TMI Blog2021 (12) TMI 1291X X X X Extracts X X X X X X X X Extracts X X X X ..... stical purposes, ground no.1 and 2 raised by the assessee are allowed. Disallowance of interest on account of interest free loan to the sister-concern - assessee has accepted interest bearing funds from bank and have been utilized for giving interest free loans and advances to P G Glass Pvt. Ltd. Moreover, M/s P G Glass Pvt. Ltd. is a related party covered u/s 40A(2)(b) - HELD THAT:- As AR submits before the Bench that assessee-company has interest free own fund, out of that interest free advance have been given to assessee, therefore no disallowance should be made - As DR argues that interest free advance to the sister concern was given out of cash credit account bearing interest burden, therefore addition made by the assessing officer should be upheld. We find merit in the submissions of Revenue, therefore, we remit this issue back to the file of the assessing officer to examine whether interest free advance to the sister concern was given out of cash credit account bearing interest burden. Thus, ground no.3 raised by the assessee is allowed for statistical purposes. Disallowance of expenditure on repairs - Revenue or capital expenditure - HELD THAT:- On perusal of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fied and prays that the same be deleted. 3.Ground No.1 and 2 relate to addition of ₹ 25,00,000/- on account of share capital / share premium. 4.The relevant material facts, as culled out from the material on record, are as follows. The assessee is engaged in the business of manufacturing of glass bottles and components. During the year under consideration, the assessee company has issued 7500, 5% Convertible Non-Cumulative Redeemable Preference Shares of ₹ 100/- each at a premium of ₹ 900/- each to M/s Nakshtra Electricals Engineers Pvt. Ltd. and Mr. Mohammad Imran Attarwala. The details of shares issued are as under:- Sr No. Name of shareholder No of shares Share Capital Share premium Total 1 M/s Nakshtra Electricals Engineers Pvt. Ltd. 2500 100 900 25,00,000/- 2 Mr. Mohd. Imran Attarwala 5000 100 900 50,00,000/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of ₹ 25,00,000/- (share capital ₹ 2,50,000/- and share premium of ₹ 22,50,000/-), received as unexplained cash credit u/s 68 of the Income Tax Act, 1961. 7.Aggrieved by the order of Assessing Officer, the assessee carried the matter in appeal before Ld. CIT(A) who has confirmed the action of Assessing Officer. 8.We have given our thoughtful consideration to rival contention. Learned Counsel for the assessee reiterated the submissions made during the appellate proceedings. On the other hand, the Ld. DR for the Revenue has primarily reiterated the stand taken by the Assessing Officer, which we have already noted in our earlier para and is not being repeated for the sake of brevity. We note that Ground Nos. 1 and 2 raised by the assessee pertain to addition of ₹ 25 lakhs made u/s 68 on account of unexplained cash credit being the amount received from issuance of shares. The AO examined this issue at length and noticed that the assessee had shown investment in shares in the name of M/s. Nakshatra Electricals and Engineers Pvt. Ltd. at ₹ 25 lakhs. On perusal of the return of income of M/s. Nakshatra Electricals and Engineers Pvt. Ltd., it was noti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... est bearing funds amounting to ₹ 1,50,07,000/- to associate concern P.G. Pvt. Ltd. without charging any interest undisputedly, the assessee has paid huge interest amounting to ₹ 2,00,72,166/- on cash credit account. Ld. AR has vehemently submitted that shareholders capital and reserves and surplus were to the tune of ₹ 55.73 crores and hence, no interest can be disallowed. However, it is noticed that the interest free advance to the sister concern was given out of cash credit account bearing interest burden. The total snort term borrowings have increased during the year under consideration from ₹ 15.24crores to ₹ 20.04 crores. Since, there was direct nexus between the interest free advances given to the associate concern and borrowed funds, in my considered view, the decisions relied upon by the Ld. AR are distinguishable on facts. Accordingly, I hold that the disallowance u/s 36(l)(iii) is called for since the assessee has not utilized borrowed funds for the purposes of business to the extent of interest free advances. This view gets support from the ratio laid down in the following cases: i) CIT vs Harrisons Malayalam Ltd. (2012) 25 taxmann.com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8377; 27,38,798/-. 14. Brief facts qua the issue are that assessing officer observed from the profit and loss account, of the assessee company that assessee has claimed repairs and maintenance of Building to the tune of ₹ 63,43,875/- in the profit and loss account. During the course of assessment proceedings, the assessee was asked to furnish bills/vouchers with supporting evidences for verification. Ongoing through details filed by assessee, the AO noticed that following amounts were paid for road repairing work, which are of the nature of capital expenditure: Sr. No Bill/voucher No. Name of party Amount 1 06/370 Keshavji Devji Sons, Tarsadi ₹ 3,53,160/- 2 06/373 Keshavji Devji Sons,Trasadi ₹ 5,16,100/- 3 09/226 Bharat M Ramani, Kosamba ₹ 73,920/- 4 06/227 Shree Ram Quarry, Kosamba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e capitalized Before Sep.-11 After Sep.11 ₹ 3,53,160/- ₹ 35,316/- -- ₹ 3,17,844/- ₹ 5,16,100/- ₹ 51,610/- -- ₹ 4,64,490/- ₹ 93,841/- ₹ 9,384/- --- ₹ 84,457/- ₹ 1,34,102/- ₹ 13,410/- -- ₹ 1,20,692/- Rs.,1,69,298/- ₹ 16,929/- -- ₹ 1,52,369/- ₹ 7,00,255/- ₹ 70,025/- --- ₹ 6,30,230/- ₹ 3,53,164/- ₹ 35,316/- ---- ₹ 3,17,848/- ₹ 2,33,349/- ₹ 23,334/- -- ₹ 2,10,015/- ..... X X X X Extracts X X X X X X X X Extracts X X X X
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