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2015 (12) TMI 99 - ITAT DELHI

2015 (12) TMI 99 - ITAT DELHI - TMI - Addition towards notional interest @ 12% on the amounts advanced to Adityam Technoplast Pvt. Ltd. - Held that:- No cogent material on record to establish that the assessee had sufficient/ surplus funds available with him, which could be advanced as interest free loans to the said company. His total capital as on the first day of the financial year was ₹ 18,32,831/- and at the year end was ₹ 17,79,072/-. Secured loan is of ₹ 2,58,375/- and u .....

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unds which could be advanced as interest free loan. It appears that loan has been given to Adityam Polymer (P) Ltd., Roorki for the purpose of purchasing land out of loan fund. The assessee could not be able to substantiate his stand that he had surplus fund which could be advanced as interest free loan to the sister concern so as to make the assessee eligible for deduction of interest. The case laws cited by the assessee, actually deal with the cases where there was surplus fund on account of h .....

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L.P. Sahu, Accountant Member: This appeal by the assessee is directed against the order dated 07.01.2013 of learned CIT(A), Ghaziabad for the assessment year 2007-08, challenging the sustenance of addition of ₹ 2,98,396/- made by the AO towards notional interest @ 12% on the amounts advanced to Adityam Technoplast Pvt. Ltd.. 2. The brief facts of the case are as under : The assessee is a proprietor of Adityam Polymers and is engaged in the business of manufacture and sale of moulds, plast .....

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loan of ₹ 24,86,550/- to Adityam Technoplast Pvt. Ltd. in the following manner : Date Amount (Rs.) a). 10th April, 2006 6,60,000 b). 27th May, 2006 9,15,000 c). 27th May, 2006 7,37,500 d). 30th May 2006 1,74,050 24,86,550 3. The said loan was for purchase of plot at Roorki by the said company and the assessee is one of the co-promoters of that company. The assessee has also taken interest free loan of ₹ 11.50 lacs during the relevant period and he has owned capital of ₹ 17,79, .....

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His investment as on date of balance sheet on Fixed Assets was of ₹ 78,11,751/-. The authorities below did not agree with the stand taken by the assessee and disallowed the interest of ₹ 2,98,386/- @ 12% on the amount advanced of ₹ 24,86,550/- to M/s. Adityam Technoplast Pvt. Ltd. It was also submitted that the objects of the Company were similar to the manufacturing activity carried on by him. 4. The learned counsel for the assessee argued that the money advanced to the said c .....

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n be made. Out of total loan amount of ₹ 24,86,550/- advanced to Aditya Polymers Pvt. Ltd., as reproduced above, a sum of ₹ 6,60,000/- was advanced out of ₹ 3,50,000/- deposited in case on 10.04.06 out of own fund and ₹ 2,25,000/- taken as unsecured loan on 12.04.2006 @ 8% interest. A sum of ₹ 9,15,000/- and ₹ 7,37,500/- was advanced out of deposit of ₹ 17 lacs on 27th May, 2006, which was transferred from current account no. 2784 with ICICI Bank, contai .....

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lso placed reliance on the following decisions : (i). CIT vs. Reliance Comm. Infra Ltd. (2012) 21 Taxmann.com 118 (Bom.) (ii). JCIT v. Beekay Engineering Corporation (2010) 325 ITR 284(Chattisgarh) (iii). CIT v. Premier Poly Sacks Pvt. Ltd. (2010) 321 ITR 450 (Mad.) (iv). CIT vs. Ms. Sushma Kapoor (2010) 188 Taxmann 24 (Delhi) (v). CIT v. K.B. India Pvt. Ltd. (2010) 2 DTL online 301 (Delhi) (vi). Regal Theatre v. CIT 100 Taxman 116 (Delhi) (vii). Madhav Prasad Jatia v. CIT (1979) 1 Taxmann 477 ( .....

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h which has no direct nexus with the loan advanced to M/s. Adityam Technoplast (P) Ltd. He further submitted that interest on borrowed money is allowed as a deduction from the business only if the assessee satisfies the condition laid down in section 36(1)(iii) of the Act only if the same has been used for the purpose of business. Where the money borrowed was diverted for giving interest free loans to sister concern, the proportionate interest attributable to such loans could be legitimately dis .....

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have gone through the orders of the authorities below, materials available on record and the decisions relied upon. 7. Having considered the rival submissions and on careful examination of the Balance Sheet produced by the appellant, we find no cogent material on record to establish that the assessee had sufficient/ surplus funds available with him, which could be advanced as interest free loans to the said company. His total capital as on the first day of the financial year was ₹ 18,32,8 .....

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