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TMI Blog2017 (1) TMI 105X X X X Extracts X X X X X X X X Extracts X X X X ..... count of alleged interest free advance given to related parties. 2) The learned Commissioner (Appeals) erred in not properly appreciating the facts of the case, the case laws relied upon and sustaining the addition. 3) The addition as above be deleted and the income of the assessee be reduced to that extent. 4) Such other orders be passed as deemed fit and proper. 3. The issue arising in the present appeal is against the disallowance made under section 36(1)(iii) of the Act amounting to Rs. 6,53,489/-. 4. Briefly, in the facts of the case, the assessee was an individual engaged in construction business. However, during the year under consideration, the assessee had only shown work-in-progress but had not shown any other income f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... astu H.R. Pvt. Ltd. All the cheques were issued by the assessee from CC account on 31.03.2010. The Assessing Officer thus, noted that the assessee had given sum of Rs. 1,75,00,000/- as loan to the family members. The Assessing Officer further noted that for the year ending 31.03.2011, the loans remained at Rs. 49,76,856/- in respect of Shri R.C. Khinvasara and sum of Rs. 1.25 crores in respect of Neelvastu H.R. Pvt. Ltd. Since the assessee had debited interest expenditure of Rs. 25,50,519/-, the assessee was show caused to explain as to why the said interest should not be disallowed being not used for business purpose. In reply, the assessee explained that the advance to Neelvastu H.R. Pvt. Ltd. was an adventure for acquiring the portion of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ores and hence, there was no merit in the said disallowance of interest. Reliance in this regard was placed on the ratio laid down by the Hon'ble Bombay High Court in CIT Vs. Reliance Utilities & Power Ltd. (2009) 313 ITR 340 (Bom) for the proposition that in case of availability of interest free funds, the presumption was that the said interest free funds were utilized for making interest free advances. He admitted that the transaction were from the CC account but further pointed out that for the year under consideration, his tax free income was to the extent of Rs. 85 lakhs. 8. The learned Departmental Representative for the Revenue on the other hand, placed reliance on the orders of authorities below and pointed out that in view of clea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held by the assessee. The Assessing Officer further analyzed the balance sheet for assessment year 2010-11, wherein the assessee had overdrawn the facilities from the Cooperative Bank to the extent of Rs. 1,80,78,231/-. The Assessing Officer also obtained the information vis-à-vis said bank account from which it transpired that fresh loan obtained was utilized for giving advances to Shri R.C. Khinvasara to the extent of Rs. 50,76,856/- and further sum of Rs. 1.25 crores to Neelvastu H.R. Pvt. Ltd. Both these advances were made interest free. The explanation of assessee that the advance of Rs. 1.25 crores to Neelvastu H.R. Pvt. Ltd. was business advance in lieu of MOU between the parties, was accepted by the CIT(A) and the disallowan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he present case because of direct nexus between the OD limits raised by the assessee and its direct utilization for making interest free advances to Shri R.C. Khinvasara, the interest relatable to the said advances merits to be disallowed in the hands of assessee. Accordingly, the disallowance of Rs. 6,53,489/- is upheld in the hands of assessee. 10. The learned Authorized Representative for the assessee vehemently stressed that in view of ratio laid down by the Hon'ble Bombay High Court in CIT Vs. Reliance Utilities & Power Ltd. (supra), presumption is to be drawn that the interest free funds in the form of capital were available with the assessee and hence, the same were utilized for making the said interest free advances. It was also po ..... X X X X Extracts X X X X X X X X Extracts X X X X
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