2019 (3) TMI 1812

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....o "The Act") arising out of the order dated 02.03.2015 passed by the Income Tax Officer, Ward - 1(1)(2), Ahmedabad for the Assessment Year 2012-13. 2. The appellant company filed its return of income on 29.09.2012 declaring income at Rs. Nil, which was processed u/s 143(1) of the Act on 13.05.2013. Upon scrutiny assessment notice u/s 143(2) dated 19.09.2013 followed by a notice u/s 142(1) of the Act dated 09.04.2014 was served upon the assessee. Pursuant to the said notice, the appellant duly filed the audit report, return of income and other primary details on 21.04.2014. On 15.09.2014, a questionnaire was also served upon the assessee along with a notice u/s 142(1) of the Act.  During the course of assessment proceeding, the de....

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....p; 35395402 NON INTEREST BEARING Unsecured loan   8562459 Total Interest free fund A 231068588 Interest bearing fund     SECURED LOAN     Bank OD   67756949 Term Loan   8744200 Differed Payment (car loans)   215568 INTEREST BEARING Unsecured Loan   30331445 Total B 107048162 Gross Fund Employed in business   338116750 PERCENTAGE OF INTEREST BEARING FUND   31.66 PERCENTAGE OF NON INTEREST BEARING FUND   68.33 TOTAL INTEREST PAID DURING THE YEAR     BANK INTEREST ON OD EXP.   10895287 BANK INTEREST ON TERM LOAN   2202071 INTE....

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....e of Rs. 3365.23 lacs interest free funds were used in business for various fixed assets and movable current assets i.e. Stocks, debtors balance with bank and cash and other assets. It was, therefore, submitted that the interest bearing funds were utilized for other specific purpose and advances given to parties was out of the own funds of the appellant company. Since the interest on borrowed fund is allowable as business expenditure by virtue of income tax provision u/s 36(1)(iii) hence payment made for interest on borrowed fund should be allowed as interest expenses in its totality and interest free loans and advances granted out of the interest free own funds even not used for business and no actual interest is received by the assessee t....

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....e's own fund have been utilized for the purpose of advances to various parties. The assessee company has huge surplus funds at its disposal. The details of the party wise advance and owned funds as submitted by the assessee is as follows: Sr. No. Name of the Party Amount in Rs. 1. Dineshchandra A Patel 14379486.00 2. Shree Balaji Corporation 70000.00 3. Subhaubhai M. Shah (Real Estate) 13791000.00 4. Subhaubhai M. Shah 1093660.00 5. Vibrat P Patel (Real Estate) 1000000.00 6. Shree Shyam Distributors (Real Estate) 4500000.00 7. Shakarbhai Chaturbhai Patel (Real Estate) 1000000.00   Total 35834146.00 Following details of interest free fund consisting o....