TMI Blog2014 (1) TMI 1275X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee indulged in financial business and almost the entire loan has been utilized for repayment of other creditors, which was on account of business expediency - The CIT(A) has noted that the repayment of loan was not for business purpose, however, nothing has been brought on record, how the same was not for the business purpose - the case of the assessee required to be considered in right perspective - The loan was not utilized somewhere else other than the business purpose - it cannot be said that the same was not for the business purpose. Disallowance of interest – Held that:- The AO has disallowed for the reason that the funds were utilized for non-business purpose - The CIT(A) has not given any finding on this issue - this amou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nterest was paid, were diverted to group companies free of interest. On appeal, learned CIT(A) vide his order dated 31-5-2006 allowed the deduction for above interest except on a loan of Rs.10 lacs utilized for financing in the purchase of shares of a group company. On second appeal, both by the assessee and the department, the Tribunal vide order dated 3-7-2009 sent back the issue to the file of the AO. The AO was directed to reconsider the facts of the case and to live link all the interest income. The direction of the Tribunal has been recorded in para 11, which is reproduced in the order of learned CIT(A) at page 2 of the present order. The AO while completing the fresh assessment found that the assessee has given loans to various parti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee has repaid Rs.45 lakhs to Himco (I) Ltd., which was taken as share application and similarly certain amount has been repaid by the assessee, which was taken earlier. Accordingly, he observed that there is apparently no business connection or any purpose for taking loan at higher interest and repaid the sister concern at low rates. Therefore, he disallowed the entire interest at Rs.4,53,984/- paid to Satara Sahakari Bank Limited. However, no finding has been given in respect of interest disallowed by the AO of Rs.1,87,313/-. 6. As stated above, the department in appeal against the relief allowed by the learned CIT(A) and the assessee is in appeal against the disallowance confirmed by the learned CIT(A). 7. Learned DR has placed relian ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore, in my considered view, there was no occasion to hold that the assessee is inflated the cost of project by Rs.25 lakhs or charging less interest from the sister concern at the rate of 14%, against 15% interest paid by the assessee. The moot question for consideration is that whether the loan of Rs.2 crores was utilized for business purpose or not. From the facts of the case, it is clearly seen that amount of Rs.2 crores was directly paid to M/s Vestas RRB (I) Pvt. Ltd. by the bank, therefore, there is no question of doubting that the same was not for the purpose of business. Accordingly, I hold that the entire interest paid by the assessee was for commercial purposes. Accordingly, the disallowance sustained by Rs.1,44,645/- is here by d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Rs.1,87,313/-. The AO has disallowed for the reason that the funds were utilized for non business purpose. The contention of the assessee was not found favourable to the AO that the interest was paid to share holders from whom the loan was taken in earlier years, which was used for business purpose of the assessee. The CIT(A) has not given any finding on this issue. Keeping in mind the smallness of the amount, I am of the view that this amount is also allowable for the reason that the loan was taken from the share holders in earlier years and interest paid in earlier year was not disallowed. Therefore, there was no reason to disallow the interest on the amount of loan taken from the share holders paid during the year. Therefore, the addit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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