TMI Blog2015 (12) TMI 1277X X X X Extracts X X X X X X X X Extracts X X X X ..... s 36(1)(iii) would be that if there are funds available both interest free and loans taken, then a presumption would arise that investment would be out of interest free fund generated or available with the company, if the interest free funds were sufficient to meet the investments . In the case of the assessee this presumption is established in view of huge interest free funds available with the assessee. Hence we delete the disallowance as interest @ 12% on advance outstanding to sister concern - Decided in favour of assessee. Addition as unexplained loans and advances - Held that:- We are convinced that loans and advances are outstanding as per the balance sheet of the company in case of two parties as at 31-3-2009 amounting to ₹ 1,41,71,094/- and the maximum outstanding balance at any time during the year of these two parties in aggregate amounts to ₹ 1,50,41,688/-. Therefore the actual balance outstanding is only ₹ 1,41,71,094. The note no. 6 in schedule no. 19 of the balance sheet as well as the auditor's report clearly describes so. The ld. AO as well as the CIT(A) both erred in reading the audited accounts of the company and making and confirming the add ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ddition of ₹ 8,69,906/- on account of unexplained loans and advances and addition of ₹ 4,20,512/- was made as amount outstanding as suspense account as unexplained income on the ground that no explanation is furnished. All these three additions were confirmed by CIT(A) against which assessee is in appeal before us. 3. Ground no. 1 is relating to disallowance of ₹ 2,31,640/- out of interest computed @ 12% on advances given to M/s. Chrysalis Printing and Dying Mills Ltd. being sister concern of the assessee. It was found that an advance of ₹ 19,28,900/- was outstanding in the name of one Chrysalis Printing and Dying Ltd as the close of the year. Appellant company holds 50% share holding in that company. The breakup of amount outstanding in the name of these parties shows that these are given from financial year 1998-99 to 2003-04. Ld. AO was of the view that assessee has given loan to this party and no interest has been charged on the same, he computed 12% interest on the amount of ₹ 19,28,900/- and disallowed ₹ 2,31,460/- applying the provisions of Section 36(1)(iii) of the Act. Ld. CIT(A) also upheld the disallowance holding that as assessee h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ately ₹ 2 crores each and at the end of the each year outstanding balance was also remaining of approximately RS 19 lakhs. As the details submitted shows that assessee is engaged in the business transactions with that company as these advances were given for the purpose of Printing and Dying Groups services for the assessee, it cannot be said that the advances are not for the purpose of the business of the assessee company. Further the assessee was having interest bearing fund of ₹ 36,21,707/- and non interest bearing funds of approximately ₹ 13.51 crores in the form of share capital and reserves and surpluses as at 31st March, 2009, therefore there is a considerable force in the arguments of AR that as it has more non-interest bearing funds available with it then the amount of alleged advances given to sister concern, the presumption of diverting the interest bearing funds used for giving this advances is not correct. Hon'ble Bombay High Court in case of CIT vs. Reliance utilities Ltd. 313 ITR 340 has held that the principle for disallowance u/s 36(1)(iii) would be that if there are funds available both interest free and loans taken, then a presumption would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... LTD CLOSING BALANCE 1,22,42,194 (B) CHRYSALLIS LOANS (CLOSING BALANCE) (Opening and Closing Balance being same) 19,28,900 CLOSING OUTSTANDING (A)+(B) 1,41,71,094/- She drew our attention to item no. III (a) were auditors have certified that the maximum amount involved in the transaction is ₹ 150.41 lacs. These figures are regarding the loan to the companies and parties covered in the registered maintained u/s 301 of the companies Act, 1956. The closing balance of these parties is only ₹ 1,41,71,094/- therefore there is no figures of loans and advances as per balance sheet as mentioned by AO. She further drew our attention to note no. 6 of schedule 19 of the balance sheet where the details are crystal clear that the loans and advances are of ₹ 1,41,71,094/- only in which the Directors are interested and maximum amount outstanding during the year is ₹ 1,50,41,688/-. Therefore she submitted that the addition has arisen because of incorrect understanding of the bala ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e stated that the tax rate for both the years are same and therefore addition may be deleted an income offered by the assessee. 13. Ld. DR submitted that the income offered by the assessee in financial year 2010-11 is not verifiable at this stage and therefore the matter may be set aside to the file of AO for the purpose of verification. 14. We have considered the rival submission and as facts demonstrated before us that suspense account is arisen out of various debits and credits which could not be identified by the assessee. Same were neither offered as income nor claimed as expenditure. Ultimately in financial year 2010-11 the assessee has written it back to the P L Account and as it is not disputed that there is no difference between the tax rate of the current year as well as AY 2011-12, therefore we set aside this issue back to the file of AO for verifying the facts whether the suspense account written back has been offered to tax in Financial Year 2010-11i.e. AY 2011-12 and if so, delete the addition in the assessment year in the appeal. This ground of appeal is allowed for the statistical purposes. 15. In the result appeal of the assessee is allowed. Order Pro ..... X X X X Extracts X X X X X X X X Extracts X X X X
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