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TMI Blog2017 (10) TMI 769X X X X Extracts X X X X X X X X Extracts X X X X ..... er and trader of TDR (transfer of development rights). For the assessment year under consideration, the assessee filed its return of income on 30th October 2007, declaring income of Rs. 63,02,700. During the assessment proceedings, on a perusal of Profit & Loss account the Assessing Officer found that the assessee has debited interest expenditure of Rs. 6,86,00,838, whereas, it has borrowed funds amounting to Rs. 48,84,01,659. He further found that the assessee has advanced interest free loans to various parties amounting to Rs. 2,49,75,541. The Assessing Officer being of the view that interest free advances were for non-business purpose called upon the assessee to explain why interest cost attributable to such advances should not be disallowed. In reply, it was submitted by the assessee that interest free loans were advanced out of interest free funds available with the assessee. Further, it was submitted, interest free loans includes an amount of Rs. 94,77,382, advanced to Isha Infotech Pvt. Ltd., a company jointly promoted by the assessee to implement specific project. Thus, it was submitted, such advances being for business purpose no interest disallowance in respect of such ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terest free loans. In fact, the Assessing Officer also to some extent has accepted assessee's plea by observing that interest free loan of Rs. 74,03,683, was out of interest free funds available with the assessee. It is the claim of the assessee that as on 31st March 2007, the assessee was having interest free funds of Rs. 2,82,13,694, whereas, interest free loans advanced by the assessee stood at Rs. 2,49,75,541. In our considered opinion, the aforesaid contention of the assessee requires verification. In case, the assessee is able to establish the fact that sufficient interest free funds was available to advance interest free loan, no disallowance under section 36(1)(iii) of the Act can be made in view of the ratio laid down by the Hon'ble Jurisdictional High Court in CIT v/s Reliance Utilities and Power Ltd., [2009] 313 ITR 340 (Bom.). It is further evident, from the assessment stage itself the assessee has submitted that out of the total interest free loans advanced an amount of Rs. 94,77,382, was given to Isha Infotech Pvt. Ltd., an SPV created for implementing a particular project. This contention of the assessee has been totally ignored by the Departmental Authorities. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e creditors for loan aggregating to Rs. 37 lakh. Accordingly, he added back the said amount under section 68 of the Act. In respect of entire 12 loan creditors, the Assessing Officer observed the assessee failed to produce all required details to prove the genuineness of the loan. Accordingly, he added back the amount of Rs. 2.18 crore. Thus, the total addition made by the Assessing Officer under section 68 of the Act was to the tune of Rs. 3,70,95,486. Being aggrieved of the addition made, the assessee preferred appeal before the first appellate authority. The learned Commissioner (Appeals) after considering the submissions of the assessee and materials placed before him, directed the Assessing Officer to examine them and submit his report. After going through the remand report submitted by the Assessing Officer, the learned Commissioner (Appeals) found that loan aggregating to Rs. 2,17,26,615, from eight persons, the Assessing Officer has not made any adverse comment. Therefore, out of the total addition made by the Assessing Officer, the learned Commissioner (Appeals) deleted the amount of Rs. 2,17,26,615, while sustaining the balance addition. 11. Learned Authorised Representa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cepted as genuine. As far as the loan of Rs. 2 crore availed from Avtar Singh Sethi, which is the subject matter of dispute in Revenue's appeal. The learned Departmental Representative submitted, the learned Commissioner (Appeals) should not have deleted the said addition, since, the assessee failed to prove the creditworthiness of the creditors. 13. We have heard rival contentions and perused the material available on record. As could be seen from the order of the learned Commissioner (Appeals), out of loan availed of Rs. 20.61 crore from 380 parties, the Assessing Officer has disputed the loan transactions with 37 parties. During the assessment proceedings, the Assessing Officer after making enquiry has added back loan availed from these 37 parties on the ground that in some cases, the parties were not available and the assessee has also failed to submit the loan confirmations and in some cases, though, creditors appeared, however, there creditworthiness could not be proved. Before the learned Commissioner (Appeals), the assessee produced further evidence which was examined on remand by the Assessing Officer. On the basis of remand report of the Assessing Officer, the learned Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it. If the assessee can prove the genuineness of the loan transactions by producing any witness, the assessee must be allowed to do so. As far as the contention of the learned Departmental Representative that learned Commissioner (Appeals) should not have deleted the loan standing in the name of Avtar Singh Sethi, as his creditworthiness was not proved, we must observe, in the remand report the Assessing Officer while examining this particular loan transaction has verified the bank account of the said loan creditor and found that the amount of Rs. 2 crore was advanced to the assessee a deposit of Rs. 1.99 crore was made in the account of the creditor. He has also stated that the assessee filed copy of account of the creditor to indicate that the said amount of Rs. 1.99 crore came from the over draft account. In our view, this fact also requires further verification by the Assessing Officer. In case, it is proved that the loan of Rs. 2 crore originated from Rs. 1.99 crore in the over draft account of the creditors, then, there will be no case for addition of the said amount. However, in our view, further enquiry has to be conducted by the Assessing Officer to establish availability ..... X X X X Extracts X X X X X X X X Extracts X X X X
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