TMI Blog2018 (4) TMI 702X X X X Extracts X X X X X X X X Extracts X X X X ..... Individual) and Shri J.P. Agarwal (Karta of HUF) is for the purpose of business and hence no proportionate disallowance of interest paid on borrowed capital could be made in respect of amounts advanced to these two parties. With regard to amounts advanced to Kolkata Concrete Pvt. Ltd. (sister concern of the assessee) assessee had charged interest on the amounts advanced to them during assessment year 2008-09 and had offered to tax - since M/s Kolkata Concrete Pvt. Ltd. was facing financial crunch and was in bad position, the assessee company waived its right to charge interest during assessment year 2009- 10 i.e. the year under appeal and was able to recover a substantial portion of balance outstanding in the sum of ₹ 1,36,30,495/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - 6-4-2018 - Hon ble Shri M. Balaganesh, AM And Hon ble Shri S. S. Viswanethra Ravi, JM For the Appellant : Shri V. N. Purohit, FCA For the Respondent : Shri A. Bhattacharjee, Addl. CIT ORDER Per M.Balaganesh, AM 1. This appeal by the assessee arises out of the order of the Learned Commissioner of Income Tax(Appeals)-19, Kolkata [in short the ld CIT(A)] in Appeal No.364/CIT(A)- 19/Kol/2014-15 dated 17.12.2015 against the order passed by the ITO, Ward-9(3), Kolkata [ in short the ld AO] under section 143(3) of the Income Tax Act, 1961 (in short the Act ) dated 02.12.2011 for the Assessment Year 2009-10. 2. The first issue to be decided in this appeal is as to whether the Ld. CIT(A) was justified in upholding the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the other hand, it had advanced interest free loans and advances to interested parties. Accordingly, he sought to disallow the proportionate interest claimed as deduction by the assessee. The assessee replied that the advances made to Director and to the company in which director was interested were for the purpose of purchase of goods and in order to meet its business commitments and accordingly, no interest was charged from them by the assessee. It was also pleaded that the assessee was having own funds as on 01.04.2008 to the tune of ₹ 96.90 lacs. Accordingly, it was pleaded that the assessee had made advances to interested parties out of own funds. The assessee furnished the following details of interest paid during the assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal in the case of Shri J,P. Agarwal in I.T.A. No. 2034/Kol/2014 dated 12.04.2017 for the assessment year 2010- 11 wherein the addition made in the hands of Shri J.P. Agarwal towards deemed dividend for excessive borrowings by him from the assessee company in the sum of ₹ 21,13,676/-, was deleted by the Tribunal by holding that funds were given to Shri J.P. Agarwal only to facilitate the company s business and thereby proving business exigency thereon. In that decision, it was held that Shri J.P.Agarwal had permitted his properties mortgaged to the bank for enabling the assessee company to take the benefit of loan and in spite of request of Shri J.P. Agarwal, the assessee company was unable to release the properties from the mort ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ght to charge interest during assessment year 2009- 10 i.e. the year under appeal and was able to recover a substantial portion of balance outstanding in the sum of ₹ 1,36,30,495/- during the year, thereby leaving a meager balance of ₹ 9,09,183/- as on 31.03.2009. In any case, we find that the assessee is having sufficient funds to make advance to M/s Kolkata Concrete Pvt. Ltd. as is evident from the balance sheet. Hence, there cannot be any disallowance of interest u/s 36(1)(iii) of the Act. Accordingly, ground no. 1 raised by the assessee is allowed. 5. The last issue to be decided in this appeal is as to whether the Ld. CIT(A) was justified in confirming the disallowance u/s 14A of the Act, in the facts and circumstances o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the ld. AR that the interest received by the assessee is to be netted off with interest paid and bank interest also deserves to be excluded for the purpose of computing disallowance under the second limb of Rule 8D(2). This is because of the fact that the interest paid to SBI for the loan borrowed has been used only for the purpose of business and the same has been allowed as deduction in the earlier grounds supra. Once the bank interest is reduced from the total interest payment and the resultant figure thereon is netted off with interest received by the assessee on the loan given by the assessee, then there is no positive figure of interest payment. Hence, no disallowance under the second limb of Rule 8D(2) is warranted. With regard t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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