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TMI Blog2013 (2) TMI 532X X X X Extracts X X X X X X X X Extracts X X X X ..... ount of advance of Rs.3,56,838/- to Fatu S/o Immamudin. (iii)Rs.3,00,000/- on account of advance of Rs.25,00,000/- to M/s Sonakshi Marketing Pvt. Ltd. (iv) Rs.12,000/ - on account of advance of Rs.1,00,000/- to M/s Maple Leaf Exim Pvt. Ltd. (v) Rs.17,265/- on account of advance of Rs.1,43,875/- to M/s Mass Global Logistic Pvt. Ltd. (vi)Rs.6,35,382/- on account of outstanding amount of Rs.52,94,846/- from M/s A. Nitin & Co. (vii)Rs.1,08,000/- on account of outstanding amount of Rs.9,00,000/- from M/s Associated Capital Market. (viii)Rs.12,000/- on account of advance of Rs.1,00,000/- to M/s Jai Spring Industries and Investment Pvt. Ltd. Rs.15,09,844 3. The Revenue has raised the following grounds of appeal : "1. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) is right in allowing relief to the assessee of interest amounting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bsp; The assessee claims the same to be the expenses recoverable on account of project development. The claim of the assessee was that it had entered into a joint venture with the said company which did not materialize and the expenses incurred for project development were recoverable from the said party. The Assessing Officer noted that the said expenditure was incurred by the assessee on account of M/s Rassini in the years 2000 to 2003. However, the said amounts were not recovered till date. In the absence of the assessee producing any document to establish the nature of the expenses incurred and the business expediency, the Assessing Officer held the assessee to have failed to justify the nexus of such advances with business expediency. ii) Advance of Rs.52,94,846/- to M/s A.Nitin & Co. and Rs.9,00,000/- to M/s Associated Capital Market: The assessee explained that the said amount was outstanding against the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sp; c) Sonakshi Mktg. Pvt. Ltd. -Rs.25,00,000/- d) Mars Global Logistics Pvt. Ltd. -Rs.1,43,875/- 9. The Assessing Officer thus held that the disbursement to the extent mentioned above could not be held for the purpose of business and the assessee was not entitled to claim of deduction of the interest on the borrowings to the extent they were diverted to the sister concerns or other persons without interest. The Assessing Officer as per the tabulation at pages 5 and 6 computed the disallowance out of interest expenditure of Rs.44,69,439/-. 10. Before the CIT (Appeals), the assessee filed written submissions, against which the Assessing Officer furnished its comment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said debit balance was confirmed by the CIT (Appeals). ii) Advance of Rs.52,94,846/- to M/s A.Nitin & Co. and Rs.9,00,000/- to M/s Associated Capital Market: The assessee explained that the balance of Rs.52,94,846/- outstanding from M/s A. Nitin & Co. represented advances made for purchase of share and also amount receivable on sale of shares through the said party. The copies of account for the financial years 1997-98 to 2005-06 were placed on record. The CIT (Appeals) at pages 19 and 20 has reproduced the copy of account of M/s A. Nitin & Co. in the books of account of the assessee and on verification of the account held the same to be not verifiable and hence the plea of the assessee was found to be not tenable and thus rejected. In respect of the transactions with M/s Associated Capital Market, the CIT (Appeals) from the copy of account noted that there were transfer entry to Yamunanagar vide joint venture dated 31.8.2000 of Rs.20 lacs. Further entries of adjustment, as per the CIT (Appeals) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ls) in the absence of any evidence. 11. The assessee is in appeal against the order of CIT (Appeals) and Revenue is in appeal against the reliefs allowed by the CIT (Appeals). The learned A.R. for the assessee for the assessee drew our attention to the application filed under Rule 10 of the Tribunal Rules for admission of affidavit of Shri Shakti Goyal, General Manager Finance. As per the said certificate, it was affirmed that the expenses were not incurred on behalf of M/s Rassini but were incurred on behalf of the assessee company for traveling, conveyance and professional charges for the proposed joint venture to be entered with M/s Rassini. The observations of CIT (Appeals) in this regard were thus assailed. 12. The assessee has filed an application under Rule 29 of the Tribunal Rules in which permission was sought to file additional evidence i.e. correspondence between the assessee and M/s Rassini during the period 2000 to 2004 to prove that both the parties had agreed to enter into joint venture to manufacture new type of automobiles spri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The learned A.R. for the assessee further drew our attention to the tabulated details at page 62 of the Paper Book, in which it is brought out that the interest free funds were available with the assessee and also that the said loans and advances given for business purpose. In the said chart, further tabulation of interest claimed and allowed by the Assessing Officer vide orders passed under section 143(3) of the Act for the last 15 years is given. As per the learned A.R. for the assessee there is no disallowance in any of the years except assessment years 2005-06 and 2006-07. In respect of assessment year 2005-06 the appeal was stated to be pending before the CIT (Appeals). The learned A.R. for the assessee submitted that the loans were old and some sanctity be given to the assessment orders passed under section 143(3) of the Act. The learned A.R. for the assessee further placed reliance on the written submissions in which it had analyzed various case laws on the issue. 15. The learned D.R. for the Revenue placing reliance on the orders of the Assessing Officer and CIT (Appeals) pointed ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds in the form of capital introduced in business, that again will show a camouflage by the assessee as at the time of raising of loan, the assessee will show the figures of capital introduced by it as a margin for loans being raised and after the loans are raised, then substantial amount is diverted to the sister concerns for non-business purposes without interest, a plea is sought to be raised that the amount advanced was out of its capital, which in fact stood exhausted in setting up of the unit. Such a plea may be acceptable at a stage when no loans had been raised by the assessee at the time of disbursement of funds. This would depend on the facts of each case. The view that where the amount is advanced from a mixed account or share capital or sale proceeds or profits, it would not be deemed diversion of borrowed capital or that the Revenue had not been able to establish nexus of the funds advanced to the sister concerns with the borrowed funds, is not correct. Once it is borne out from the record that the assessee had borrowed certain funds on which liability to pay tax is being incurred and on the other hand, certain amounts had been advanced to sister concerns or othe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ack to the file of the Assessing Officer to redecide the issue de-novo after taking into consideration the additional evidence sought to be furnished by the assessee before us under Rule 29 of the Tribunal Rules. Reasonable opportunity of hearing shall be provided to the assessee in this regard before deciding the issue. The issue is thus set aside to the file of the Assessing Officer for statistical purposes. 19. In respect of the advances due from different parties, admittedly the above said advances were made interest free. The assessee has failed to file any evidence to prove the business expediency in respect of the said advances. The advance of Rs.52,94,846/- outstanding from M/s A.Nitin & Co., as per the assessee represented advances made for purchase of shares and also the amount receivable on sale of shares. The said account of the assessee with M/s A.Nitin & Co. was not verifiable and was rejected by the CIT (Appeals). The assessee has failed to controvert the findings of the CIT (Appeals) and accordingly, the interest relatable to the advances made to M/s A.Nitin & Co. is held to b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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