TMI Blog2013 (5) TMI 77X X X X Extracts X X X X X X X X Extracts X X X X ..... 1.72 crore as advance interest free and not charged interest on it, the AO had not established the nexus between the interest borrowing fund utilized for interest free advances in the assessment order - If the interest free funds were sufficient to meet the investment in this case also the interest free funds are available and the Bombay High Court proposition in above case is squarely applicable in the case of interest free advances - Thus we allow the appeal of the assessee - I.T. A. No. 2343/Ahd/2012 - - - Dated:- 15-2-2013 - Shri D. K. Tyagi And Shri T. R. Meena,JJ. Sri Y.P. Verma, Sr. D.R. Sri Manish J. Shah, A.R. ORDER This is the assessee s appeal emanating from the order of Ld. CIT(A)- VIII Ahmedabad dated 24/09/2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The assessee was paying interest to its lenders @ 9 per cent wherein the assessee was receiving interest @ 3 per cent only. Accordingly, out of the total interest expenses, interest expenses to the tune of 6 per cent worked out by the A.O. and was disallowed and added back to the total income of the company at Rs. 10,88,824/-. 4. Being aggrieved by the order of the A.O. the assessee carried the matter before the CIT(A) who had confirmed the addition and held as under:- I have gone through the assessment order and the submission of the appellant carefully. The AO has observed that the assessee is paying interest to its lenders at the rate of 9% wherein the assessee is receiving interest @ 3% only, therefore, out of the total interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellant had interest free fund available with them at Rs. 14.15 crore. He also relied on Co-ordinate B Bench decision in ITA No. 3229/Ahd/2009 A.Y. 2006-07 in the case of Guruji Shree Sandipani Education Foundation vs. ACIT. The operative portion is placed as under:- Ld. AR Mr. Manish J. Shah has drawn our attention on the figures of the interest-free funds available with the assessee. Ld. A.R. has informed that as on 31.03.2005 the partner s capital account reflected the balance at Rs. 85,07,339/-. During the accounting period ended on 31.03.2006, the partners capital account had gone up and the closing outstanding balance was at Rs. 1,03,01,458/-. Therefore the argument was that the presumption could be either way as it was held in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f in the case of Ravindra Singh Arora vs. ACIT A.Y. 2007-08 wherein the assessee had borrowed certain fund on which liability to pay interest was incurred and on the other in certain amounts had been advanced to sister concerns without carrying any interest was to be disallowed u/s 36(1)(iii). Thus, the appeal of the assessee was allowed in favour of the Revenue. Therefore, he requested to confirm the addition. 6. We have heard rival contentions and examined the paper book submitted by both the parties. As appellant has given Rs. 1.72 crore as advance interest free and not charged interest on it, the AO had not established the nexus between the interest borrowing fund utilized for interest free advances in the assessment order. Further th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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