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TMI Blog2014 (8) TMI 164X X X X Extracts X X X X X X X X Extracts X X X X ..... h claim by producing documentary evidence/proof - there is no reason why it should be disallowed in the subsequent year – thus, the matter is remitted back to the AO for fresh adjudication - assessee is also directed to furnish documentary evidence, to substantiate her claim - If on verification assessee’s claim is found to be correct then deduction claimed has to be allowed – Decided in favour of Assessee. - ITA Nos. 1726, 1727, 1728, 1729 & 1730/Hyd/2013, ITA Nos. 1735, 1736, 1737, 1738 & 1739/Hyd/2013 - - - Dated:- 1-8-2014 - Shri B. Ramakotaiah And Shri Saktijit Dey,JJ. For the Petitioner : Shri D. V. Anjaneyulu/ Smt. P. Pravallika For the Respondent : Shri Solgy Jose T. Kottaram ORDER Per Bench: These appeals filed by two different assessees are directed against separate orders dated 16/09/2013 of CIT(A)-I, Hyderabad for the Assessment Years 2006-07 to 2010-11. Since identical issues are involved in these appeals, they were clubbed and heard together, therefore, a common order is passed for the sake of convenience. ITA NOS. 1726 to 1730/Hyd/2013 in case of Sri B. Seenaiah 2. The only dispute in these set of appeals of the assessee is in res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... believed the explanation of the assessee. The Assessing Officer was of the view that first promissory note dt. 28/03/2006 clearly shows that assessee has lent money to M/s Amareswara Agritech Ltd. Whereas the second promissory note dt. 27/03/2009 for ₹ 1,36,29,000/- shows that assessee has charged interest of ₹ 47,79,000/- on the capital of ₹ 88,50,000/- @ 18% for three years. Further, mentioning that assessee has been following mercantile system of accounting, the Assessing Officer held that interest income has to be brought to tax on accrual basis from AY 2006-07 to 2010-11. Accordingly, the Assessing Officer computed the assessment for the aforesaid assessment years by bringing interest income to tax on accrual basis. 4. Being aggrieved of assessment order so passed, assessee preferred appeal before the CIT(A). The CIT(A) confirmed the addition by holding as under: 7.0 I have gone through the facts of the case and the submissions of the appellant. The contention of the appellant that as an abundant precaution and security, he renewed the unsecured loan by way of pro-note is carefully considered. It if is only to have some security for the loan advanced, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lude that interest has been earned by the appellant every year. Moreover, the interest is not notional interest but real income receivable by the appellant as per the discussion above. 5. Reiterating the stand taken before the departmental authorities, learned AR submitted, the promissory notes were obtained from the company only for security purpose though, actually assessee has invested the amount towards share application money. It was submitted, during the post search proceeding the assessee has categorically stated that no interest was received from the company. Ld. AR submitted, during assessment proceeding the Assessing Officer has conducted inquiry with the company and the company had confirmed before the Assessing Officer that the amount advanced by the assessee was converted to share application money in March, 2008 and ultimately 8,50,000/- shares of face value of ₹ 10 each was allotted to the assessee on 30/03/2013. In this context, learned AR drew our attention to Board Resolution dt. 10/03/2008 and 30/03/2013 and company s confirmation dt. 22/10/2011 and 23/10/2011. Ld. AR submitted that ignoring all these evidences Assessing Officer simply cannot rely upon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as been shown as share application money. It is also a fact that assessee has brought to the notice of learned CIT(A) that shares were allotted to the assessee on 30/03/2013 by placing on record the board resolution. Therefore, if the amount advanced by the assessee was converted to share application money in March 2008 and ultimately shares were allotted to the assessee, then the amount cannot be treated as unsecured loan post conversion to share application money, consequentially there cannot be any accrued interest on such amount. However, so far as assessment years 2006- 07 and 2007-08 are concerned, as per company s own admission the amount advanced by the assessee was treated as unsecured loan in its books of account. Assessing Officer has also referred to Board resolution dt. 23/03/2006 which authorized the Chairman to raise unsecured loan from the assessee. Therefore, Board resolution authorizing raising unsecured loan from assessee, treatment of amount advanced as unsecured loan in the books of the company and promissory note dt. 28/03/2006 clearly establishes the intention of the parties and the fact that the amount advanced by the assessee initially was intended to be un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... long before. It was stated that as the assessee was not able to pay the principal amount regularly the interest component is increasing year by year on compounding basis. It was further stated that even the interest is not paid regularly and is only provided in the books. The AO however was not convinced with the explanation of the assessee. By observing that the assessee s claim is not supported by any evidence/proof, the claim of deduction was disallowed. Accordingly, deduction claimed towards interest payment in each of the impugned assessment year was added to the income of the assessee. 13. Being aggrieved of such addition, the assessee preferred appeals before the CIT (A). The CIT(A) also confirmed the additions made with the following observations: 8.1 During the course of appellate proceedings, the AR of the appellant has not filed any documentary evidence in support of his claim but simply stated that the AO without making proper enquiry has disallowed the interest u/s 24. 8.2 It may be noted that the appellant has not filed any confirmation from the lender of the loan either during the assessment proceedings or appellate proceedings. Therefore, the interest cla ..... X X X X Extracts X X X X X X X X Extracts X X X X
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