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TMI Blog2017 (9) TMI 1217X X X X Extracts X X X X X X X X Extracts X X X X ..... onfirming disallowance of net interest of Rs. 31,51,334, paid in the regular course of business and fully allowable under section 36(1)(iii) of the Act. 2. On the facts and in the circumstances of the case and in law, the learned Commissioner (Appeals) erred in not allowing credit for TDS on interest earned of Rs. 12,88,776 on the ground that it was not claimed in the income tax return without appreciating the fact that the claim was made before the Assessing Officer in the assessment proceedings and the corresponding interest income was duly offered in the income tax return." 3. As far as ground no.1 is concerned, brief facts are, the assessee a partnership firm is engaged in trading of Stainless Steel Wire Rods. For the assessment yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns obtained for business purposes. He, therefore, called upon the assessee to explain why proportionate interest debited in the Profit & Loss account should not be disallowed for utilisation of fund for non- business purpose. In response, it was submitted by the assessee that loans were given in the regular course of business of the firm as financing and investing is also a part of assessee's business. It was submitted, the investment of Rs. 23.22 crore in the partnership firm being towards share capital it cannot be treated as loans and advances. Thus, the assessee submitted that no disallowance out of interest expenditure should be made. However, the Assessing Officer did not find merit in the submissions of the assessee. He observed, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ause 3(c) of the partnership deed dated 20th April 1999, a copy of which is at Page-64 of the paper book. Learned Authorised Representative submitted, the assessee has been carrying on financing and investment activity from the earlier assessment years and the income earned is always shown under the head business and the interest expenditure is set-off against such income. In this context, he drew our attention to the financial statements for assessment year 2009-10 and subsequent years. Learned Authorised Representative submitted, in subsequent assessment year also, the interest income earned has been shown under the head business and interest expenditure claimed have been allowed in scrutiny assessments. In this context, he drew our atten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee and the partnership firm to which loans were advanced are related parties, hence, cannot be considered for the purpose of assessee's business. He submitted, while the assessee is paying interest @ 12% it has charged interest @ 9%. He, therefore, justified the disallowance of interest expenditure. 7. We have heard rival contentions and perused the material available on record. A careful reading of the assessment order reveals that the disallowance of interest expenditure is fundamentally on the basis of alleged interest free advance of Rs. 23.22 crore made by the assessee to Shree Ranka Kothari Kanugo Realtors. However, a perusal of the financial statement of the assessee for the impugned assessment year indicates that assessee had ea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the assessee has entered into such partnership business with 5% shares, however, he has ultimately disallowed the interest debited to Profit & Loss account on the reasoning that the interest fee loan of Rs. 23.22 crore is for non-business purpose. In our view, merely because the amount of Rs. 23.22 crore was shown under the head loans and advances it will not be proper to presume it to be a loan and not a contribution towards share capital without properly examining the facts and merely going by the nomenclature given in the financial statement. Similarly, the observations of the Assessing Officer that assessee has never been involved in business of financing and investment appears to be a general observation without proper enquiry. It i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ugned assessment year. 11. We have heard rival contentions and perused the material available on record. It is the contention of the learned Authorised Representative that in the course of assessment proceedings, the assessee on 26th February 2014, has made a claim for allowing credit for TDS on the interest earned of Rs. 12,88,776. In this context, he has drawn our attention to the copy of the said letter placed at Page-73 of the paper book. In any case of the matter, due credit for TDS should be given to the assessee. In view of the aforesaid, we direct the Assessing Officer to examine the issue and allow credit for TDS if corresponding income has been shown by the assessee in the impugned assessment year. Ground no.2, is allowed for sta ..... X X X X Extracts X X X X X X X X Extracts X X X X
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