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2012 (9) TMI 228 - AT - Income TaxAddition made by invoking S28(iv) treating certain liabilities as in-genuine liability - Held that:- In present case, assessee has shown liability of the aforesaid amounts in its books of account and the balance sheet. The liability is still existing, which is also noted in balance sheet. It is also evident that these were old loans, which were accepted by the Revenue in the preceding assessment year in the scrutiny assessment. Thus, these were opening balance coming up in the assessment year under appeal. The assessee has not written off or squared up any of the amounts in the accounts of the assessee. The amount in question has not been transferred to the P/L A/c. There is no waiver of the loan and the amounts have not been transferred to any reserve fund of the assessee. Therefore, the same cannot be treated as income of the assessee because the liability still existing in the books of the assessee. Dis-allowance u/s 14A - Held that:- Addition is clearly unjustified in the matter. Firstly, assessee has shown that investments have been made in shares in AYs starting from 1991-92 to December, 2006 and Nov. 2007. Thus, no investment has been made in the AY under appeal. Secondly, no borrowed funds have been used for the purpose of investment. AO has not proved any nexus between the borrowed funds and the amounts invested in shares in assessment year. Further, sufficient funds and profits are available to the assessee to make investment though no investment has been made in this year, but it was made several years back. Thirdly, interest received by the assessee are in a sum of Rs.2,62,656/-, but interest paid was Rs.1,48,913/-, thus, assessee practically did not incur any expenditure on the interest. Hence, provisions of section 14A have been wrongly applied. Addition is, therefore, deleted. Dis-allowance u/s 36(i)(iii) - loan given to HUF for no business consideration - Held that:- It is observed that assessee has sufficient capital, profit and interest-free funds available with him for the purpose of investment. No nexus between the borrowed funds and interest free funds has been established by the AO on record. Therefore, the addition would be unjustified in the year under consideration - Decided in favor of assessee
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