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TMI Blog2014 (2) TMI 1157X X X X Extracts X X X X X X X X Extracts X X X X ..... ee funds available with him for the purpose of giving interest free loans to the above named persons (sons). No nexus between the borrowed funds and interest free loans have been established by the AO on record. Therefore, disallowance of interest u/s. 36(1)(iii) of the IT Act on proportionate basis is wholly unjustified. We following the earlier order of the Tribunal dated 20.07.2012 set aside the orders of the authorities below and delete the addition of ₹ 1,06,800 - Decided in favour of assessee. - ITA No. 371/Agra/2013 - - - Dated:- 14-2-2014 - SHRI BHAVNESH SAINI AND SHRI PRAMOD KUMAR, JJ. For Appellant by :- Shri Rajendra Sharma, Advocate For Respondent by :- Shri Athesham Ansari, Jr. D.R. ORDER Per Bhavnes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is entitled to claim the entire amount of interest paid by him on the borrowed funds as business expenditure. The AO found that when interest is payable on borrowed funds, proportion to such amount to loan given to his sons is not available. The AO held that such funds could have been used by the assessee. The AO was of the opinion that if the assessee has sufficient capital of his own, he would not have required borrowings thereby prejudicing his own business interest. He has, therefore, considered that the interest is to be disallowed or to be restricted u/s. 36(1)(iii) of the IT Act and accordingly, made above addition. The assessee submitted before the ld. CIT(A) that similar issue came up before the Tribunal in the case of same asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e IT Act. He has also submitted that the AO has not proved any nexus between the borrowed funds and interest free loans given to above persons. He has submitted that the issue is covered in favour of the assessee by the order of ITAT, Agra Bench in the case of same assessee for preceding assessment year 2008-09. 4. On consideration of the above facts, we are of the view, the addition is liable to be deleted. In preceding assessment year 2008-09, ITAT, Agra Bench in the case of same assessee on identical facts vide order dated 20.07.2012 deleted the similar addition. The facts and findings given in para 9 to 10 are reproduced as under : Ground No. 5 : 5 That the Authorities below have erred on facts and in law while disallowing of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n which the assessee briefly explained that the AO has not co-related the interest payment with borrowed funds. The assessee has paid interest and received part interest. The details of same have been given at page 18 of the paper book, as noted in ground No. 3 4 above. Further, the assessee has sufficient capital interest-free funds available with the assessee. Therefore, no addition could be made. The ld. CIT(A), however, confirmed the addition. His findings in para 5.3 of the appellate order read as under : 5.3. I have considered the facts and circumstances of the case and I am of the opinion that the assessee and his HUF are two separate legal entities and they are not one and the same as argued. The assessee has made out no case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Munjal Sales Corporation vs. CIT, 298 ITR 298, in which it was held - Held also, that since the opening balance of the profits of the assessee-firm as on April 1, 1994, was ₹ 1.91 crores, and the profits were sufficient to cover the loan given to a sister concern of ₹ 5 lakhs only, the Appellate Tribunal ought to have held that the loan given was from the assessee s own funds. Considering the submissions of the assessee and the material on record, it is clear that the assessee has sufficient capital, profit and interest free funds available with him for the purpose of giving interest free loans to the above named persons (sons). No nexus between the borrowed funds and interest free loans have been established by the AO o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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