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TMI Blog2014 (11) TMI 218X X X X Extracts X X X X X X X X Extracts X X X X ..... nistrative expenses at Rs. 28,310/- and in this way made a total disallowance of Rs. 1,73,586/-. 4. On appeal, the CIT(A) held that identical issue had come up for consideration in assessee's own case in the immediately preceding assessment year 2007-08 and his predecessor in office had confirmed the disallowance of Rs. 2,17,664/- so made vide order dated 21.06.2010 by holding that the onus lies on the assessee to prove that the investments in shares were not made out of interest bearing funds. Merely saying that the assessee had enough noninterest bearing funds was not sufficient. He, therefore, confirmed the disallowance of Rs. 1,73,586/- made by the Assessing Officer. 5. The AR of the assessee filed before us the order of the Tribunal in assessee's own case for AY 2007-08, passed in ITA No.2461/Ahd/2010 vide a consolidated order dated 29.11.2013 and submitted that the Tribunal confirmed the disallowance made by the Assessing Officer. He, therefore, submitted that following the order of the Tribunal in assessee's own case for AY 2007-08, this ground of appeal of the assessee is to be dismissed. 6. In view of the above submissions of the AR of the assessee, this ground of appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee's bank accounts maintained with Bank of India, Central Bank of India, Union Bank of India and Corporation Bank. It is surprising that the assessee had raised loans of Rs. 2,08,95,000/- from aforesaid related persons whereas the Assessing Officer had disallowed interest of Rs. 1,40,01,748/-. The disallowance of interest is more than half of the borrowed funds which cannot be said to be reasonable and convincing. Even if the Assessing Officer was of the view that the entire borrowings were for non business purposes, then the interest paid on such borrowings was only disallowable. It was also noticed during the course of appellate proceedings that no new FDRs were purchased from the bank accounts maintained with Bank of India, Central Bank of India, Union Bank of India and Corporation Bank. Therefore, it cannot be said that the assessee had raised borrowed funds to be utilized in making of FDRs. The details with relation to opening balance, collection, payments and borrowed amounts were called for of the banks in which the borrowed funds were deposited. As per details furnished, these borrowings were deposited in assessee's bank accounts maintained with Bank of India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... harge the liability of payment of Rs. 1,47,30,286/-. Therefore, there was no necessity to raise funds of Rs. 5,25,000/- on 12.07.2007 from the related persons. The borrowings of Rs. 5,25,000/- was thus not for the business purpose and interest payment @ 14% is disallowable u/s 36(1)(iii) of the Act on the deposits of Rs. 5,25,000/- for 294 days. The relevant disallowable interest works out to Rs. 59,202/-. (d) The appellant had raised deposits/borrowings of Rs. 1,38,20,000/- on different dates from different related persons and deposited the same in Union Bank of India. Which is, based upon details provided are summarized as under:- Borrowings from related persons deposited in Union Bank of India:- Rs. in lakhs Date O/balance Deposits Days Interest @ 14% 1 2 3 4 5 16-6-2007 18935928.50 170000 290 18909 28-6-2007 1000000 278 106630 14-8-2007 600000 231 53161 01-09-2007 100000 213 8169 10-09-2007 2000000 195 149589 3-10-2007 3000000 181 208273 6-10-200T1 2000000 178 136547 11-10-2007 100000 173 6635 18.10.2007 3000000 166 191013 20.10.2007 1000000 164 62904 05.10.2007 400000 148 22706 08.01.2008 450000 84 14498 13820000 979034 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Borrowing were from relatives. In view of this, the Assessing Officer concluded that the borrowings were made to give benefit to the relatives. He, therefore, disallowed Rs. 1,40,01,748/- by treating it excess interest paid. 15. On appeal, the CIT(A) found that the assessee has borrowed funds amounting to Rs. 2.09 crores only during the year under consideration. He also observed that no fresh deposits in FDRs were made by the assessee during the year. Further, he examined each transaction of the fresh loan obtained during the year and on examination wherever he found that loan amount was utilized for immediate business payments he deleted the disallowance of interest. Further, in certain cases of borrowings, he found that the loan amounts were not utilized for immediate business payments, on the date of the borrowing funds available with the assessee was more than the business payments made on that date, the CIT(A) upheld the disallowance of interest. Thus, the CIT(A) retained the interest disallowance to the extent of Rs. 10,71,797/- and deleted the balance amount of disallowance of Rs. 1,29,29,151/-. 16. The DR, before us, supported the order of the Assessing Officer. The DR c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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