TaxTMI 
TaxTMI 
2022 (1) TMI 483
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.... 28th February, 2018 passed U/s. 143(3) r.w.s 250(6) of the Act. ITA No. 1087/Hyd/2018 is filed against the order of the Ld. Principal Commissioner of Income Tax-2, Hyderabad in F.No.48/CIT-2/263(6)/2017-18, passed 263 of the Act dated 22/03/2018. 2. In ITA No.535/Hyd/2018 the assessee has raised six grounds in his appeal however, the cruxes of the issues are that: (i) The Ld. CIT(A) has erred in confirming the disallowance made by the Ld. A.O. of Rs. 80,96,491/- towards interest. (ii) The Ld. CIT(A) has erred in confirming the addition made by the Ld. A.O. for Rs. 3 Crs invoking the provisions of section 68 of the Act towards loan received from M/s. Kawrat Associates and Sri Ganesh Associates of Rs. 1.5 Crs each. 3.....
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....s further submitted that the investment was made in order to enhance the professional income of the assessee and therefore the borrowed funds were utilised for acquiring controlling shares in the company. However, the Ld. A.O opined that the expenses incurred was not with respect to the profession of the assessee and therefore the interest income attributable to the funds borrowed has to be disallowed. Accordingly, out of the total interest expenditure incurred by the assessee amounting to Rs. 5,73,24,746/-, the Ld. A.O. disallowed the amount of Rs. 80,96,491/-. On appeal, the Ld. CIT(A) confirmed the order of the Ld. A.O by observing as under: "5. I have carefully considered the issue and submissions made by the AR. The contention....
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....of RGEMAPL as on 31.03.2013 that the appellant holds only 29.36% equity shares whereas, M/s. Indivision India Partners, Mauritius is holding 47.60% of the shares. Therefore, the submission of the appellant that he has 65% of the controlling interest in the said company is incorrect. (vi) The contention that interest is allowable U/s.36(1)(iii) also does not hold any water for / the reason that the borrowed funds invested in the company were not incurred wholly and exclusively for the purpose of profession of the appellant. (vii) It is interesting to note that the appellant has not claimed interest to the extent of Rs. 4,92,28,255/- (out of total interest expenditure of Rs. 5,73,24,746/- only Rs. 80,96,491/- was claimed as ....
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....e. In this situation, we are of the view that the addition made by the Ld. A.O which was further sustained by the Ld. CIT(A) is not appropriate. It is also evident that the assessee has interest free borrowings also to certain extent. These aspects were also not taken into consideration by the Ld. Revenue Authorities while arriving at the conclusion. Therefore, We hereby delete the addition made by the Ld. A.O for Rs. 80,96,491/- on this count which was further sustained by the Ld. CIT(A). 7. Ground No.(ii) Addition of Rs. 3 Crs U/s. 68 of the Act: 7.1. It was observed by the Ld. A.O. that the assessee had received loan from M/s. Kawrat Associates and Sri Ganesh Associates for Rs. 1.5 Crs each. The Ld. A.O. was of the view that the id....
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....he confirmation letter produced before her. These are significant discrepancies which couldn't be made up by the appellant to discharge the onus cast on him u/s.8 of the Act. It is worthwhile to note that in this case also, no interest has been credited by the appellant to the account of the creditor. Furthermore, even the so called confirmation letter does not state anything about interest receivable. 9.2. The case laws relied upon by the AR are distinguishable on facts. In the present case, the appellant failed to discharge the primary onus cast on him to furnish proper confirmation letter. Even the furnished confirmation letter of M/s. Sri Ganesh Associates suffers from so many defects/deficiencies, which has raised red flag....
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....ansactions are routed through banking channels. In this situation, the Ld. Revenue Authorities ought to have made some further enquiry on this regard before making addition in the hands of the assessee. It is also apparent that the assessee had repaid the amount of Rs. 62,50,000/- to M/s. Kawrat Associates and also obtained confirmation statement from Sri Ganesh Associates. In this situation, we are of the view that the addition made by the Ld. A.O. which was further sustained by the Ld. CIT(A) is unwarranted. Hence, We hereby set aside the order of the Ld. CIT(A) on this issue and direct the Ld. A.O to delete the addition of Rs. 3 Crs made invoking the provisions of Section 68 of the Act. ITA No. 1087/Hyd/2018 11. The Ld Pr. CIT in h....