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TMI Blog2020 (10) TMI 408X X X X Extracts X X X X X X X X Extracts X X X X ..... ther reasons and hence the same kindly be deleted. 2. The ld. CIT(A) erred in law as well as on the facts of the case in confirming the disallowance of interest Rs. 7,98,401/- in respect of interest free advances given to related concerns. The disallowance so made & confirmed by the ld. CIT(A), is contrary to the provisions of law and facts hence, kindly be deleted in full. 3. The ld. AO further erred in law as well as on the facts of the case in charging interest u/s 234A, 234B, 234C & 234D of the Act and as also in withdrawing interest u/s 244A of the Act. The appellant totally denies its liability of charging and withdrawal of any such interest. The interest so charged/withdrawn, being contrary to the provisions of law and facts, k ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of assessment order that the assessee has interest free creditors only of Rs. 2,17,31,640/- as against interest free debtors of Rs. 3,28,14,935/-. Hence the interest free debtors of Rs. 1,10,83,295/- are his own family members. The ld A.O. has not considered the assessee's reply dated 30.11.2016 para 7 wherein it was stated that "accounts of Shree Mahavir Industries, Shri Swastik Pigments and VR Industries are current account in nature. In view of the submission made in para (6) above, your honour is requested not to disallow any part of the interest paid by the assessee". Copy of assessee's letter dated 30.11.2016 is placed at page no. 4-5 of paper book. Even if the balance of current account of related parties of Rs. 1,16,23,549/- is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... free loan to the extent of the capital of Rs. 37,62,815/- , there is a big question "Could have". The assessee has not forwarded the same from his capital. Had he forwarded from his capital his capital would have wiped off. 3) The Fact further is that the capital has already been invested and therefore the need to borrow from the bank and other parties arose. The assessee has fixed asset and investment of non income paying nature from his capital. Actually the whole of business is being run from the Interest bearing loans. 4) The AR has not taken into consideration the advances given to the related concerns. The picture depicts that the related concerns are thriving at the cost of assesse's business, which is not allowable under t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "6.3 I have gone through the assessment order, grounds of appeal and written submission carefully. It is seen that the appellant had given interest free advances of Rs. 1,82,23,896/- (Rs. 1,16,23,549/- + Rs. 66,00,347/-). The appellant has not furnished any Fund Flow Statement to show that interest free advances have been given out of assessee's own funds or out of interest free funds available with him Neither the appellant has been able to show that the interest free advances were given for business purposes. In view of these facts, the proportionate disallowance of Rs. 7,98,401/- made by the appellant out of the total interest paid of Rs. 21,49,236/- is hereby confirmed." The ld DR accordingly supported the findings of the lower author ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ogy applies in respect of interest free trade creditors and even in case of mixed funds where again the availability of mixed funds at the relevant point in time needs to be determined. The position as reflected in the balance sheet shows the position at the year end and therefore, doesn't reflect the position of interest free capital and trade creditors or for that matter, the mixed funds which is available with the assessee as free cash and bank balance at the relevant point in time of making the individual advances during the year. In the instant case, where we look at the position of cash and bank balance as on the balance sheet date of 31.03.2014, it shows cash of Rs. 8,495 and bank balance of Rs. 45,697/- as compared to advances to re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nature of trade debtors and the matter has not been examined by the AO, the matter is set-aside to the file of the AO with a direction to verify the said claim and where, on verification, it is found that such transactions are in course of the assessee's business, the same is directed to be excluded while working out the disallowance of interest. In the result, the ground no. 2 is disposed off. 9. Ground no. 1 is general in nature, it doesn't require any separate adjudication and is hereby dismissed. 10. Ground no. 3 is regarding levy of interest, the same being consequential in nature, the same is also dismissed. In the result, the appeal of the assessee is disposed off with above directions. Order pronounced in the open Court on 07/10 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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