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2016 (4) TMI 1234 - ITAT CHANDIGARH

2016 (4) TMI 1234 - ITAT CHANDIGARH - Tmi - Disallowance u/s 36(1)(iii) out of interest paid and the disallowance is in any case too excessive - Held that:- The lower authorities have not properly considered the reply of the assessee and also the documentary evidence submitted by the assessee in support of its claim. It appears that the Assessing officer has completely ignored the relevant documents furnished by the assessee. Even, the first appellate authority has passed a cryptic order without .....

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ed:- 6-4-2016 - SHRI H.L.KARWA, HON'BLE VICE PRESIDENT AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER For The Appellant : Sh. S.K. Mittal For The Respondent : Sh. Gagandeep Singh ORDER PER H.L.KARWA, VP This appeal filed by the assessee is directed against the order of CIT(A) II, Ludhiana dated 29.12.2010 relating to assessment year 2007-08. 2. The only effective ground raised by the assessee in this appeal reads as under:- That the Ld. CIT(A) has erred in law and on the facts of the case in sus .....

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sessing officer required the assessee to furnish details of above debit balances and to explain as to why proportionate interest thereon should not be disallowed u/s 36(1)(iii) of the Income-tax Act, 1961 (in short 'the Act'). In response to the above query, the assessee furnished copies of the account of the above parties and explained that the amounts represented business transactions. The Assessing officer rejected the explanation of the assessee stating that above amounts represented .....

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h, Ld. Counsel for the assessee pointed out that the amount in question was paid by cheques to the aforesaid concerns namely M/s Sonal Fabricators Pvt Ltd and M/s Disk India Pvt Ltd for the fabrication / manufacturing of four LPG Bullet Trucks / LPG Road Tankers for transportation of explosive LPG under proper fabricating licnece from the Ministry of Commerce and Industry, Department of Explosives, Government of India. It is claimed that M/s Sonal Fabrication Pvt Ltd is engaged in the business o .....

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Thus, these advances are old advances and no fresh payments have been made to these concerns in the financial year 2006-07. The tankers were got fabricated from the above concerns in the financial years 2004-05 and 2005 06. The vehicle numbers and tank numbers fitted are as under;- Vehicle No. Tank No. PB 10 BM 8757 SFL/LPG/050 PB 10 BM 8760 SFL/LPG/051 PB 10 BL 4495 SFL/LPG/028 PB 10 BL 4496 SFL/LPG/029 It is a matter of record that the tank bodies were received duly fitted on the Chassis in th .....

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that the above two amounts represented cost of LPG tanks which were purchased and used for business purposes and do not represent any interest free loans or advances for non business purposes. The assessee has also a submitted copy of the confirmation letter on behalf of M/s Sonal Fabricators Pvt Ltd., wherein the said concern has certified that the assessee on their behalf had paid ₹ 5 lakhs vide cheque No. 533245 dated 3.12.2005 to M/s Disk India Pvt Limited towards payments against new .....

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There is no material on record to controvert the documentary evidence furnished on behalf of the assessee. Considering the entire facts and circumstances of the present case, it is clear that the disputed amounts had been given as trade advance to the above concerns therefore, no question of charging of interest arises, and at the same time no disallowance of interest u/s 36(1)(iii) of the Act is required to be made. Accordingly, we allow this ground of appeal raised by the assessee and delete t .....

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was engaged in the business of manufacturing of Circular Knitting Machines. The money was given to the sister concern as application money for fresh issue of new shares of that concern. The amount given was called back in the succeeding years for the reason of non-issuance of the new shares. As regards M/s Vicky Carriers and M/s Rajiv Kapoor Transport, it was claimed that these concerns are engaged in the business of plying of trucks as the sub contractors of the assessee. The outstanding balan .....

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for the amounts advanced in the current year, I do not find force in the arguments of the Ld. Counsel that these were for business purposes and the payments made in the current year under consideration are held to be for non-business purposes on which proportionate disallowance out of interest is upheld. The disallowance of interest should be worked out for the period such amount has been outstanding. Similarly, as regards the debt balance in the accounts of Vicky Carriers (Rs. 68,33,492/-) and .....

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of interest on these amounts is upheld. However, the disallowance of interest should be worked out for the period such amounts have been outstanding. 8. We have heard the Ld. Representatives of both the parties. Shri Gangandeep Singh, Ld. Counsel for the assessee vehemently argued that the amount in question was advanced by the assessee firm to M/s Punjab Machinery Works P. Ltd being a sister concern as application money for fresh issue of new shares of the said concern. He further pointed out t .....

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a Government of India undertaking. Copies of the accounts were filed before the Assessing officer. Shri Gagandeep Singh, Ld. Counsel for the assessee further pointed out that both the concerns i.e. assessee and M/s Vickey Carriers are engaged in the transportation job for Hindustan Petroleum Ltd., under a common tender and were using each other s trucks at different junctures so that the amount became due which was adjusted from time to time. Shri Gagandeep Singh, Ld. Counsel for the assessee s .....

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