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TMI Blog2012 (7) TMI 128X X X X Extracts X X X X X X X X Extracts X X X X ..... application money as interest free is not acceptable as the assessee is a private limited company and share application money has been kept as a trustee of that application money - as the Sundry Creditors is pertaining to the business of the assessee, therefore, it cannot be said to be interest free own capital or reserve available with the assessee for giving interest free advance - as decided in CIT vs. Radico Khaitan Limited [2004 (9) TMI 37 (HC)] if the assessee is having sufficient capital and reserve fund, to that extent interest free advance given to the sister concern cannot be disallowed. In case of otherwise position proportionate disallowance is warranted - on perusal of Balance Sheet and P&L Account for the year under consideration, the interest free own fund in the form of capital and reserve after reducing loss available with the assessee is only Rs.21,02,941/- (35,09,000 – 14,06,059) - remit the matter back to the file of the AO to make necessary calculation of amount of disallowance on proportionate basis - partly allowed in favour of assessee. - ITA No.51/Agr/2011 - - - Dated:- 8-6-2012 - SHRI BHAVNESH SAINI, AND SHRI A.L. GEHLOT, JJ. Appellant by : Shri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4. The CIT(A) confirmed the order of the Assessing Officer as under :- (CIT(A) paragraph no.2.3 2.3 I have gone through the assessment order and submission made by the Ld. AR. In all the cases pertaining to which disallowance has been made by the AO by invoking the provisions of sec.36(1)(iii), the main plea of the Ld. AR is that even after giving the loan/advance, there was a credit balance in the bank account. However, no details have been furnished as to when the money was received from the persons to whom the interest was paid. It is also not the case of the appellant that it was maintaining a separate bank account for the loans/advances amounts. Therefore, it is apparent that the assessee's own money and the amounts received on which interest has been paid were thrown into a common hotchpotch. Thus, the argument of the Ld. AR that there was still credit balance in the bank account and the interest free loans/advances were not given out of borrowed funds cannot be taken on its face value. In the case of M/s Farah Ice Cold Storage (P) Ltd. it is an admitted fact that it is a sister concern of the appellant. In the case of this company, as per the Ld. AR the money was ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sum of Rs.2 lacs was given on 20.4.05 and another sum of Rs.2 lacs on 13.5.05 for purchase of agricultural land situated at Khata No.228 at Mauja Gurdha, Tehsil Etmadpur, Agra and another land situated at Khasra No.840 and 842 Mauja Chaugan, Etmadpur, Agra. It has been further submitted that the original purchase deed of said land was deposited by the said party with the assessee as a security of advance of money of sale. As per assessee s own admission registered sale deed has not yet been executed. It is worth noting that money was advanced on 20.4.05 13.5.05 and even during the appellate proceedings nothing has been brought on record that the sale deed for the purpose of which ostensibly the money was advanced has been executed. Therefore, the explanation given by the assessee cannot be taken on its face value as the sale deed has not been executed even after a lapse of 5 years which is quite unusual as the purchaser will be in a hurry to get the sale deed registered after parting with a part of sale consideration. In the case of M/s Akin Security (P) Ltd., it has been submitted that the sum of Rs.35 lacs was given for purchase of land at village Chaugan, Etmadpur, Agra. How ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tative in support of his contention relied upon the judgment of M.P. High Court in the case of R.D. Joshi Co. vs. CIT, 118 Taxman 394 (M.P.) and some other decisions of I.T.A.T. Ld. Authorised Representative submitted that in case of M/s. Akin Security Pvt. Ltd. the interest free advance of Rs.35,00,000/- was given for purchase of land. The said advance amount has been adjusted against the purchase price of the land as the assessee has purchased the land and copy of registration deed is filed at page nos.29 to 50 of assessee s Paper Book. The advance given has also been adjusted in the sale deed itself. The relevant copies of sale deed have been placed at page nos.29 to 82 of assessee s Paper Book. 7. The Ld. Departmental Representative relied upon the order of CIT(A). 8. We have head the ld. Representatives of the parties and record perused. We notice that the assessee has filed a copy of Balance Sheet as at 31.03.2006 at page no.85 of the Paper Book. A copy of Profit Loss Account has been filed at page no.86 of assessee s Paper Book. In the said Profit and Loss Account the assessee has claimed interest on loan Rs.7,27,924/-. As regards the contention of the Ld. Authorised ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of this additional evidence. The assessee did not make any such request before us also. Under the circumstances, such document cannot be accepted at this stage. The sale deed placed at page no.29 of assessee s Paper Book wherein the seller Shri Dangal Singh, Santosh Kumar purchased from Shri Rajendra Chandra Jain. The submission of the assess that the original purchase deed and the said mount were deposited by the said party with the assessee as a security of advance money for sale and registered sale deed has not been executed but the assessee has failed to submit the subsequent position neither before the Revenue authorities nor before us. In the light of the facts, merely filing a sale agreement of third party and saying they have deposited sale deed against the advance is not acceptable as no other evidence has been filed. In the light of above detailed discussions, we hold that the interest free advance has been given to 6 parties which is neither for the purpose of assessee s business nor in accordance with business expediency. However, we follow the principle/formula laid down in the judgement of Hon ble jurisdictional High Court in the case of CIT vs. Radico Khaitan Limi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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