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2016 (11) TMI 796 - CALCUTTA HIGH COURT

2016 (11) TMI 796 - CALCUTTA HIGH COURT - [2016] 387 ITR 523 - Interest on loan disallowed - amount utilized for non-business purposes - Held that:- There is no material which proves that there was outstanding interest as on 31.03.2004 in the overdraft account under consideration, the interest accrued on month to month basis had been paid on month to month basis as the deposit of each month was much more than the corresponding interest debited in respective month and as such no part of such inte .....

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directed against the judgement and order dated 28th March, 2008 by which the learned Income Tax Appellate Tribunal, D Bench, Kolkata allowed an appeal being ITA No.1818/Kol/2007 preferred by the Assessee and dismissed an appeal being ITA No.2105/Kol/2007 preferred by the Revenue both pertaining to the assessment year 2004-05. The aggrieved revenue has come up in appeal. The following questions were formulated on 29th July, 2009 when the appeal was admitted: 1. Whether the Tribunal below substan .....

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utilised for non-business purposes by the assessee ? The assessing officer disallowed payment of interest amounting to a sum of ₹ 22,39,581.82 and ₹ 14,292/- ,due to the following reasonings: There is no schedule of repayment drawn by the bank for the purposes of realizing the outstanding principal amount. A review of the bank s statement and books of account will show that total amount deposited with the bank during the year far exceeds the total interest of ₹ 22,53,874.43 (Rs .....

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(2)(b) The provisions of section 43B runs as under : 43B. Notwithstanding anything contained in any othe rp[rovision of this Act, a deduction otherwise allowable under this act in respect of (a)..(b)…(c)…(d)…(e) any sum payable by an assessee as interest on any loan or advances from a scheduled bank in accordance with the terms and conditions of the agreement governing such loan or advances, Or……(f) shall be allowed irrespective of the previous year in which th .....

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as been converted into a loan or advance shall not be deemed to have been actually paid., The above explanation has been inserted by the Finance Act with retrospective effect from 01.04.1989 and as such is applicable for the previous year 2004-05. The assessee submits that there is no schedule for payment that the total amount deposited exceeds the total interest of ₹ 22,53,874 (Rs.22,39,581.82 in M/s.Shreekant Phumbhra and ₹ 14,292.61 in M/s.Shreekant Phumbhra and Co.) charged by th .....

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f the following reasonings : As discussed above, in an overdraft account, as and when interest is debited, the debit balance increases signifying increase in the amount of loan. But this is an automatic process and it does not require any authorization or volition from the constituent. Even if there is no consent in writing, interest will continue to be debited in an overdraft account. It is correct that the appellant paid more than the interest charged. As such the question is not merely whethe .....

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re was no payment schedule. In a payment schedule, normally a institution works out the number of equated monthly installments (EMI) which includes some interest and a portion of principal. As such, EMI is comprised of interest and principal, while interest is recovered on monthly basis the principal loan is also repaid on such basis. Thus, in such cases interest and the principal recovered are quantifiable. However, where there is no schedule of payment, the exact amount of interest not being k .....

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month and as such no part of such interest remained which could be said to have been converted into any loan or advance as on the close of the previous year so as to be deemed not actually paid. Under the facts and the circumstances, the disallowance of interest of ₹ 22,39,581/- is deleted. This ground is allowed. The learned Tribunal did not interfere. Since the observation of learned CIT(A) while deleting the above addition remains uncontroverted before us, we do not see any reason to i .....

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n Long Term Investment and in Short Term Investment has essentially come from his loan fund. Therefore, interest attributable to the fund engaged in Long Term Investment and Short Term Investment has to be considered as not allowable. (21) M/s. Shreekant Phumbhra (NSE): (a) While Interest on Bank Loan has already been disallowed u/s. 43B, on the facts and in the circumstances of the case as discussed above, Interest of ₹ 1,49,33,053/- as claimed is also disallowed as per the computation be .....

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8377; 9,07,340, (Rs.61,140, ₹ 41,350). Since, the provision of section 14A is applicable in the case of the appellant, considering the dividends from investments as shown above against the respective recipients are correct, the expenses including the interest is being proportionately disallowed as it is admitted that certain portion of the expenses and investments have flown from common account in view of the above provision. In the case of the expenses, ratio of dividend to gross income w .....

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