TaxTMI 
TaxTMI 
2012 (9) TMI 1193
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....r (Appeals) erred in confirming the disallowance of interest of Rs. 1,02,931/- out of the net interest paid of Rs. 3,64,977/- on the ground that the appellant has not established the nexus between the advances received of Rs. 4,15,000/- from M/s. Deepak Hardware and Rs. 1,50,000/- from Shri Jitendra Vrajlal Doshi, which was claimed to have been advanced to the proprietary concern of the assessee's HUF, viz., M/s. Chetan Steel Co. 2. The order of the Commissioner (Appeals) is bad in law and without jurisdiction. 2. The Assessee an individual, filed his Return of Income on 27-10-2003 declaring total income of Rs. 6,90,980/-. Assessment was finalised on 24-03-2006 u/s. 143(3) of the Income Tax Act, 1961 (Act) by the Assessing Offic....
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....ssee and the Assessment Order, he held that appellant had not established any nexus between advances received of Rs. 4.15 lakhs (from M/s. Deepak Hardware Corporation) and Rs. 1.5 Lakhs (received from Shri Jitendra V. Doshi) that was claimed to have been advance to M/s. Chetan Steel Co., that the interest free loan to M/s. Chetan Steel Co., was given out of interest free deposits was not established by the assessee, that assessee had not explained the nexus between interest free deposits and interest free advances in the submissions made to the AO and also during the proceedings before him. Upholding the order of the AO, he confirmed during the disallowances of the interest to the extent of Rs. 1,02,931/-. 4. Before us, the Authorised Re....
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.... 5. AR referred to Pg Nos. 4,5,12 and 15 of the Paper Book to support the submissions made by him. He relied upon the order of the 'B' Bench of ITAT, Mumbai in the case of M/s. Mohit Diamond Pvt. Ltd., (ITA No. 2097/M/2011 A.Y. 2006-07 dt. 31-07-2012). He also relied upon the cases of M/s. Reliance Utility and Power Ltd., (313 ITR 340). Departmental Representative (DR) submitted that he was no nexus between the interest free loans advanced by the assessee and business carried out by him. He relied upon the orders of the AO and the FAA. 6. We have heard the rival submissions and perused the material placed before us. The basic issue to be decided here is about the dis-allowance made by the AO with regard to interest payment. We would li....
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....ity of interest free loans and capital are the crucial deciding factors for the case under consideration. We have gone through the cases relied upon by the AR on the matter of Reliance Utility and Power Limited, (supra) Hon'ble Bombay High Court has held that "if there are interest free funds available to an assessee sufficiently in excess of its investment and at the same time the assessee has also raised a loan, it can be presumed that the investments were from interest free funds available. In view of the fact that the interest free funds advanced by the assessee to its subsidiary company are much less than the interest free funds available with it in the shape of Share capital along with Reserve and surplus, in our considered o....