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TMI Blog2012 (7) TMI 128X X X X Extracts X X X X X X X X Extracts X X X X ..... ccordingly calculated the amount of disallowance at Rs.6,86,000/- as under :- (A.O. paragraph no.5) "5. So, it is clearly established that proportionate disallowance u/s 36(1)(iii) of interest should be made on the interest free loans given by the assessee to the following persons. Assessee has paid interest at different rates, for example in the case of Bharat Trust interest has been paid @ of 15%, in the case of share holders and directors interest has been paid @ 8%, and in the case of Pushp Lata Agarwal and Ravi Agarwal, HUF interest has been paid @ 12%. Therefore, disallowance of interest is being paid @ 12%.: Sl.No. Name Amount Rate of interest Period Total Interest 1. M/s Farah Ice & Cold Storage Pvt. Ltd. 10,50,000 8,50,000 12% 20 days 10 months 7000 85000 2. K.P. Buildwell Pvt. Ltd. 10,50,000 12% 10 months 105000 3. M/s Singhal Wire & Insulation Pvt. Ltd. 4,50,000 12% 6 months 27000 4. 4. Gulab Build Well Pvt. Ltd. 1000000 12% 8 months 80000 5. Rajendra Chand Jain 7,00,000 12% 11 months 77000 6. Akin Finvest Pvt. Ltd. 5,00,000 10,00,000 10,00,000 10,00,000 12% 11 months 10 months 8 months 7 months 55000 100000 80000 70000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the explanation offered it is clear that money was advanced to the company not for any business consideration. In the case of M/s Singhal Wire & Insulation (P) Ltd., it is stated that there was loan account of the said company and money was given and received back at different intervals even within a month, two months or three months, here also no business expediency is forthcoming from the explanation of the assessee. In the case of Gulab Buildwell (P) Ltd. it is stated that the money was advanced for the purpose of dealing of some land at village Samri near Rajpur Samsabad Road, Agra and the money was given on 18.7.05. As per the explanation of the appellant, the deal could not materialize and the cheque was received on 22.3.06. This plea of the assessee cannot be accepted as the money was given on 18.7.05 and received back on 22.3.06. There is a gap of nearly 8 months, if some agreement for purchase of immovable property was entered into and money was parted at the time of agreement, the same at least should have been reduced to writing if not registered. No documentary evidence has been filed by the appellant to substantiate its claim. In the case of Shri Rajendra Chand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion money of Rs.4,00,000/- and sundry creditors and advance of sale was Rs.36,37,606/-. Thus, the total fund available with the assessee on which no interest was payable was Rs.75,46,676/-. The Ld. Authorised Representative made alternate contention that the assessee was having sufficient own fund out of which the interest free advance was made. The Ld. Authorised Representative relied upon the following decisions:- 1) CIT vs. Radico Khaitan Limited, 274 ITR 354 (All.) 2) CIT vs. Prem Heavy Engg. Works Pvt. Ltd., 150 Taxman 90 (All.) 3) CIT vs. Harbhajan Sarabjeet & Associates, 151 Taxman 27 (All.) 4) CIT vs. Tin Box Co., 135 Taxman 145 (Delhi) 6. The Ld. Authorised Representative submitted that when the assessee is having sufficient capital and reserve funds in that case interest pertaining to advances to sister concern, the interest cannot be disallowed. It is also submission of the Ld. Authorised Representative that the interest free advance was given to sister concern for business expediency. Ld. Authorised Representative further submitted that the A.O. has failed to establish the nexus between the borrowed fund and the interest free advance mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (A) held that during the appellate proceedings nothing has been brought on record that the sale deed for the purpose of which ostensibly the money was advanced has been executed. In respect of M/s. Akin Security (P) Ltd., the CIT(A) held that nothing has been brought on record that actually some formal agreement was entered into with this party or giving of advance resulted into actual purchase of land from the party. In the light of the facts recorded by the CIT(A), we find that the judgment of the Apex Court in the case of S.A. Builder Limited vs. CIT, 206 CTR 631(SC) and Munjal Sale Corporation vs. CIT, 215 ITR 105 (SC) do not help the assessee as the assessee has failed to substantiate its submission that the advance was given in accordance with business expediency. As regards the purchase of land from M/s Akin Finvest Securities Ltd., copy of Sale Deed is placed in Paper Book which is dated 21st October 2009 whereas the Assessing Officer has passed the Assessment Order on 25th November, 2008 and the order of CIT(A) is dated 28.12.2010. Admittedly, this sale deed was not before the A.O. while making the assessment. On perusal of records, we notice that the assessee did not mak ..... X X X X Extracts X X X X X X X X Extracts X X X X
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