated parties were out of interest bearing funds. It is the contention of the assessee that it had sufficient non-interest bearing funds to the tune of Rs. 34.42 crores as per balance sheet as on 31.03.2010 as against interest bearing funds offered at Rs. 10.74 crores. Hence, interest-free funds of Rs. 34.52 crores have been utilised for giving interest-free advances to aforesaid above parties on which no interest was charged. Thus interest-free advance were given out of interest-free funds available with the assessee during the year for which sufficient interest-free funds were available. Therefore, we are of the view that the Ld. A.O. has failed to establish that interest free ....