TMI Blog2018 (3) TMI 147X X X X Extracts X X X X X X X X Extracts X X X X ..... RI MANISH BORAD, ACCOUNTANT MEMBER For The Appellant : Shri M.K.Sharma, C.A. For The Respondent : Shri Rajeev Jain, Sr. DR ORDER PER KUL BHARAT, J.M: Appeal by the assessee is directed against the order of CIT(A) - 31,New Delhi, Camp at Bhopal dated 29.08.2016, pertaining to assessment year 2010-11. The assessee has raised the following grounds of appeal :- 1. That the Ld. CIT(A) has erred in law and on facts in confirming the addition of ₹ 6,39,274/- to the total income of the appellant. 2. That the Ld. CIT(A) has erred in law and on facts in confirming the addition, ignoring the fact that the ld. AO failed to prove a one to one correlation between the amount of interest free advances given by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ow were not justified in making the addition on the ground that the assessee has reiterated the submissions as made in the written submissions :- The facts of the case are that the Ld. AO has made a disallowance of interest of ₹ 6,39,274/- being a notional interest on the interest free advance of ₹ 61,20,000/-. The Ld. AO has ignored the fact that the appellant had proprietary capital of ₹ 1,63,98,930/- against the advance given to Aliamma Jacob for a sum of ₹ 61,20,000/-, details of which are as follows :- Proprietor s Capital on 1.4.2009: Fitwell Corporation ₹ 94,01,170/- Star Software Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenses. The Hon'ble Supreme Court in case of Hero Cycles P.Ltd. vs. CIT vide appeal no.514 of 2008 held that the company has Reserve and surplus to the tune of almost 15 crores and therefore assessee company could in any case utilize those funds for granting it to directors. Therefore, in view of judgment of Hon'ble Jurisdictional High Court and also judgment of Hon'ble S.C. disallowance of ₹ 6,39,274/- u/s 36(1)(iii) of Income-tax Act, 1961, should be deleted for the reasons given below :- 1. Ld. AO and Ld. CIT(A) both failed to prove nexus between borrowing and interest free advance given. 2. Ld. AO and Ld. CIT(A) has failed to appreciate the fact that the capital available with the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... each the coffers of an assessee, they lose their identity and become one. Therefore, unless a direct nexus between the interest free funds and advancement of the non interest bearing loans is established, for which the onus is entirely on the assessee, the argument put forth by the appellant Cannot be accepted, Similarly, the argument that only a small amount was advanced during the year is of no avail as it is the amount outstanding during the year that matters rather than whether any loan was given during. the year or not. Under these circumstances, I am of the considered view that an addition was called for as on one hand the appellant has claimed payment of interest on loans taken and on the other hand had advanced interest free funds f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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