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Commissioner of Income Tax (Central) , Ludhiana Versus Smt. Satish Bala Malhotra And Others

2016 (9) TMI 116 - PUNJAB & HARYANA HIGH COURT

Disallowance of deduction under Section 33(1)(iii) in relation to interest paid by the assessee - ITAT deleted the addition - Held that:- A perusal of the balance-sheet showed that the capital of the assessee included the profit earned during the year and that, therefore, both the closing capital and the profit earned during the year could not be considered as being available separately for advancing the interest free loans. Even assuming that to be so, it would make no difference. This is for t .....

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h exceeded the capital of the assessee. However, Mr. Katoch was unable to invite our attention to any part of the record which established this assertion. He merely relied upon the observation. Further, the nature of this investment is also not indicated. Nor is there anything to indicate that such investment was made out of the capital. There is no co-relation of the investment made and the interest bearing loan and the capital available to the assessee. In these circumstances, the Tribunalís a .....

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The assessee was one Ashok Kumar Malhotra who carried on business in the firm name and style of M/s Modern Publishers as the sole proprietor thereof. The three respondents are his heirs. 3. Questions (i) to (v) raised in the appeal do not survive in view of an order of the earlier Division Bench of this Court dated 28.10.2013. These questions relate to the issue regarding the deletion of an addition on account of deemed dividend with respect to an amount received by the deceased assessee for th .....

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ving interest free capital before any interest free advance was made and that there is nothing on record by any of the authorities below that the assessee had used the interest bearing funds for other than business purposes, whereas the assessee had submitted that loan raised by the assessee has been used for the purpose of business, ignoring the specific finding of the AO that the claims of the assessee that interest bearing funds were not diverted as interest free loan and that advances were g .....

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ses, whereas the assessee had submitted that loan raised by the assessee has been used for the purpose of business, ignoring the specific finding of the Ld. CIT(A) that the onus of proving that funds advances free of interest to sister concerns during the year were on account of commercial expediency, was on the assessee and merely giving of the money to the sister concern does not prove the commercial expediency, unless it is shown that the amounts have been used commercially even by the sister .....

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the Assessing Officer passed an assessment order under Section 144 of the Income Tax Act, 1961 (in short the Act). The assessee challenged the same before the CIT (Appeals). On 22.01.2009, a search was carried out under Section 132 of the Act at the assessee s premises. On 23.11.2009, the assessee filed a return of income under Section 153 A. There was no difference between the two returns. 6. On 26.02.2010, the CIT (Appeals) passed an order in the assessee s appeal against the assessment order .....

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elief to the assessee. The assessee accordingly filed two appeals against the two orders of the CIT (Appeals). The appellant-department also filed two appeals against the said orders of the CIT (Appeals) to the extent of the reliefs granted to the assessee. There were accordingly four appeals before the Tribunal and correspondingly four appeals before this Court. 7. This brings us back to the above questions raised in the appeal. The Assessing Officer disallowed the deduction under Section 33(1) .....

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Assessing Officer, the assessee paid various amounts of interest of which interest of an amount of Rs. 46.63 lacs is relevant in this appeal. The said amount of Rs. 46.63 lacs was paid as interest during the accounting year from the assessee s overdraft account. The Assessing Officer disallowed interest on a proportionate basis. 8. The assessee established that he had capital of Rs. 12.69 crores, received an interest free loan from his wife in the sum of Rs. 1.18 crores and earned profit of Rs. .....

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eals) found that he had made out a case of commercial expediency. 9. The Tribunal, however, did not consider the issue of commercial expediency having come to the conclusion that the assessee in any event had established that the interest free loans were made from the free reserves available to him. Had we decided this issue in favour of the revenue, it would have been necessary to remand the matter to the Tribunal to consider the case of commercial expediency both on behalf of the revenue as we .....

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siness purposes. Mr. Katoch, learned counsel appearing on behalf of the appellant was also unable to establish the same. Further, even before us, it has not been established that the assessee did not have sufficient interest free capital to the extent of Rs. 7.37 crores which is the amount advanced by him free of interest. Nor was our attention invited to any material to indicate that it is the interest bearing loan which was in turn advanced free of interest to the assessee s sister concerns. 1 .....

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