TMI Blog2012 (7) TMI 326X X X X Extracts X X X X X X X X Extracts X X X X ..... Respondent by : Shri Sanjeev Jain, FCA. ORDER PER TS KAPOOR, AM: This is an appeal filed by the revenue against the order of Ld CIT(A)- XXVI, New Delhi dated 14,2.2011. The grounds raised by the revenue are as under:- 1. That Ld CIT(A) has erred both in law as well as in the facts of the case while giving relief of Rs..19,00,505/- out of expenditure incurred on interest paid to specified persons ignoring the fact that assessee has diverted interest bearing loans in interest free advances/loans. 2. That ld CIT(A) has ignored the fact that during the course of assessment proceedings assessee failed to discharge its onus to establish that advance have been made to family members out of interest free funds available w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rrowings and interest free loans given by the appellant. In support, the Ld AR relied upon the following judgments:- 1. CIT v. Tin Box Company 260 ITR 637 (Del.). 2. CIT v. Hotel Savera 102 Taxman 247 (Mad.). d) That during the earlier year i.e. 2006-07, similar disallowance was made against which though appellant had not filed appeal as the disallowance was set up against loans but the penalty levied by the Assessing Officer u/s 271(1) of the Act was deleted by Ld CIT(A). 3. The Ld CIT(A) after considering the submissions of the assessee deleted the addition made by the Assessing Officer. The relevant portion of CIT(A) s order is reproduced below:- I have considered the submissions of the Ld counsel and the remand report of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... free advance/loans given. The Courts have held that for making the disallowance of interest the nexus has to be established by the Assessing Officer. As the nexus has not been established to show that interest bearing funds in earlier years have been diverted as interest free loans and advances it is held that the disallowance of interest of Rs..19,00,505/- is not justified. It is accordingly deleted. 4. Aggrieved the revenue has filed appeal before us. 5. The Ld DR contended before us that the assessee had not sufficient capital to give interest free loans and he took us to page 14 of the paper book wherein the balance sheet dated 31.3.2007 partner capital stood at Rs..260.41 lakhs against which loans and advances were to the tune of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which ideally should have been taxable under their respective heads of income, had the business been totally closed but in the present case, it seems that the assessee is in the process of closing down business and therefore his spending unavoidable expenses including interest on un-secured loans which were taken way back in 2001-02 202-03 and were deployed for the business of the assessee to distinguish as to how much of the un-secured loans has been used for making loans and advances and how much were used for acquiring business purposes is difficult. The cases relied by the assessee before Ld CIT(A) in the case of CIT v. Tin Box Company (supra), it was held that where the capital of the firm and interest free un-secured loans exceed th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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