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2021 (12) TMI 641 - ITAT JAIPURDisallowance of interest paid on loan u/s 36(1) (iii) - Diversion of interest bearing funds during the period under consideration - assessee advanced loan to Shri Babu Lal Natani on interest @ 15% and derived income there form as interest and declared in the “income from other sources”, the rate of interest charged 15% is more than interest on borrowed funds - whether the directorship in the Companies is profession or not? - HELD THAT:- The assessee is director in Natani Rolling Mills (Pvt,) Ltd and Neelkanth Industries (Pvt.) Ltd since long back and purchased shares of Neelkanth Industries (Pvt.) Ltd. prior to the assessment year 2009-10 of ₹ 47,65,000/- and there was no any further investment in the shares and the share in another Company Natani Rolling Mills (Pvt.) Ltd. were also purchased before the assessment year 2009-10 of ₹ 7,32,000/-, thus, the total share were purchased of ₹ 54,97,000/-, thus, we are view of that the assessee has the same shares only and there in no any direct nexus of investment out of the loan during the period under consideration because no any shares were purchased during the period under consideration.. Assessee took loan for business purposes from the financial institutions namely Bajaj Finance and thereafter from the HDFC Bank Ltd. The assessee has been doing business as working partner in the partnership firms as well as profession/vocation as Director in three Companies. From perusal of Section 2(36) “Profession” includes Vocation definition of the profession the assessee is entitled for deductions of interest on loans took for business/profession. Thus, it is crystal clear that the interest was paid in the business and commercial expediency apart from that there was no any direct nexus between the investment in shares and loans taken thereafter - as the assessee borrowed the funds from the bank as well as other, the borrowing was for the business purposes only and interest thereon was paid to the Bank as well as to others also.See SA BUILDERS LTD. VERSUS COMMISSIONER OF INCOME-TAX [2006 (12) TMI 82 - SUPREME COURT] We found merit in the contentions raised by the assessee and the ld. DR has not brought on record any new material to rebut or controvert the submissions and documents placed before us, therefore, we direct to delete the disallowances confirmed by the ld. CIT(A) - Decided in favour of assessee. Disallowance with regard to excess interest paid on borrowings to the Bank who given the loan, because the assessee could not utilize the whole amount in his own business - As per the deed of partnership, it is crystal clear that the assessee could not took interest on advances as working capital to it’s partnership firm i.e. Oliya Import Export exceeding 12% which was advanced as working capital. It is important to mention here that in the course of business, it is not necessary to have profit only and there should not be any loss therein. As far as advances to Giriraj Buildcon is concerned, we noticed that the Giriraj Buildcon is a sister concern of the assessee as proprietor of the Giriraj Buildcon was also a director in the Natani Rolling Mills Pvt. Ltd. and had dealing in purchasing from the company during the period under consideration and in subsequent year also. Hence, looking to the commercial expediency given some advance for his business. Considering the totality of facts and circumstances of the case, material placed on record as well as the relevant provisions of the Act, we found merit in the contentions raised by the assessee and the ld. DR has not brought on record any new material to rebut or controvert the submissions and documents placed before us, therefore, we direct to delete the disallowance. - Decided in favour of assessee.
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