TaxTMI 
TaxTMI 
2021 (12) TMI 1291
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.... the same be deleted. 3. The learned Commissioner (Appeals) erred in confirming disallowance of interest to the extent of Rs. 12,09,891/- on account of interest free loan to sister concern. Your assessee submits that the disallowance is not justified and prays that the same be deleted. 4.The learned Commission (Appeals) erred in confirming disallowance of expenditure on repairs to the extent of Rs. 27,38,798/- and instead, allowing depreciation at 10% in respect thereof. Your Assessee submits that the disallowance is not justified and prays that the same be deleted." 3.Ground No.1 and 2 relate to addition of Rs. 25,00,000/- on account of share capital / share premium. 4.The relevant material facts, as culled out from the material on record, are as follows. The assessee is engaged in the business of manufacturing of glass bottles and components. During the year under consideration, the assessee company has issued 7500, 5% Convertible Non-Cumulative Redeemable Preference Shares of Rs. 100/- each at a premium of Rs. 900/- each to M/s Nakshtra Electricals & Engineers Pvt. Ltd. and Mr. Mohammad Imran Attarwala. The details of shares issued are as under:- Sr No....
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....ess of the shareholder and genuineness of the transaction in the case of M/s Nakshtra Electricals & Engineers Pvt. Ltd, therefore, assessing officer treated the aforesaid sum of Rs. 25,00,000/- (share capital Rs. 2,50,000/- and share premium of Rs. 22,50,000/-), received as unexplained cash credit u/s 68 of the Income Tax Act, 1961. 7.Aggrieved by the order of Assessing Officer, the assessee carried the matter in appeal before Ld. CIT(A) who has confirmed the action of Assessing Officer. 8.We have given our thoughtful consideration to rival contention. Learned Counsel for the assessee reiterated the submissions made during the appellate proceedings. On the other hand, the Ld. DR for the Revenue has primarily reiterated the stand taken by the Assessing Officer, which we have already noted in our earlier para and is not being repeated for the sake of brevity. We note that Ground Nos. 1 and 2 raised by the assessee pertain to addition of Rs. 25 lakhs made u/s 68 on account of unexplained cash credit being the amount received from issuance of shares. The AO examined this issue at length and noticed that the assessee had shown investment in shares in the name of M/s. Nakshatra Ele....
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....o disallowance of interest at Rs. 12,09,891/- u/s 36(l)(iii). The AO noticed that the assessee company had diverted interest bearing funds amounting to Rs. 1,50,07,000/- to associate concern P.G. Pvt. Ltd. without charging any interest undisputedly, the assessee has paid huge interest amounting to Rs. 2,00,72,166/- on cash credit account. Ld. AR has vehemently submitted that shareholders capital and reserves and surplus were to the tune of Rs. 55.73 crores and hence, no interest can be disallowed. However, it is noticed that the interest free advance to the sister concern was given out of cash credit account bearing interest burden. The total snort term borrowings have increased during the year under consideration from Rs. 15.24crores to Rs. 20.04 crores. Since, there was direct nexus between the interest free advances given to the associate concern and borrowed funds, in my considered view, the decisions relied upon by the Ld. AR are distinguishable on facts. Accordingly, I hold that the disallowance u/s 36(l)(iii) is called for since the assessee has not utilized borrowed funds for the purposes of business to the extent of interest free advances. This view gets support from the r....
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....wed for statistical purposes. 13.Ground No.4 relates to disallowance of expenditure on repairs to the extent of Rs. 27,38,798/-. 14. Brief facts qua the issue are that assessing officer observed from the profit and loss account, of the assessee company that assessee has claimed repairs and maintenance of Building to the tune of Rs. 63,43,875/- in the profit and loss account. During the course of assessment proceedings, the assessee was asked to furnish bills/vouchers with supporting evidences for verification. Ongoing through details filed by assessee, the AO noticed that following amounts were paid for road repairing work, which are of the nature of capital expenditure: Sr. No Bill/voucher No. Name of party Amount 1 06/370 Keshavji Devji &Sons, Tarsadi Rs. 3,53,160/- 2 06/373 Keshavji Devji &Sons,Trasadi Rs. 5,16,100/- 3 09/226 Bharat M Ramani, Kosamba Rs. 73,920/- 4 06/227 Shree Ram Quarry, Kosamba Rs. 93,841/- 5 09/384 Vijay engineering,Vadodara Rs. 1,69,298/- 6 09/385 Vijay Engineering, Vadodara Rs. 1,69,298/- 7 09/386 Bharat M Ramani, Kosamba Rs. 7,00,255/- 8 09/387 S....