TMI Blog2015 (9) TMI 174X X X X Extracts X X X X X X X X Extracts X X X X ..... maintained with Rajasthan Bank Ltd., Kota. The assessee has transferred ₹ 43 lacs from CD A/c of HDFC Bank, Kota to A/c No. 1672070000032 on 1-02-2005 in the bank maintained with Rajasthan Bank Ltd., Kota. The assessee had not charged any interest. It is undisputed fact that the assessee had paid bank interest of ₹ 472,324/- which includes interest paid to HDFC Bank, Kota at ₹ 1,21,214/- and SBI, Chawni Branch, Kota at ₹ 3,51,110/- which has been directly adjusted by the assessee against interest income. The AO had established the nexus that the assessee had borrowed the funds on interest and advance the interest free loans to the sister concerns or other concerns. Thus in view of the above deliberations, we confirm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... derived income from other sources by way of interest and this income from other sources was wrongly set off on account of payment of interest on overdraft facility and bank charges on account of payment of DD Commission etc. The AO further observed that bank overdrafts were mainly due to the fact that interest free advances were made to either the sister concerns or other assessee's from whom no interest was charged. The assessee had not shown the interest and bank charges payment for ₹ 4,80,069/- in the profit and loss account and he simply reduced this amount from the income from other sources and disclosed net income. As per the AO, the set off of payment of interest on bank loans and bank charges were wrong and not allowable. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . If these loans would have been received back, there would not have been any liability for payment of interest. It is further found by the AO that the assessee had given ₹ 60.00 lacs to M/s. Mittal Pigment (P) Ltd. on 12-12-2005 and no interest had been charged from that amount. The assessee had also given ₹ 1.50 crores to M/s. Gaurav (P) Ltd. i.e. another sister concern on 17-01-2006 from his bank account maintained with Bank of Rajasthan Ltd. However, on this account also, the amount was transferred from the loan/ overdraft account on which interest had been paid. This shows that there is no business expediency and the assessee had advanced the loan without charging interest. The AO relied on the following case laws.. 1. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccount cannot be accepted. Entire money in a business entity comes in a common kitty. The AO further observed that the money received as share capital, as term loan, as working capital loan, a sale proceeds etc. did not have any different colour. Whatever are the receipts in the business that have the colours of business receipts and have no separate identification. Sources have no concerns. Whatsoever, the only thing sufficient to disallow the interest paid on the borrowing to the extent of the amount is lent to sister concern without carrying any interest or non-business purposes would be that the assessee had some loans or other interest bearing debts to be repaid. In case the assessee had some surplus amount which could not be repaid pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ddition of ₹ 2,40,035/- was confirmed by the ld. CIT(A) and remaining interest payment of ₹ 2,40,034/- was deleted. 2.3 Now the assessee is before us. The ld. AR of the assessee submitted that funds had not been advanced during the year under consideration but it was the loan outstanding from earlier years. The ld. CIT(A) observed that loans to M/s. Anjali Traders for ₹ 15.00 lacs , M/s. Anljani Dyeing Printing Mills Ltd. for ₹ 9.00 lacs and Shri Rajender Kumar Garg for ₹ 5.00 lacs were out of OD account but it is a fact that loans i.e. to M/s. Anjali Traders given on 13-08-2001, M/s. Anjani Dyeing Printing Mills Ltd. on 4-05-1998 and Shri Rajender Kumar Garg on 18-05-2003 to prove that loans given to ab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion which has been confirmed by the ld. CIT(A). 2.4 At the outset, the ld. DR relied on the order of the ld. CIT(A) 2.5 We have heard the rival contentions and perused the materials available on record. It is a fact that whatever names mentioned by the ld. CIT(A) in his findings were the loanee in preceding years. Therefore, the ld. CIT(A) s finding is totally wrong. However, the AO s findings in case of M/s. Mittal Pigment (P) Ltd. and M/s. Gaurav (P) Ltd. were found correct that during the year under consideration the assessee had given ₹ 60 lacs on CD A/c maintained with HDFC Bank bearing A/c no. 1672070000032 on 12-12-2005 to M/s. Mittal Pigment (P) Ltd. and ₹ 1.50 crores to M/s. Gaurv (P) Ltd. on 17-01-2006 from the b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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