9911796707
TMI Blog2012 (9) TMI 506X X X X Extracts X X X X X X X X Extracts X X X X ..... . The assessee is an individual and he is engaged in the business of trading in sanitary ware, pipes and fittings. On perusal of the Profit & Loss account the AO noticed that the assessee had claimed deduction a sum of Rs.29,32,184/- under the head interest expenses. The above interest expenditure relates to interest on borrowings of Rs.2,54,65,206/-. From the balance sheet the AO noticed that the assessee has made the following advances. 1. Other loans Rs. 90,46,510 2. Mehra & Sons Rs. 15,00,000 3. Shravan Mehra Rs. 9,00,000 1,14,46,510 The AO further noticed that the assessee has received an interest of only Rs.3,18,480/-. The AO was of the view that the Assessee paid higher interest on borrowings and gave those funds at l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2.00 DCB Bank loan 576,345,00 Deutsche Bank 484,827,00 ING Vysya Loan A/c 954,700,00 Other unsecured loans Amarchand 346,000,00 Batija Sanjay 200,000,00 B.T.Mohan 200,000,00 Chaitanya & Co 136,960,00 Drusina 250,000,00 Harilal 197,062,00 Kamal Bensilal 173,000,00 Kanchan B Tukrel 171,200,00 Kranti Mohan Mehra 100,000,00 Kripa S Bathija 200,000,00 Manoj Kumar Co 342,400,00 Nirmala Bansilal 200,000,00 Pandu Bhai 550,000,00 Shravan Mehra 72,500,00 Total Rs. 5,854,496,00 4. The CIT(A) however, did not accept the submissions made by the assessee. He held as follows; "3.5 I have considered the facts of the case, the assessee's submissions and perused the assessment order. A perusal of the balance she ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oan Rs. 84,27,440 Closing balance as on 31/3/2007 Rs. 87,96,510 3.8 A perusal of the ledger account shows that the total advance made during the previous year relevant to the assessment year under consideration was Rs.1,06,70,476/- by withdrawing from the account No.10748 with Canara Bank (OD account). It is interesting to note that repayment of loan was through various parties and that also by journal entries and no single transaction has been received through cheques or demand drafts. A few of such parties are H.Murlidhar & Sons, Koshandas Jethanand, Sunil Finance, Bharat Satram Kumar, Jagadish Hemdev, Chaitanya & Co., Shri Shiva Sakthi, Gopaldas Thakur, etc. 3.9 At the end of the previous year, they are having credit balance in respec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... OD account amounting to Rs.21,19,225/- and interest of Rs.2,01,055/- on unsecured loan. The assessee advanced loan to the extent of Rs.24,00,000/- to close associates but no interest was charged. 3.11. In the light of the discussions made above, I am in agreement with the AO's observation that the assessee is paying higher rate of interest on the funds, which have been advanced at lower rate of interest. Since there is no exact method of working out such interest, the AO's working for disallowance of Rs.9,99,529/- is reasonable looking to the transactions made during the year. Therefore, the disallowance of Rs.9,99,525/- is confirmed". 5. Aggrieved by the order of CIT(A), he asessee preferred the present appeal before the Tribunal. 6. W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which would go to reduce its taxable income. Reference was also made to the decision of the Hon'ble Delhi High Court in the case of Punjab Stainless Steel Industry Vs CIT ( 324 ITR 396) wherein it was held that interest disallowance has to be sustained where commercial expediency is not established by the assessee. 8. We have considered the rival submissions. Perusal of the written submissions fled by the assessee before the CIT(A) shows that the assessee has specifically pleaded availability of sufficient interest free funds from which interest free loans had been advanced to the sister concern. The above aspect has not been examined by the CIT(A). The CIT(A) has proceeded only on the basis of that there was nexus between interest free l ..... X X X X Extracts X X X X X X X X Extracts X X X X
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