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TMI Blog2019 (2) TMI 1321X X X X Extracts X X X X X X X X Extracts X X X X ..... l petition is filed on the following amongst other grounds of appeal, which it is prayed may be considered without prejudice to one another. 1. On the facts, and in circumstances of the case, and in law, learned Commissioner of Income-tax (Appeal) erred in upholding action of the Assessing Officer in disallowing interest expense of RS. 648,422 without appreciating that the advances given were in nature of trade advances, and the loans taken were utilized for the purpose of business. 2. Without prejudice to above, on the facts, and in circumstances of the case, and in law, learned Commissioner of Income-tax (Appeal) erred in not appreciating that overdraft was raised in the business as some of the funds were employed to buy industrial un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t paid on loans borrowed for the purpose of business merely for the reason that the assessee has given various advances to certain persons for non business purpose without appreciating the fact that the loans have been borrowed for specific purposes, which have been used for the purpose of business alone. Though the assessee has given various advances, but those advances were given out of assessee's own funds, therefore, merely for the reason that there is a negative capital account for the year under consideration, the availability of own funds cannot be ignored when a detailed cash flow statement has been filed to prove the availability of own funds. 4. The Ld.CIT(A), after considering relevant submissions of the assessee held that asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest bearing. As against these, the net current assets of the assessee are only to the tune of Rs. 25,52,607/- and the assessee has nearly obliterated his fixed assets and investments. Therefore, it is clear that the assessee is funding his activities through interest-bearing funds only. It is only on account of the massive loans taken from the bank and others for the purpose of acquiring properties that the assessee has been forced to pay bank interests, other interests and bank charges on the same. Further the assessee had not acquired any business asset also and the industrial units acquired by the assessee jointly with his wife have been merely let out. The income from the let out property is claimed as Income from House Property ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ft loan with Citibank which was used for the purpose of business and for that purpose various evidences have been filed. The overdraft account with Citibank was also witnessed certain credits on account of sale of goods and services. Thus it is evident that the assessee is entitled for interest paid on Citibank loan partially against business income and partially against income from house property. The Ld.AR further submitted that the other loans were purely used for the purpose of business from time to time and as a matter of fact that there are no new loan taken during the year, therefore, whatever interest paid on unsecured loan amounting to Rs. 2,43,251 cannot be disallowed. The Ld.counsel also took an argument in the light of decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts to Shri Sunil J Shah for investment made in Gujarat. It is the contention of the assessee that the AO has disallowed interest expenditure debited to the P&L Account in total including bank charges and interest paid on Citibank loan which is partially taken to meet business needs and partially for acquisition of property. The assessee further contended that interest paid on other loans has been utilised purely for the purpose of business and such loan has been taken in the previous financial year and which has nothing to do with acquisition of property. Therefore, the AO was erred in disallowing total interest expenses even though the funds have been partially used for business purpose and partially used for acquisition of properties. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt held that when mixed funds are available, a general presumption goes in favour of the assessee that loans and advances are out of interest free funds and no part of interest bearing funds has been used. Consequently, no interest expense has been disallowed. In this case, the assessee has filed enough evidence to prove that loan has been partially borrowed for the purpose of business. Therefore, we are of the considered view that the issue needs to be re-examined by the AO in the light of claim of the assessee that the Citibank loan has been partially funded for business purpose. Accordingly, we set aside the issue to the file of the AO. In case, the AO finds that the Citibank loan has been partially borrowed for the purpose of business, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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