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TMI Blog2013 (7) TMI 36X X X X Extracts X X X X X X X X Extracts X X X X ..... ort term basis recoverable on notice. The interest @ 15% has been paid on substantial deposits which were utilized by the appellant for long term business activities. Also the interest rate of 15% is not abnormal. It shows business expediency and hence does not warrant any disallowance as has been made by the AO - In favour of assessee. Disallowance of interest u/s. 36(1)(iii) - CIT(A) deleted the addition - Held that:- From the accounts submitted by the appellant it is found that the appellant had surplus fund in the banks from which advances have been made to the parties @ 9% on short term basis. The bank balance with the account maintained by the appellant with Bank of Baroda as on 31/3/2007 was Rs.35,99,633 and as on March, 2006 it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the A. O. 2.0 The Ld. CIT(A)-XX Ahmedabad has erred in law and on facts in deleting the addition of Rs.4,56,197/- made by the A. O. on account of disallowance of interest u/s. 36 (1) (iii) of the I. T. Act, 1961 without properly appreciating the facts of the case and the material brought on record by the A. O." 3. Brief facts of the case are that the assessee is a firm engaged in the business of whole sale trading in iron and steel filed its return of income for the assessment year 2007-08 on 12-10-2007 declaring total income of Rs.11,71,360/-. The case was selected for scrutiny and finally assessment order was passed by the AO on 17-12-2009 determining the total income of the assessee at Rs.19,98,310/- wherein an addition of Rs.3, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 15% has been paid on substantial deposits which were utilized by the appellant for long term business activities. Also the interest rate of 15% is not abnormal. It shows business expediency and hence does not warrant any disallowance as has been made by the A. O. In view of the above, the disallowance made by the AO of Rs.3,70,753/- is hereby directed to be deleted. This ground of appeal is therefore allowed." 3.2 With regard to ground No.2 addition on account of disallowance made by the learned AO of Rs.4,56,197/- u/s 36(1) (ii) on account of borrowing for non-business purpose, the learned CIT(A) has deleted the same by observing in Para 6.3 of his order which is reproduced herein under for reference:- "6.3 I have gone through the fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s covered under section 40A (2) (b) of the Act. This ground is therefore allowed and the addition made of Rs.4,56,197/- is directed to be deleted." 4. Against the above findings of the learned CIT(A), the revenue is in appeal before us. 5. None appeared on behalf of the assessee on the date of hearing despite receipt of notice; therefore, we proceed to decide the appeal after hearing the learned DR. The learned DR argued in support of the order of the learned AO stating that the addition of Rs.3,70,753/- made by the learned AO on account of excess payment of interest @15% to related parties u/s 40A (2) (b) of the Act as against 9% interest paid to others is justifiable and, therefore, the same may be sustained. The learned DR further ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as on 31st March, 2007 was Rs.41,85,914/- whereas the opening capital balance as on 01-04-2006 was Rs.33,91,470/-.Therefore, the assessee had enough own funds for such advances made. (c) The assessee had advanced only surplus funds for short term in order to reduce its interest expenditure. 7. From the above findings of the learned CIT(A), we are of the view that the learned CIT(A) has judiciously considered the issue and arrived at the correct conclusion in favour of the assessee. In these circumstances, we do not find it necessary to interfere in his order. Therefore, we confirm the order of the learned CIT(A) and accordingly dismiss the appeal of the revenue on both the issues. 8. In the result, the appeal of the revenue is dismiss ..... X X X X Extracts X X X X X X X X Extracts X X X X
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