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M/s Kiran Gems Private Ltd. Versus Addl. CIT-5 (2) , Mumbai

2016 (4) TMI 808 - ITAT MUMBAI

Disallowance of interest made u/s 36(1)(iii) - Held that:- In the present appeal, the accounts were mixed and the disallowance was made by the ld. Assessing Officer on the plea that the assessee could not prove that only surplus funds were given for acquisition of fixed asset. However, the claim of the assessee is that the own networth of the assessee is 124.54 crores and unsecured interest free loans from the promoter was ₹ 74.78 crores and even the current year net profit is much more th .....

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pports the case of the assessee. Disallowance of interest made u/s 36(1)(iii) deleted - Decided in favour of assessee - ITA NO.7403/MUM/2012 - Dated:- 21-3-2016 - Shri Joginder Singh, Judicial Member and Shri Rajendra, Accountant Member For The Assessee by Shri K.A. Vaidyalingam For The Revenue : Shri M. Murli-DR ORDER Per Joginder Singh (Judicial Member) The assessee is aggrieved by the impugned order dated 24/09/2012 of the ld. First Appellate Authority, Mumbai. 2. During hearing, the ld. coun .....

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of capital asset and not the borrowed funds. Reliance was placed by the assessee upon the decision from Hon ble jurisdictional High Court in CIT vs HDFC Bank Ltd. (2014) 366 ITR 505 (Bom.) order dated 23/07/2014 and also writ petition in HDFC Bank Ltd. vs DCIT (W.P. no.1753 of 2016) order dated 25/02/2016. 2.2. On the other hand, the ld. DR, Shri M. Murli, merely relied upon the decision of the Assessing Officer/Commissioner of Income Tax (Appeals). 2.3. We have considered the rival submissions .....

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,21,282/- on the total loans as on close of balance sheet, it was ₹ 620.99 crores and the reserve and capital was only ₹ 124.53 crores. The assessee company gave advance for purchase of business premises in Bharat Diamond Boars and other immovable properties including Amby Valley Projects, Gujarat Hira Boars, Everest Electricals, Suzlon Energy and Vestas RRB Indi, etc. The average balance, during the year was computed at ₹ 6,08,05,929/-. Since, there were advances for fixed ass .....

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s having own funds then why the interest to the tune of ₹ 19,48,21,282/- was paid to banks and since the accounts are mixed and no nexus was proved by the assessee, therefore, he made disallowance of the claimed interest of ₹ 9,93,475/-. On appeal, the ld. Commissioner of Income Tax (Appeals) affirmed the stand of the Assessing Officer. The assessee is in further appeal before this Tribunal. 2.4. If the observation made in the assessment order, leading to addition made to the total i .....

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part of interest on borrowings can be disallowed on the basis that investment were made out of interest bearing funds, supports the case of the assessee. Likewise, Hon ble High Court in CIT vs HDFC Bank Ltd. (366 ITR 505) (Bom.), took identical view. It is noteworthy that while coming to a particular conclusion, the Hon ble jurisdictional High Court, duly considered the decision in Reliance Utilities and Power Ltd. (supra) along with the case of American Express International Banking Corporation .....

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dinate or subordinate court. It is axiomatic that a decision cannot be relied upon in support of the proposition that it did not decide. (Mittal Engineering v. Coll,of Central Excise 1997 (1)SCC 203).Therefore it is only the ratio decidendi i.e. the principle of law that decides the dispute which can be relied upon as precedent and not any obiter dictum or casual observations. (Girnar Tea vs. State of Maharashtra 2007(7) SCC 555 and Shin Estu Chemical Co. Ltd v. Aksh opticfibre Ltd. 2005 (7) SCC .....

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s. Consequently, there is a presumption that the investment which has been made in the tax free securities has come out of the interest free funds available with the petitioner. This is so as it been held by this Court in the petitioner s own case for an earlier AY being HDFC Bank Ltd. In any event, the tax free investments in securities were the petitioner s stock in trade. Consequently, there would be no occasion to invoke Section 14A as held by this Court in India Advantage Securities Ltd. wh .....

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itself would not lead to the conclusion that Reliance Utilities and Power Ltd. been considered and the opinion on the same been rendered in the case of Godrej and Boyce Manufacturing Co. Ltd. The test to decide whether or not two decisions are in conflict with each other is to first determine the ratio of both the cases and if the ratio in both cases are in conflict to each other, then alone, can it be said that the two decisions are in conflict. We find that no such exercise has been done in cu .....

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