9911796707
TMI Blog2017 (6) TMI 558X X X X Extracts X X X X X X X X Extracts X X X X ..... Revenue has not disallowed any interest on account of utilization of borrowed fund in the impugned property and there was an investment in the impugned property to the tune of 6,06,10,665/- which was enhanced in the year under consideration by 1,36,95,000/-. At the same time, we find that investment in the property was enhanced whereas the loan liability of the assessee was reduced from 38.89 crores to 27.98 crores as evident from the audited balance-sheet of the assessee. Therefore, the possibility of making such investment in the impugned property in the current year out of borrowed fund is ruled out. Admittedly, no disallowance was made by the Revenue on account of interest in the immediate preceding year. Loan liability of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the year under consideration has claimed interest expense of ₹3,39,24,382/- in its profit and loss account. The assessee has also shown a sum of ₹7,43,05,666/- under the head "advance" towards the purchase of the property. During the course of assessment proceedings, AO observed from the tax audit report that assessee is not engaged in property business, therefore, he treated the advance given for the purchased of impugned property as 'investment'. Accordingly, he opined that the proportionate interest should be disallowed. Thus, AO held the estimated rate of interest @ 7% for the purpose of disallowance after considering the advance shown by assessee. The interest on the advance was worked out at ₹52,01,397/- (7% of 7, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is needless to say that the appellant has fulfilled the above conditions except condition ii. The investment was made not for the purpose of business within the meaning of section 36(1)(iii). Not only that this investment in properties was not in the regular course of business but also lacking commercial expediency as the appellant is debiting huge interest without making any substantial profit while dealing in properties. As per the appellant's version, the amount was invested out of its own fund and not from the borrowed capital fund and arguing that there was sufficient fund available and the investment made from the mixed account. Such type of vague explanation does not hold much water. The AO has taken the rate of interest @ 7% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re being no finding by Revenue in any year whatsoever, that the borrowed funds were ever used by the Appellant Company for any purpose other than business, the Ld. Commissioner of Income Tax (Appeals) was not justified in disallowing the interest of ₹ 52,01,397 on any arbitrary and unfounded allegation that the borrowed funds were not wholly used by the Appellant for the purposes of its business. 4) That the adverse findings and allegations in para 5.2 of the impugned order passed by Learned Commissioner of Income Tax (Appeals), for confirming the disallowance of ₹ 52,01,397 made by the Assessing Officer, are contrary to facts on record and perverse." 5. Ld. AR for the assessee before us filed paper book which is running pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uthorities Below. 6. We have heard rival contentions of the parties and perused the materials available on record and perused the order of Authorities Below. The issue in the instant case relates to the disallowance made by the Authorities Below on account of utilization of borrowed fund in the investment of impugned property. As per Ld. AR, the assessee is engaged in the business of property. However, on perusal of records, we find that Ld. AR failed to substantiate its claim on the basis of documentary evidence that assessee is engaged in the business of property. Therefore, we are not inclined to hold that assessee is engaged in property business and thus the advance in impugned property is representing investment. Now, however, coming ..... X X X X Extracts X X X X X X X X Extracts X X X X
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