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2015 (10) TMI 995 - ITAT AGRADisallowance of interest free advance - Held that:- It is an undisputed position that interest free funds available to the assessee are far in excess of the interest free advances given by the assessee. In the documents filed before us, it is shown that the assessee had a capital of ₹ 176 lakhs and business profit of ₹ 82.45 lakhs, and both these amounts put together are far in excess of the interest free investments made by the assessee. With these undisputed facts in mind, let us take a look at the legal position laid down by Hon’ble Bombay High Court, in the case of CIT Vs Reliance Utilities & Power Ltd (2009 (1) TMI 4 - HIGH COURT BOMBAY), as stated thus, “The principle therefore would be that if there are funds available both interest-free and overdraft and/or loans taken, then a presumption would arise that investments would be out of the interest-free fund generated or available with the company, if the interest-free funds were sufficient to meet the investments”. On the basis of this principle, as has been consistently held by coordinate benches of this Tribunal, as long as interest free funds available to an assessee are in excess of the non business investments or interest free advances, presumption has to be that investments or interest free advances are out of interest free advances, and, accordingly, disallowance in respect of interest paid on borrowings cannot be made on the ground that the borrowed monies have not been used for business purposes. The impugned interest disallowances are, accordingly, deleted - Decided in favour of assessee. Penalty imposed under section 271(1)(c) - Disallowance of sales tax liability - Held that:- The deduction was made in a transparent manner inasmuch as it was stated in the profit and loss account as “Sales Tax Arrears 81-82” and as such it cannot be said to be a case of furnishing inaccurate particulars of income. It is also an undisputed position that even the tax auditor missed the disallowance in the tax audit report. There is nothing before us to indicate malafide in this action. It is also not a case of double deduction for the same amount, as the relevant previous year was the year in which payment was made. In these circumstances, even if it was an inadmissible claim, by no stretch of logic, this can be a fit case for imposition of penalty under section 271(1)(c) of the Act. Learned Departmental Representative, when confronted with these facts, did not have much to say, beyond placing his dutiful reliance on the orders of the authorities below.In view of the above discussions, and bearing in mind entirety of the case, we deem it fit and proper to delete the impugned penalty - Decided in favour of assessee.
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