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2018 (4) TMI 702

vailed from the bank, which clearly demonstrates the business nexus of the advances made by the company to Shri J.P. Agarwal. Hence, it cannot be said that the monies advanced to Shri J.P. Agarwal were for non-business purposes. Once the money is borrowed for the purpose of business and interest is paid thereon, the same would be squarely allowable as deduction u/s 36(1)(iii) of the Act. Accordingly, the lending of monies to Shri J.P. Agarwal (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 co .....

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r the third limb of Rule 8D(2) in the sum of ₹ 2,515/- the ld. AR fairly agreed for the same. In any case it is already settled that the disallowance under 14A read with Rule 8D cannot exceed the exempt income claimed by the assessee - addition made under the second limb of Rule 8D(2) is hereby directed to be deleted and disallowance under the third limb is sustained - Decided partly in favour of assessee. - I.T.A No. 273/Kol/2016 - Dated:- 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 In .....

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14.98 crores. During the year under consideration, the assessee s main business was wholesale and retailer in essential commodities like edible oil, wheat, flour and sheers. The ld. AO observed that the assessee had advanced the following funds to its Director and to a concern in which such director is interested: The ld. AO observed that on one hand, the assessee had paid interest on its borrowings, and on 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 a .....

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ppeal before us on the following grounds: 1. On the facts and in the circumstances of the case the Ld. CIT(A) is not justified in confirming the disallowance of a sum of ₹ 10,00,515/- under the head interest expenditure on estimated basis. 4. We have heard the rival submissions. We find that the ld. AR had placed on record a copy of the Co-ordinate Bench decision of this 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. .....

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4.1.With regard to amounts advanced to Kolkata Concrete Pvt. Ltd. (sister concern of the assessee), we find that the assessee had charged interest on the amounts advanced to them during assessment year 2008-09 and had offered to tax. It was stated that 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/- 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 .....

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nterest income of ₹ 1,64,60,886/- which needs to be netted off with the interest paid. He further argued that the assessee has got own funds to make the investments and hence no disallowance under the second limb of Rule 8D(2) is warranted. We find that the assessee is having sufficient own funds and in any case we are inclined to agree with the argument 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 deduc .....

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