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2015 (12) TMI 1277 - ITAT DELHI

2015 (12) TMI 1277 - ITAT DELHI - TMI - Disallowance of interest computed @ 12% on advances given to sister concern - Held that:- 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 ₹ .....

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iance utilities Ltd. [2009 (1) TMI 4 - HIGH COURT BOMBAY] 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 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 .....

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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 addition. According to us and as details furnished there is no difference in the balance sheet of the assessee and therefore we delete the addition - Decided in favour of assessee.

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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. - Decided in favour of assessee for the statistical purposes. - ITA No. 5488/Del/2013 - Dated:- 21-10-2015 - A. T. Varkey, JM And Prashant Maharishi, AM For the Appellant : Ms Vandana Bhandari, CA For the Respondent : Sh Hemant Gupta, Sr. DR ORDER Per Prashant Maharishi, AM 1. This appeal is against order of CIT(A)- .....

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s on the reasoning that figures mentioned by the auditors in the audit report is different from the details provided. 3. The Ld. CIT-A has erred both in facts and in law in treating ₹ 4,20,512/- as unexplained income on the ground that the appellant could not furnish any explanation regarding nature of receipts." 2. Appellant is a private Ltd. Company and filed its return of income showing income of ₹ 1,36,23,491/- and after setting off brought forward loses the income was reduc .....

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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 t .....

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ern. Therefore he hold that the amount of money borrowed for the purpose of the business by the assessee has not been utilized for the purpose of the business and therefore the disallowance of ₹ 2,31,460/- was confirmed. 4. Before us ld. AR submitted that the company was providing dying and printing Services to the appellant in FY 1998-99 to 2003-04 and therefore the advances were given to that party. She submitted details of transactions entered into with that party from 1998-99 till 2003 .....

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mission made before the AO and CIT(A) that these are business advances and these business advances could not be recovered on account of dispute of that party with its landlord and that party stopped the business from 13th July, 2001. She submitted that the assessee has also share capital and reserve fund of more than thirteen and half crores therefore the assessee has more non interest bearing funds then the amount alleged to have been lent interest free. She submitted that disallowance has been .....

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4. In F Y 2008-09 to 2003-04 assessee was enjoying business relation with that company as that company was carrying on business of Dyeing and printing for the assessee. During that period the transaction entertain to by the assessee company with its sister concern were approximately ₹ 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 tha .....

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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 arise that investment .....

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2 of the appeal is against disallowance regarding the addition of ₹ 8,69,906/- as unexplained loans and advances. The ld. AO noted that the loan amount shown by the assessee is not tallying with the figures mentioned by the auditor in its audit report. Out of the total loan of ₹ 150.41 lacs for which show cause notice is issued assessee only provided details of 1,41,71,094/- and therefore he made an addition of ₹ 8,69,906/-. Before CIT(A) assessee submitted that the outstandin .....

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er CARO 2003 where the auditor is required to submit maximum outstanding balance of the specified parties at any during the year. She submitted the details tabulated as under :- "TABLE- 1 MAXIMUM AMOUNT OF LOAN AND ADVANCE OUTSTANDING DURING THE YEAR (A) ROSETTA TEXTILES PRIVATE LTD OPENING BALANCE (Being Maximum Amount O/s) 1,31,12,788 (B) CHRYSALLIS LOANS (OPENING/CLOSING BALANCE) (Opening and Closing Balance being same) 19,28,900 MAXIMUM OUTSTANDING (A)+(B) 1,50,41,688 TABLE-2 CLOSING AM .....

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e 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 tha .....

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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 addition. According to us and as details furnished there is no difference in the balance sheet of the assessee and therefore we delete the addition of ₹ 8,69,906/- and reverse t .....

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ed the addition because assessee failed to offer an explanation before AO and therefore he treated this income as trading income. 12. Ld. AR before us submitted that the suspense account is the amount outstanding in the books of the company for which the details of parties remitting the same amount could not be identified and they have been received through banking channel. She submitted that as on 1.4.2008 the opening balance of ₹ 3,43,335/- was outstanding and during the year 77,176/- we .....

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