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2023 (10) TMI 328 - DELHI HIGH COURTAddition u/s 68 - assessee had failed to demonstrate the creditworthiness of the source of source - ITAT Confirmed order of deletion as done by CIT(A) - HELD THAT:- As the identity of the investor, which is BBHL, is not in dispute. As a matter of fact, the source of source was also identified, which in this case, is one Mr Joseph Thomas, a permanent resident of UAE. The creditworthiness of the investor, i.e., BBHL, is demonstrated by the fact that the amount invested in India was sourced from a personal loan given by Mr Joseph Thomas. BBHL is an investment company and therefore, its creditworthiness can only be ascertained from the availability of funds and not by having regard to the period for which it has been in existence and earned its revenue. As far as the genuineness of the transaction is concerned, the respondent/assessee has adverted to the relevant material which was placed before the concerned statutory authorities, which included permission accorded by RBI and the methodology used for calculating the premium. Assessee has correctly argued before us, that insofar as the foreign investor is concerned, i.e., BBHL, the respondent/assessee could not have allotted shares below the floor price, which was Rs. 95.07 per share. This, to our mind, explains the difference between the price per share collected by the respondent/assessee from BBHL as against domestic investors. It is also relevant to note that the domestic investors, i.e., the two individuals, are promotor directors of the respondent/assessee, which is why perhaps, they were allotted shares at face value. The third domestic investor, i.e., Blue Ocean Resorts Pvt. Ltd. is controlled by Rishal Sawhney and Rohini Sawhney. As noticed hereinabove, both persons hold 50% shares in the said company. The argument advanced by revenue that the onus was on the respondent/company to further demonstrate credit worthiness of the source of source, i.e., Mr Joseph Thomas, is flawed as the amendment in law with regard to the identifying source of source was inserted by way of a proviso to Section 68 of the Act with effect from 01.04.2013. Therefore, this obligation in law could not be cast on the respondent/assessee, although it did identify the source of source and Mr Joseph Thomas furnished a personal loan to BBHL. Therefore, insofar as BBHL was concerned, the fund flow was disclosed to the statutory authority. Beyond that, in the AY in issue, nothing further was required to be shown. Mr Joseph Thomas is concerned, the CIT(A) found that he furnished a personal loan to BBHL. Therefore, insofar as BBHL was concerned, the fund flow was disclosed to the statutory authority. Beyond that, in the AY in issue, nothing further was required to be shown. Therefore, the deletion ordered by the CIT(A) which was confirmed by the Tribunal, was, in our view, the correct call, in the facts and circumstances obtaining in the case. Disallowance of 70% of the expenses incurred by the respondent/assessee for arranging hotel accommodation, air passage and vehicles for its directors - CIT(A) records in his order, that he examined the invoices and other material and thereafter concluded, that the expenses claimed by the respondent/assessee indeed had a nexus with its business interest. The CIT(A) records in the order that the AO had called for an explanation with regard to the purpose of the visits which had led to the directors incurring the expenses towards accommodation and travel. The CIT(A) also records that the appellant/revenue brought nothing on record to show that the expenses given were false/incorrect. The expenditure was disallowed, as it appears on the ground that it was expended for personal use as against business use, and not on the ground that it was expensed on accommodation or travel. We are of the view that the CIT(A) and the Tribunal came to the correct conclusion that the expenses incurred had a nexus with the business interest of the respondent/assessee. Revenue appeal dismissed.
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