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TMI Blog2017 (1) TMI 393X X X X Extracts X X X X X X X X Extracts X X X X ..... For The Assessee : None PER Rajendra A.M. - Challenging the order dated 22.4.2015 of CIT(A)-22 Mumbai, the Assessee has filed the present appeal. Assessee-company, engaged in the business of manufacturing research and development of all types of electric computers, computer hardware and software systems filed its return of income on 30/09/2011, declaring total income at ₹ 5.78 lakhs. The Assessing Officer (A.O.)completed the assessment on 14.3.2014 u/s. 143(3) of the Act, determining its income at ₹ 42.74 lakhs. 2. First Ground of appeal is about disallowance of interest of ₹ 18.14 lakhs on loan taken from SIDBI. During the course of hearing before us, the Departmental Representative(DR) stated that while dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ely they have rejected the explanation offered by the assessee. To this effect, the assessee referred pages 31 32 of the paper book to establish that the said submissions made before the revenue authorities. The assessee had acquired shares in Sameera Electronics Pvt. Ltd., which is a loss making company is the sister concern of the assessee company in which the assessee is having interest. The assessee had also given interest free loans to its sister concern Sameera Electronics Pvt. Ltd. The assessee in one of its submissions before us stated that nobody is interested in acquiring shares in Sameera because it is a loss making company. When the Sameera Electronics Pvt. Ltd. is loss making company where assessee is also having interest, we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ount of dividend which the assessee received compared to the large amount of managing agency commission received during the various previous years. Therefore, the entire amount of interest paid was deductible in computing the profits and gains of the asessee s business. 10. The learned counsel for the assessee also relied upon the decision of ITAT, Mumbai Bench H , Mumbai, in the case of ATE Enterprises Ltd. Vs. JCIT order dated 11/11/2005 wherein the Tribunal has held as under:- 11. Rival submissions of the parties have been considered carefully. The question for consideration I whether interest paid by the assessee on the borrowings for acquisition of shares of Trumac can be allowed as deduction u/s 36(1)(iii) considering t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Trumac as nonexecutive Chairman and could get sole selling agency for the distribution of the products manufactured by Trumac. Since it was main source of income, it was natural for a prudent man to safeguard its business interest. Therefore, if the assessee decided to increase its holding in Trumac In our opinion, the assessee was guided by business consideration to safeguard its selling agency. If shares are purchased by outsiders then there is possibility that outsider may jeopardize th business interest of assessee company. Therfore, in our opinion, act of borrowing money for the acquisition of shares was closely connected with or incidental to the carrying on the business. Consequently, the conditions of allowing deduction u/s 36(1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. Next Ground of appeal is about disallowing ₹ 13.13 lakhs as unexplained liability. During the assessment proceedings the AO found that the assessee had shown sundry creditors in the name of Thingna Contractors (T C) at Rs, 13.73 lakhs which were outstanding for more than 3 yrs. He directed the assessee to file explanation in that regard. After considering submission of the assessee dt.22.1.14 the AO held that explanation was not satisfactory. For making further verification of the outstanding liability he issued notice u/s. 133(6) of the Act to T C to file a copy of the ledger account of the assessee in their books of accounts. It was found that the outstanding balance of the assessee company in the books of account of T C w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lakhs, that the assessee had advanced a sum of ₹ 20 lakhs to a party called M/s. Saif Steel at the behest of T C, that it was the moral responsibility to secure repayment of the same, that it confirmed a lower figure of outstanding .After considering the submission of the assessee and the assessment order the FAA held that in the books of the assessee the outstanding balance fee was shown at ₹ 20.90 lakhs in the case of T C, that on verification T C informed that correct outstanding was ₹ 6.58 lakhs, that the AO had computed ₹ 13.31 lakhs that was not payable by the assessee to T C, that he added the said amount as unexplained liability, that AO had added ₹ 7.14 lakhs only, that the difference between figure o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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