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TMI Blog2024 (3) TMI 517X X X X Extracts X X X X X X X X Extracts X X X X ..... T. Act, 1961. [2] On the facts and in the circumstances of the case, as well as law on the subject, the Learned Commissioner of Income Tax (Appeals) erred in confirming the addition made by the Learned Asst. Commissioner of Income Tax, Circle - 1(3), Surat on account of Notional Rent of Rs. 3,04,000/-. Your assessee therefore prays that looking to the facts and circumstances of the case the addition made by The Learned Asst. Commissioner of Income Tax, Circle-1(3) to the tune of Rs. 55,34,972/- & sustained by the Learned CIT(A) may please be deleted. Your assessee further reserves his right to add, alter or to amend any of the aforesaid grounds at the time of hearing of an appeal." 3. Ground No.1 raised by the assessee relates to disallowance of interest expenses of Rs. 52,30,972/- claimed u/s 37 of the Act. 4. Succinct facts qua the issue are that during the assessment proceedings, the Assessing Officer noted that assessee has advanced total loans/advances of Rs. 25,48,87,911/- to outside parties while interest income of only Rs. 96,40,693/- has been shown, which is less than 4% of charged interest rate. On verification, the Assessing Officer found that the assessee has ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee. 8. On the other hand, Learned Senior Departmental Representative (ld. Sr. DR) for the Revenue, argued that assessee has failed to establish any one-to-one relation between the unsecured loans/bank loans and the interest-bearing advances. The disallowance u/s 37 of the Act, was due to diversion of interest-paid funds to non-business, personal avenues, therefore, ld DR contended that addition made by the Assessing Officer may be upheld. 9. We have heard both the parties and carefully gone through the submissions put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the facts of the case including the findings of the ld. CIT(A) and other material brought on record. The Ld. Counsel for the assessee submitted before us the following documents and evidences, viz: (1) Copy of ROI along with computation of income and audit report for AY. 2017-18 (vide Pb.21 - 56), (2) Chart showing major source of income earned in preceding three previous years, from which amount has been lended to the family members of the assessee (vide Pb. 58, (3) Ledger copy of account of family members and other parties to whom money is lended f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ands of the assessee. For that, we rely on the judgment of Co-ordinate Bench of ITAT, Ahmedabad in the case of DCIT vs. Sylvannus Builders & Developers Ltd., in ITA No.1923/Ahd/2019, for AY.2015-16, order dated 08.05.2023, wherein it was held as follows: "7. Regarding ground no. 2 disallowance of interest expenditure u/s. 36(1)(iii) of the Act, the Ld. CIT(A) has held that the assessee had surplus interest free funds surplus of nearly Rs. 52,51,80,178/- and this is far excess of the interest free advances of Rs. 32,43,89,592/-. This is uncontrovented by the Revenue. Therefore the addition made u/s. 36(1)(iii) is not sustainable. 7.1. It is settled principle of law by various judgments of the Jurisdictional High Court that when the interest free funds available with the assessee were far in excess of investments, it can be said that the investments are made out interest free funds, then the disallowance made u/s 36(1)(iii) by the A.O. is not justifiable. Respectfully following the jurisdictional High court in the case of Amod Stamping Pvt. Ltd., the disallowance made by the A.O. is unjustifiable and the same is hereby deleted. Thus the grounds raised by the Revenue is devoid of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dvances, therefore no disallowance should be made in the hands of the assessee, hence, we delete the addition of Rs. 52,30,972/-. 14. In the result, ground No.1 raised by the assessee, is allowed. 15. Ground No.2 raised by the assessee relates to addition on account of notional rent of Rs. 3,04,000/-. 16. Brief facts qua the issue are that during the course of assessment proceedings; it was noted by Assessing Officer that there are 3 properties owned by the assessee, at Bunglow No.6, [Claimed to be Self-occupied], Piplod, Surat; Flat No.3, Vrundavan, Athwalines Surat (30% share) Devraj Residency Althan, in respect of which no actual/deemed rent have been shown by the assessee. However, no documentary evidence or details have been provided as regards to the market Annual Lettable Value (ALV) of the premises. All the premises are spacious and located in posh and active locality of Athwalines and New City Light with reasonable Annual rent values. Therefore Assessing Officer noted that there are 2 house properties [Apart from the S.O.P.] owned in respect of which no deemed rent have been shown. However, no documentary evidence or details have been provided as regards to the market A ..... X X X X Extracts X X X X X X X X Extracts X X X X
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