TMI Blog2018 (8) TMI 1621X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 36(1)(iii) of the Act be made to the extent pertaining to the amount so advanced. With this limited direction we restore the issue to the Assessing Officer to readjudicate the same. Decided in favour of assessee for statistical purposes. - ITA No.813/Chd/2017 - - - Dated:- 13-7-2018 - Shri Sanjay Garg, Judicial Member And Ms. Annapurna Gupta, Accountant Member For the Appellant : S/Shri Sudhir Sehgal , Adv. Ashok Goyal , CA For the Respondent : Smt.Chanderkanta, Addl .CIT Shri Yoginder Mittal, Sr.DR ORDER Annapurna Gupta (Accountant Member).- 1. This appeal has been preferred by the assessee against the order of the learned Commissioner of Income-tax (Appeals), Shimla dated March 8, 2017 relating to the assessment year 2013-14. 2. The grounds raised by the assessee read as under : 1. That in the facts and in the circumstances of the case, the learned Commissioner of Income-tax (Appeals) has erred in confirm ing the assessment as made in the status of association of persons by the Assessing Officer, against the assessee's claim that it was a part nership firm. 2. That the learned Commissioner of Income-tax (Appeals) has misdir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 36(1)(iii) of the Act was unwarranted. 7. The learned Commissioner of Income-tax (Appeals) after considering assessee's submissions noted that huge funds to the tune of ₹ 5,68,42,578 had been advanced to the partner Shri G. S. Sethi without any interest and that simultaneously, the assessee was claiming deduction on interest paid to banks for availing of over draft facility to the tune of ₹ 39,69,660. The Commissioner of Income-tax (Appeals) further noted that the assessee was availing of loan/overdraft facility/credit facility from Hindu Co-operative Bank and the amount outstanding from the said bank as at the end of the year was ₹ 3,03,37,185. The Commissioner of Income-tax (Appeals) further noticed that the entire advance had been made to the partner from the said bank only on which interest was being paid by the assessee by issuing cheques. Considering the above facts, the learned Commissioner of Income-tax (Appeals) held that clearly the interest bearing funds had been used for making interest-free advance to the partner which was not shown to be for business purpose and, therefore, for the said reason upheld the disallowance made of interest und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7,00,000 Cheque No. 11 11645, The Hindu Co.Op. Bank 2. 26-4-2012 25,00,000 Cheque No. 1111650, The Hindu Co.Op. Bank 3. 1-5-2012 30,00,000 Cheque No. 1111655, The Hindu Co.Op. Bank 4. 21-5-2012 20,00,000 Cheque No. 1111664, The Hindu Co.Op. Bank 5 1-6-2012 21,50,000 Cheque No. 1111673, The Hindu Co.Op. Bank 6. 4-6-2012 10,00,000 Cheque No. 1111674, The Hindu Co.Op. Bank 7. 5-6-2012 20,00,000 Cheque No. 111 1676, The Hindu Co.Op. Bank 8. 5-6-2012 20,00,000 Cheque No. 1111677, The Hindu Co.Op. Bank 9. 5-7-2012 25,00,000 C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e firm. The learned counsel for the assessee in this regard pointed out that the assessee-firm had available interest-free funds of ₹ 6.3 crores as under : (1) Total credit side of the balance-sheet ₹ 9,39,52,526 (2) Less : loans taken ₹ 3,08,37,105 (3) Interest free amounts available ₹ 6,31,15,421 9. The learned counsel for assessee pointed out that the debit balance to the partner was to the tune of ₹ 5,68,42,578. Thus, the available interest- free funds with the assessee-firm, it was pointed out was sufficient to make the impugned interest-free advance. It was also pointed out that sufficiency of funds is evidenced from the credit balance of capital of other two partners to the tune of ₹ 4,97,12,378. The learned counsel for the assessee stated that the findings of the learned Commissioner of Income-tax (Appeals) that the advance had been made from overdraft account of Hindu Co-operative Bank, and therefore the nexus between the interest bearing funds and the said a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h of logic can be termed as interest-free funds available with the assessee for the purpose of making advances. Therefore, since the assessee has failed to demonstrate the actual amount of interest-free funds available with it, we cannot agree with the submissions of the learned counsel for the assessee that it had sufficient interest free funds to make the impugned advance to the partners thus warranting no disallowance of interest under section 36(1)(iii) of the Act. As for the alternate contention of the learned counsel for the assessee, that it had used its trading receipts deposited in its bank account for making the impugned advance to the partners, we find merit in this contention of the learned counsel for assessee. It is an admitted fact that the amount advanced to the partners was entirely by issuing cheques from Hindu Co- operative Bank from which overdraft/credit facility was available by the assessee. The learned counsel for the assessee has contended that it was depositing its business receipts in the said account. If there is direct nexus between the trading receipts deposited in the said account and advance given to the partners, it can be safely presumed that the t ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
