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2017 (1) TMI 393 - ITAT MUMBAI

2017 (1) TMI 393 - ITAT MUMBAI - TMI - Disallowance of unexplained liability - Held that:- We find that T&C had categorically stated that outstanding amount was ₹ 6.58 lakhs and not ₹ 20.90 lakhs, that the assessee had not brought on record to prove that there was advancement of loan on behalf of T&C to Saif Steel. In these circumstances, we are of the opinion that direct issue by FAA need no interference from our side.Confirming the his order, we decide the ground against the assess .....

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, declaring total income at ₹ 5.78 lakhs. The Assessing Officer (A.O.)completed the assessment on 14.3.2014 u/s. 143(3) of the Act, determining its income at ₹ 42.74 lakhs. 2.First Ground of appeal is about disallowance of interest of ₹ 18.14 lakhs on loan taken from SIDBI. During the course of hearing before us, the Departmental Representative(DR) stated that while deciding the appeal for the AY.2007-08(ITA/4195/Mum/2010, dated 31.1. 2012), the Tribunal had decided the issue a .....

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assessee is in the business of manufacturing and dealing of electrical, electronics and computer hardware and software. During the year under consideration, the assessee had acquired shares of M/s Sameera Electronics Pvt. Ltd., a 100% subsidiary of the assessee company, for which it had paid ₹ 16, 91, 958/- to the SIDBI from whom the assessee borrowed the money and to this effect the assessee referred pages 58 & 59 where the schedules of the Project, finance plan, and amortization sch .....

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& 32 of the paper book to establish that the said submissions made before the revenue authorities. The assessee had acquired shares in Sameera Electronics Pvt. Ltd., which is a loss making company is the sister concern of the assessee company in which the assessee is having interest. The assessee had also given interest free loans to its sister concern Sameera Electronics Pvt. Ltd. The assessee in one of its submissions before us stated that nobody is interested in acquiring shares in Samee .....

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t be said that the shares acquired by the assessee is for the purpose of the business of the assessee and, therefore, allowable u/s 36(1)(iii) of the Act. Therefore, in our considered opinion, acquiring shares in Sameera Electronics Pvt. Ltd. by the assessee is not connected for the purpose of business. Therefore, the acquisition of shares in Sameera Electronics Pvt. Ltd. is not for the purpose of the business and the interest paid thereon is not allowable either in the section 36(1)(iii) or sec .....

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iew to obtain the managing agency commission rather than dividend income. The said facts was also evident from the comparatively small amount of dividend which the assessee received compared to the large amount of managing agency commission received during the various previous years. Therefore, the entire amount of interest paid was deductible in computing the profits and gains of the asessee s business. 10. The learned counsel for the assessee also relied upon the decision of ITAT, Mumbai Bench .....

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f money is borrowed for the purpose of business. The expression for the purpose of business is much wider than the expression for the purpose of earning profits as held by Hon ble Supreme Court in the case of India Cements Ltd., 60 ITR 52. Thus, for the purpose of allowing deduction u/s 36(1)(iii) it would be irrelevant to consider whether borrowed money was utilized for meeting day to day expenses or for acquiring capital assets to be used in business. Therefore, interest for borrowing would be .....

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f companies. In its reply to show cause notice, the assessee had stated that promoters of the assessee company as well as of Maftlal Group had good business relationships having close association with Indian Textile Industry. This fact has not been disputed by the revenue at any stage. It is because of these facts, the Chairman of assessee company was on the Board of Trumac as nonexecutive Chairman and could get sole selling agency for the distribution of the products manufactured by Trumac. Sin .....

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cted with or incidental to the carrying on the business. Consequently, the conditions of allowing deduction u/s 36(1)(iii) stood satisfied. The assessee also relied on the CIT Vs. Rajeev Lochan Kanoria (supra) wherein the Court has held as under:- Held, that directorship is nothing but a vocation. The assessee was admittedly a director of several controlled companies. The activity of controlling, managing, administering and financing companies is nothing but a business/professional/vocational ac .....

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e not applicable to the facts of the case under consideration for the reason that in the present case, one of the material distinguishable fact is that the assessee entered into a separate agreement with the Sameera Electronics Pvt. Ltd. and paid service charges for the utilization of the premises of Sameera, therefore, the above case laws are not applicable to the case of the assessee. 13. In view of the above, this ground of appeal raised by the assessee is dismissed. Respectfully following th .....

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he AO held that explanation was not satisfactory. For making further verification of the outstanding liability he issued notice u/s. 133(6) of the Act to T&C to file a copy of the ledger account of the assessee in their books of accounts. It was found that the outstanding balance of the assessee company in the books of account of T&C was shown at ₹ 6.58 lakhs. Since there was difference in balance of both the parties so the AO supplied a copy of ledger account of T&C of the ass .....

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/s. Saif Steel as claimed by the assessee , that in the books of account there was no entry for the settlement in question. Finally he held that excess liability shown in the books of account of the assessee under the head of sundry creditors in the name of M/s. T&C at ₹ 7.14 lakhs was an unexplained liability.He made an addition of ₹ 7, 14, 925/-to the total income of the assessee. 5. Aggrieved by the order of the AO, the assessee preferred an appeal before the First Appellate A .....

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