2021 (8) TMI 202

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....missioner of Income Tax 27(1), Mumbai (hereinafter referred to as ld. AO). 2. The only issue to be decided in this appeal is as to whether the ld. CIT(A) was justified in confirming the disallowance made in the sum of Rs. 19,10,536/- towards interest u/s.36(1)(iii) of the Act in the facts and circumstances of the instant case. 3. None appeared on behalf of the assessee. We have heard the ld. DR and perused the materials available on record. We find that the assessee is an individual engaged in the business of trading in MS Iron and Steel products. The return of income for the A.Y.2014-15 was electronically filed by the assessee on 26/09/2014 declaring total income of Rs. 35,85,410/-. The ld. AO observed that the assessee had debited a sum....

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....n record by the ld.AO. The ld. AO merely assumed that borrowed funds have been diverted for non-business purposes by way of making investment in capital of a partnership firm from which no interest had been received by the assessee. Accordingly, he proceeded to disallow the interest paid on unsecured loans in the sum of Rs. 19,10,536/- as amount allegedly diverted for non-business purposes u/s.36(1)(iii) of the Act. We find that though the Section under which this disallowance made was not mentioned by the ld. AO in his assessment order, the disallowance was made based on the parameters pertaining to Section 36(1)(iii) of the Act. This was further ratified by the ld. CIT(A) while confirming the disallowance u/s.36(1)(iii) of the Act, wherei....

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....ribution of partnership firm, unless there is mixed funds (i.e borrowed funds and own funds inextricably mixed in the same bank account). b) In any case, there is no dispute that assessee is a partner in Ambhe Properties (firm). Hence, it is a duty of the assessee in the capacity of a partner to pump in sufficient capital contribution for the smooth running of the business of the partnership firm. This investment is to be considered as an investment made as a measure of commercial expediency. Obviously, the amount contributed by the partner would be certainly a business investment and would be for business purposes. Even if the funds required for the said contribution were received out of borrowed funds, still the business purpose of maki....