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TMI Blog2014 (1) TMI 1290X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee which does not seem to be the case the present year as profit and loss account of assessee does not show any expenditure to have been incurred on account of petrol/diesel – matter remitted back to the AO for re-adjudication – Decided in favour of Revenue. Deletion made on proportionate interest - Interest on borrowed capital paid and interest free loans advanced to sister concerns – Held that:- It has been made by Assessing Officer on the basis of assumptions only - The actual facts and figures as per balance sheet of the assessee do not indicate that interest bearing funds were diverted for interest free advances - assessee has not taken any loans and advances on which interest was paid and rather it has paid interest on the purchase of shares which were purchased on credit from share broking firms – there was no infirmity in the order of CIT (A) on this ground – Decided against Revenue. - ITA No.2621/Del/2010 - - - Dated:- 26-7-2013 - Rajpal Yadav and T S Kapoor, JJ. For the Appellant : Shri Rajesh Dureja, Adv. For the Respondent : Ms Renuka Jain, DR ORDER:- PER : T S Kapoor This is an appeal filed by the Revenue against the order of the Commissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of such seven seater, highly luxurious sports vehicle was not required in the business of the company. Moreover he observed that business of the assessee was limited to Delhi only it had paid an amount of more than Rs.25 Lacs to M/s Kotak Securities as service charges for job of investment on behalf of the assessee. Therefore, he disallowed the amount of Rs.11,41,773/-. 3. Similarly, he observed that assessee had incurred an interest expenditure amounting to Rs.44,62,425/- and interest was paid on car loan and to share broking firms on account of credit availed from them in the course of sale/ purchase of shares. The Assessing Officer observed that assessee had made interest free advances of huge sums of money to various entities without any apparent nexus with business. By giving details of such loans and advances on page no.3 of assessment order, he made a finding of fact that total advances as on the close of the year were to the tune of Rs.1,21,54,949/-. Vide order sheet entry dated 12.11.2008, the assessee was asked to explain as to why not the interest paid be disallowed as amounts has been advanced without interest and without any nexus with business. 4. In response, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t no money in real sense was borrowed and rather assessee had made credit purchases from them and had paid interest to them on such credit amounts and, therefore, it was submitted that no interest bearing funds were advanced as interest free loans. 8. The LD. CIT (A) after going through the submissions of assessee deleted the additions made by Assessing Officer by holding as under: Depreciation of car 4.2 I have gone through the assessment order, the written and oral submission(s) of the appellant and the facts on record. I have also perused the case laws cited by the appellant. There is no dispute over the fact that the vehicle in question was purchased in the name of director as under the provisions of Motor Vehicle Registration Act because a seven- seater vehicle could only be registered as a taxi, if it was in the name of a company. In CIT vs. Dilip Singh Sardarsingh Bagga (1993) 201 ITR 995 (Bom) it was held that an assessee, who had purchased the motor vehicle for valuable consideration and used the same for his business, cannot be denied the benefit of depreciation on the ground that the transfer was not recorded under the Motor Vehicle Act or that the vehicle s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /- as interest to various brokers and ICICI Bank on the car loan. The amount of interest paid to brokers was on account of the credit balance standing in the accounts of the brokers. The assessee company did not raise any loan from these brokers; rather the assessee has made purchases from them on credit and has paid interest to them. In other words, no money in real sense has been borrowed from these brokers. In view of these facts it cannot be said that the money borrowed from these brokers has been advanced as interest free loan to other parties. The amount advanced by the assessee company to the brokers. Further, the assessee company was having its own funds to the tune of Rs.1,27,87,879/- as Reserve and Surplus as on 01.04.2005 which indicates that the assessee company was having its own funds from which interest-free loans/advances could have been given by it. The Assessing Officer has not brought out any material to prove any nexus between the interest bearing funds with interest-free loans and advances. In this context, reliance is placed on the judgment in the case of CIT vs. Tin Box Company (2003) 260 ITR 637 (Del) wherein the Hon ble High Court upheld the decision of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this respect was placed on the case laws of S. A. Builders vs. CIT (A) reported in 288 ITR 1 with the proposition that there was no commercial expediency on the part of assessee to give interest free loans. 11. The Ld. AR on the other hand argued that due to specific circumstances the vehicle had to be registered in the name of director and the funds of company were utilized for purchase of vehicle. He further argued that there are lot of judgments which says that non registration under the Motor Vehicle Act cannot be basis for denial of depreciation in the Income Tax Act. Reliance was placed on the judgments as relied on before Ld. CIT (A). Regarding the other addition due to disallowance of interest it was argued that there were company s own funds as well as interest free funds in the form of unsecured loans and thus no interest bearing funds were advanced. Our attention was also invited to balance sheet as on 31.03.2006 wherein fresh interest free unsecured loans to the tune of Rs.7.89 crores were raised during the year and in view of the fact it was argued that since there were interest free funds in the form of capital, reserves and unsecured loans, no interest bearing fun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he purposes of business of assessee which does not seem to be the case the present year as profit and loss account of assessee does not show any expenditure to have been incurred on account of petrol/diesel. The Ld. AR has also argued that findings in this respect in the assessment order were not confronted to him. Therefore in the interest of justice, we set aside this matter to the office of Assessing Officer for readjudication who after hearing the assessee will decide keeping in view all facts and circumstances of the case. 14. As regards second addition made on account of disallowance of interest, we observe that the same has been made by Assessing Officer on the basis of assumptions only. The actual facts and figures as per balance sheet of the assessee do not indicate that interest bearing funds were diverted for interest free advances. In fact assessee has not taken any loans and advances on which interest was paid and rather it has paid interest on the purchase of shares which were purchased on credit from share broking firms. The contention of the Ld. Departmental Representative that interest was for non business purposes does not carry any weight as the assessee had pa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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