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2017 (7) TMI 1361 - AT - Income TaxDisallowance u/s. 14A - HELD THAT:- Assessee has enclosed as a part of his paper-book details of term loans and cash credit accounts, on which the bulk of the interest, disallowed proportionately u/s. 14A, is paid. Where the same has been applied for the stated purpose, i.e., as per the agreement, for financing the capital and the working capital assets of the business, the same stands utilized for business purposes and, accordingly, no disallowance u/s. 14A, i.e., to any extent, could arise. That is, in the absence of the AO credibly rebutting the same. The onus to substantiate its claims though would be on the assessee. The matter is, accordingly, restored to the file of the AO to adjudicate afresh in accordance with law. Deemed dividend u/s. 2(22)(e) - HELD THAT:- There is a substantial increase in the volume of the credit, the entire of which (₹ 31.26 cr.) is being claimed as in relation to the trade, and it is this claim which in effect is to be substantiated. We have already noted the AO's doubt in the matter, considering the out go of the assessee’s funds toward investment, so that the two facts/incidents are apparently corroborative. Equally relevant is the quantum increase in the credit, so that whether the same corresponds with the increase in trade may be relevant. The matter arising for determination is factual, i.e., given the law as explained, being the extent to which the transactions of inflow and outflow of funds represent moneys received or paid in discharge of or toward commercial transactions. Clearly, the entire opening credit (₹ 318.38 lacs) shall have to be regarded as a trade credit as no part of it has been regarded as loan or advance in the preceding year. The matter is accordingly restored back to the file of the AO for casting the account, retaining its chronological order, into moneys flows and commercial transactions, and considering the same along with the assessee’s explanation, for his factual findings in the matter per a speaking order and decision in accordance with the law. No restraint is placed, we may clarify, on either side by us inasmuch as the issue is essentially factual so that all relevant material/objection could be taken into account. Appeals by the assessee and the Revenue are partly allowed.
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