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TMI Blog2016 (11) TMI 796X X X X Extracts X X X X X X X X Extracts X X X X ..... 04-05. The aggrieved revenue has come up in appeal. The following questions were formulated on 29th July, 2009 when the appeal was admitted: "1. Whether the Tribunal below substantially erred in law in rejecting the contention of the revenue asking disallowance of Rs. 22,30,581/- and Rs. 14,294/- made by the assessing officer under section 43B(e) read with explanation 3D of the Income Tax Act ? 2. Whether in the facts and circumstances of the case the Income Tax Appellate Tribunal substantially erred in law in rejecting the contention of the revenue asking for disallowance of Rs. 40,24,262/- made by the assessing officer, being the income as interest on loan utilised for non-business purposes by the assessee ? The assessing officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... him only in computing the income referred to in section 28 of that previous year in which such sum is actually paid by him". Explanation 3D- For the removal of doubts, it is hereby declared that a deduction of any sum, being interest payable under clause (c) of this section shall be allowed if such interest has been actually paid and any interest referred to in that clause which has been converted into a loan or advance shall not be deemed to have been actually paid., The above explanation has been inserted by the Finance Act with retrospective effect from 01.04.1989 and as such is applicable for the previous year 2004-05. The assessee submits that there is no schedule for payment that the total amount deposited exceeds the total interes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osits were towards day to day investments and trading activities only ? It was submitted and was also accepted by the AO that there was no payment schedule. In a payment schedule, normally a institution works out the number of equated monthly installments (EMI) which includes some interest and a portion of principal. As such, EMI is comprised of interest and principal, while interest is recovered on monthly basis the principal loan is also repaid on such basis. Thus, in such cases interest and the principal recovered are quantifiable. However, where there is no schedule of payment, the exact amount of interest not being known, it creates problem in finding out as to what amount of interest and what amount of principal are comprised in a dep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble to the fund engaged in Long Term Investment and Short Term Investment has to be considered as not allowable. (21) M/s. Shreekant Phumbhra (NSE): (a) While Interest on Bank Loan has already been disallowed u/s. 43B, on the facts and in the circumstances of the case as discussed above, Interest of Rs. 1,49,33,053/- as claimed is also disallowed as per the computation below being the concerned loan amounts utilized directly or indirectly other than for business purpose: Investment in shares / Total unsecured loan x Interest on unsecured loan Rs. 1,49,33053 multiplied by (1,80,47,449/- divided by 5,46,48,273)- Rs. 49,31,602/- In other words Interest of Rs. 49,31,602 is disallowed." The CIT(A) deleted disallowance to the extent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant Phumbra was Rs. 8,05,756/- while the income from operation was Rs. 1,88,52,202/- the percentage of dividend from investment to the income from operation will be @ 4.27. In the case of M/s. Shreekant Phumbra & Company the total dividend including appellant's dividend from personal investments was taken clubbed together at Rs. 1,02,490/- and the income of the firm from share dealings was Rs. 66,09,100/- and the percentage of dividend to income will be @1.55%. Accordingly, the disallowance to the extent of Rs. 8,04,989/- in respect of M/s. Shreekant Phumbra and Rs. 1,02,441/- in case of M/s. Shreekant Phumbra & Company aggregating to Rs. 9,07,340/- is sustained as against total disallowance of Rs. 49,31,602/-. The addition of Rs. 40,24,172 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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