9911796707
TMI Blog2012 (11) TMI 799X X X X Extracts X X X X X X X X Extracts X X X X ..... under:- "The assesses has debited interest expenses of Rs.9,19,152/-. The assesses has advanced Rs.12 lacs to M/s. Millenium and Rs.20,65,000/- to M/s. Bajaj Chemical Products. On these advances no interest has been charged. The assessee is giving interest bearing funds without charging any interest, it is also relevant to state that M/s. Bajaj Chemical Products is an associate concern of the assessee. Thus, there is diversion of business profits by this act of the assessee. Therefore, interest expenses to the extent of interest not charged from [Merest free advances is required to be computed and disallowed. A show cause was issued and assessee was requested to file his reply. The assessee has submitted that regarding non-charging ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ased Cp4drs and chemicals from the party during the relevant year and had also effected transaction on current account basis. As per the mutual agreement, no interest was to be charged or received. Further, the accountant who was looking after the matter passed entries in the current account instead of creditor a/c, which resulted credit balance in one account and debit balance in other account. Moreover, the same should have been netted off before applying even notional interest. The appellant further submits that in the earlier year, the opening balance was credit said meaning thereby the appellant availed amount from the same party on current account and on which no interest was paid by the appellant and therefore on this ground also it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom the said funds. It is held by Hon'ble Madras High Court in the case of CIT Vs Hotel Savera 148 CTR 585 that when the assessee has both, own money and borrowed money, a presumption can arise that the money lent, even free of interest, came out of his own money. It is added that there were no substantial increase in unsecured loan which was Rs.92.73 lacs as against Rs.89.30 las and that were due to charging of interest at the year end. Your appellant further respectfully submits that the AO has not established that the interest bearing funds were utilized for making / giving interest free loans and therefore no disallowance out of interest can be made legally. Reliance is placed on the following decisions: Shahibaug Entrepreneurs Pvt Lt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... illennium, then the appellant would have charged Rs.27048/- from the party. Thus, overall, if interest would have charged/paid, then there would be net result of payment of interest of Rs.36,530/-. In view of the facts as stated above and considering that the company had substantial funds in the form of share capital & reserves as well as there were no substantial increase in the loans to suggest adverse inference, interest disallowed by the AO deserves to be deleted." After considering the aforesaid submissions made by the assessee, the learned CIT(A) deleted the disallowance. 4. Now, the Revenue is in appeal before us. The learned DR supported the order of the AO. 5. The learned counsel of the assessee, on the other hand, supported th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of ITATs decision in the case of Smartchem Technologies Ltd Vs. ITO 97 TTJ 818, same should have been deleted. After considering the submissions of the assessee, the learned CIT(A) deleted the addition in the following manner:- "4.2 I have considered the submissions made. I find that the issue in question is squarely covered by the decision of Ahmedabad Bench of ITAT in the case of Smartchem Technologies Ltd Vs. ITO reported at 97 TTJ 818, relied upon by the assessee. As the amount in question has been paid before the due date of filing of return, addition made by the AO is deleted." 9. The Revenue is in appeal before us against the aforesaid finings of the learned CIT(A). The learned DR supported the order of the AO. 10. T ..... X X X X Extracts X X X X X X X X Extracts X X X X
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