2016 (9) TMI 1606

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....ther in the facts and circumstances of the case the CIT (Appeals) has erred in confirming the disallowance of interest on account of the loan/advances of Rs. 1,58,54,874 to its three Directors. In the scrutiny assessment, the Assessing Officer noticed from the details filed by the assessee that the assessee claimed the interest of Rs. 2,82,57,064 on loans aggregating to Rs. 21,72,89,376. The Assessing Officer further noticed that the assessee has given advances amounting to Rs. 1,58,64,874 to its three Directors as under : S.No. Name of the Director Advance Given (Rs.) 1. Deepak Gandhi 5,86,000 2. S.K. Gandhi 92,72,000 3. Manish Gandhi 60,06,874   Total : 1,58,64,874 Accordingly, the Asse....

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....rowed fund are pooled together the presumption can be raised that the assessee's own fund is utilized for the purpose of giving interest free advances to the Directors. 4. On the other hand, the ld. DR has relied upon the orders of the authorities below and submitted that the assessee has failed to show the direct nexus between the advances given to the Directors and the assessee's own fund. He has further contended that when the assessee's own fund is already utilized for acquisition of the assets then it cannot be presumed that the own fund is available for giving loan to the Directors. 5. We have considered the rival submissions as well as the relevant material on record. The assessee has claimed that the assessee's....

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....ance sheet as on 31st March, 1999 showed that the shareholders funds were utilised for the purpose of fixed assets. To our mind the P&L a/c and the balance sheet would not show whether shareholders funds have been utilised for investments. The argument has to be rejected on this count also. 9. Apart from that we have noted earlier that both in the order of the CIT(A) as also the Tribunal, a clear finding is recorded that the assessee had interestfree funds of its own which had been generated in the course of the year commencing from 1st April, 1999. Apart from that in terms of the balance sheet there was a further availability of Rs. 398.19 crores including Rs. 180 crores of share capital. In this context, in our opinion, the findi....