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TMI Blog2014 (2) TMI 1157X X X X Extracts X X X X X X X X Extracts X X X X ..... ; (ii) Shri Virendra Kumar Agarwal Rs. 2,40,000/- and (iii) Shri Virendra Kumar Agarwal, HUF Rs. 50,000/-, totaling to Rs. 8,90,000/-. The above persons are sons of the assessee. The assessee submitted that these loans have been given by him as interest free loan at the time of their needs. The assessee over a period of time in his life has earned some income and a very little part of it has been given to his own sons as interest free loans. It was also explained that it is the discretion of the assessee to charge or not to charge interest from anyone. Therefore, no adverse view can be taken for not charging interest from above persons. It was submitted that there is no nexus between the loan taken on interest and interest free loans given ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... free loans to his sons for their personal needs, hence, it amounted to diversion of interest funds of business without any commercial expediency. The appeal of the assessee was, accordingly, dismissed. 3. We have considered the rival submissions and perused the material available on record. The ld. counsel for the assessee relied upon the order of the ITAT, Agra Bench in the case of same assessee in preceding assessment year 2008-09 in ITA No. 44/Agra/2012 dated 20.07.2012, in which on identical facts, addition has been deleted. Copy of the order is placed on record. He has also referred to balance sheet of the year under consideration and submitted that the assessee has own capital of Rs. 2,53,96,112/- and also have interest free loans av ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sallowance u/s 36 (i)(iii) of the I.T. Act is called for, addition made at Rs. 652857/- by the AO and sustained by the CIT (Appeals) is liable to be deleted." 9. The AO made disallowance of Rs. 6,52,857/- u/s. 36(1)(iii) of the IT Act. It was noted by the AO that the assessee had taken interest bearing loans on which interest @ 12% was paid. However, the assessee had given Rs. 1,13,44,044/- to his HUF. The AO held that the loan was not given by the assessee for any business consideration. Also the AO noted that the assessee during the year had paid interest of Rs. 11,64,483/- on the borrowed funds. By referring to certain case laws, the AO held that the assessee was not entitled for full allowance of interest as claimed by him u/s. 36(1)(i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he issue is the same as is argued in ground No. 3 & 4 above. On consideration of the above facts on this issue, we find that the decision given on grounds Nos. 3 & 4 also applies to the facts of this case on this ground. The assessee has sufficient capital, profit and interest-free funds available with him for the purpose of investment. No nexus between the borrowed funds and interest free funds has been established by the AO on record. Therefore, the addition would be unjustified in the year under consideration. Considering the finding given on ground No. 3 & 4 and the facts of this issue, we do not find any justification to sustain the addition. Accordingly, the orders of the authorities below on this issue are set aside and the addition ..... X X X X Extracts X X X X X X X X Extracts X X X X
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