TaxTMI 
TaxTMI 
TaxTMI 
2025 (8) TMI 1688
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.... 2. The CIT(A) has erred on facts and in law in mechanically upholding the action of AO in incorrectly invoking the provisions of Section 14A of the Income Tax Act, 1961 and making the addition of Rs. 9,39,766/- in spite of the fact that the appellant had no exempt income and has further erred in ignoring numerous from the Hon'ble Jurisdictional High Court) referred and relied by the appellant. 3. The CIT(A) has erred on facts and in law in upholding the action of AO in incorrectly invoking the provisions of Section 36(1)(iii) of the Income tax Act, 1961 and making the addition of Rs. 2,20,500/- although the appellant had sufficient capital and other non-interest bearing funds. 2. Brief facts of the case are that assessee filed its return of income originally for the year under consideration on 20.09.2014 declaring loss of Rs. 97,12,795/-. The case of the assessee was selected for scrutiny and assessed u/s. 143(3) vide order dated 28.12.2016 at a loss of Rs. 85,62,629/- by making the additions of Rs. 2,00,00,000/- u/s. 68 of the Act; addition of Rs. 9,39,766/- u/s. 14A of the Act and addition of Rs. 2,20,500/- u/s. 36(1)(iii) of the Act, thus adding total addition of Rs. 2 cro....
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....ived from M/s. Virat Exports Pvt. Ltd. as unsecured loan on different dates during the year. In the case of the assessee company, the unsecured loan has been taken of Rs. 2,00,00,000/- claimed to have been received from M/s. Virat Exports Pvt. Ltd., the amount is a huge amount and it is apparent that in such cases of closely held companies, the transaction has been done between business entities who are controlled by known persons. In such cases, higher onus is required to be placed on such companies to also prove the source of money, in the hands of such persons or business enterprises making payment or receiving funds. If the company fails to discharge the onus, the sum should be treated as income of the company and added to its income. Therefore, it is imperative for the assessee company to provide that the nature and source of any sum credited, as unsecured loan in its books, and the same can be treated as explained, only if the source of funds is also explained by the assessee company. The treatment of the amount Rs. 2,00,00,000/- as unexplained cash credit as per the provisions of section 68 of the Act has been done correctly in the assessment order and accordingly, it was co....
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.... FY 2014- 15 i.e. the next year. Since it was a business advance, hence, the question of charging interest does not arise. The argument of AO that the said Rs. 40 lacs cannot be treated as business advance since no documentary proof of the same was furnished lacks merit because even the AO has not brought on record any evidence to substantiate that Rs. 40 lacs was indeed a loan. In the case of M/s Akinchan Developers Private Limited, temporary loan was received as well as given to M/s Akinchan Developers Pvt. Ltd. For need of the business on which neither any interest was paid by the Company nor any interest was charged by the company. Had the interest been charged as well as paid by the company, the net interest chargeable by the Company would have been negligible. This fact has been accepted by the AO and the differential interest has been computed to be Rs. 15,500/-, hence, on commercial prudence, the same was not charged by the assessee and addition on this account is not tenable. Ld. DR relied upon the orders of the authorities below. After hearing both the sides, we note that the assessee company has borrowed interest bearing loans on which interest is paid to the extent of R....
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....rpose is available as a business deduction. If the assessee makes a claim to deduction in terms of Section 36 for the purpose of computation of income referred to in section 28, he has to produce materials in support of his claim of entitlement to the deduction. Section 36 (1) ii) relates to the amount of interest paid on capital borrowed for the purpose of his business, profession or vacation. The assessee has to satisfy the assessing authority that he is entitled to obtain deduction in accordance with the taxing statute. The principle equally applies in case of deductions calmed. Once the assessee claims any such interest as deduction in their books of account the onus is always on the appellant to satisfy the Assessing Officer that whatever loans were raised by the appellant were for the purpose of business. If in the process of examination of genuineness of such deduction, it transpires that the appellant has advanced certain funds to sister concerns charging no interest, there would be a very heavy onus on the assessee to discharge before the Assessing Officer to the effect that in spite of outstanding loans which the assessee is incurring liability to pay interest, there woul....