Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2017 (10) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2017 (10) TMI 769 - AT - Income TaxDisallowance of interest expenditure u/s 36(1)(iii) - Held that:- Undisputedly, the Assessing Officer has disallowed part of interest cost amounting to ₹ 14,53,423, on the reasoning that assessee has advanced interest free loans to various parties from borrowed funds. However, from the assessment stage itself, the assessee has pleaded that sufficient interest free fund was available with the assessee to advance interest free loans. In fact, the Assessing Officer also to some extent has accepted assessee’s plea by observing that interest free loan of ₹ 74,03,683, was out of interest free funds available with the assessee. It is the claim of the assessee that as on 31st March 2007, the assessee was having interest free funds of ₹ 2,82,13,694, whereas, interest free loans advanced by the assessee stood at ₹ 2,49,75,541. In our considered opinion, the aforesaid contention of the assessee requires verification. In case, the assessee is able to establish the fact that sufficient interest free funds was available to advance interest free loan, no disallowance under section 36(1)(iii) of the Act can be made. In view of the aforesaid, we restore the issue to the file of the Assessing Officer for fresh adjudication in terms with our direction herein above Addition made under section 68 - Held that:- the assessee deserves an opportunity to prove the loan transactions through all the legal means available to it. If the assessee can prove the genuineness of the loan transactions by producing any witness, the assessee must be allowed to do so. As far as the contention of the learned Departmental Representative that learned Commissioner (Appeals) should not have deleted the loan standing in the name of Avtar Singh Sethi, as his creditworthiness was not proved, we must observe, in the remand report the Assessing Officer while examining this particular loan transaction has verified the bank account of the said loan creditor and found that the amount of ₹ 2 crore was advanced to the assessee a deposit of ₹ 1.99 crore was made in the account of the creditor. He has also stated that the assessee filed copy of account of the creditor to indicate that the said amount of ₹ 1.99 crore came from the over draft account. In our view, this fact also requires further verification by the Assessing Officer. In case, it is proved that the loan of ₹ 2 crore originated from ₹ 1.99 crore in the over draft account of the creditors, then, there will be no case for addition of the said amount. However, in our view, further enquiry has to be conducted by the Assessing Officer to establish availability of nexus or otherwise between the two amounts. With the aforesaid observations, we restore the matter back to the file of the Assessing Officer for considering afresh.
|