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TMI Blog2017 (7) TMI 102X X X X Extracts X X X X X X X X Extracts X X X X ..... ing that interest expenditure on margin funding, should not be proportionately disallowed without appreciating the fact that the assessee has not establish that interest free funds were available to make such interest free loans and advances." Assessee has raised following ground No. 2: - "The learned CIT(A) has erred in confirming the disallowance of notional interest expenses of Rs. 4,17,343/- out of Rs. 31,09,270/- made by AO under section 36(1)(iii) of the I.T. Act, 1961." 3. Briefly stated facts are that the AO noticed during the assessment proceedings that the assessee had debited sum of Rs. 89,90,646/-as interest expenses and on the other hand has advanced loan free of interest amounting to Rs. 2,59,10,583/-. According to AO the assessee company had diverted interest free funds by advancing interest free loans and thereafter on this interest free advance of Rs. 2,59,10,583/-, the AO made disallowance of proportionate amount of interest at the rate of 12% at Rs. 31,09,270/-. Aggrieved assessee preferred appeal before CIT(A), who restricted the addition at Rs. 4,17,343/- out of the total disallowance of Rs. 31,09,270/- by observing as under: - "...I have carefully cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nterest cost has been incurred mainly on account of the margin. funding taken by the appellant for share trading and no major interest expenditure has been incurred on borrowing the funds. The interest on lCD is incurred on the money borrowed during the year whereas the amounts were advanced in the earlier years. It has been explained by the appellant that the margin funding money is never made available to the appellant and is directly paid by the bank on the half of the appellant. Therefore, the interest expenditure which is incurred on margin funding should not be apportioned for interest-free advances. The appellant has also incurred interest on lCD and rank interest. It has not been able to give any details regarding these interest expenditures. No nexus of the utilisation of fund, to prove that any of the funds on which these expenses on interest have been incurred was not advanced as interest-free loans, has been given. Since the appellant has not been able to give any explanation regarding the nexus of interest-free funds advanced with the funds available, it would be appropriate if the disallowance made by the AO is restricted to Rs. 417343 (27997+389346). The disallowance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n which interest is not charged for the reasons stated hereinabove." 5. We have gone through the facts in entirety and notice that this advance amount of Rs. 85,73,303/- is on margin fund and moreover the assessee is having its interest free funds in the shape of share capital of Rs. 7.15 crore and unsecured loan of Rs. 10.71 crore available with its interest free. In these facts and circumstances, we are of the view that no disallowance at all can be attributed to the assessee on account of diversion of funds. Accordingly, this issue of Revenue's appeal is dismissed and issue of CO is allowed. 6. The next issue in this Cross Objection of the assessee is as regards to confirming an addition of unexplained cash credit of Rs. 56 lakhs from Tower Inn Pvt. Ltd. For this assessee has raided following ground No.1: - "The learned CIT(A) has erred in confirming the addition of Rs. 56,00,000/- made by the AO for the alleged unexplained Cash Credit from Tower Inn Pvt. Ltd." 7. We have heard the rival contentions and gone through the facts and circumstances of the case. We find that the CIT(A) has recorded the finding while confirming this loan as unexplained cash credit by observing a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see could not attribute or could not argue in anything on merits hence, we have no hesitation in confirming the findings of CIT(A). Accordingly, this issue of assessee's appeal is dismissed. 9. The next issue in this cross objection of assessee is as regards to disallowance of depreciation of car confirmed by the CIT(A). For this assessee has raised following ground No.3: - "The learned CIT(A) has erred in confirming the disallowance made by the AO for the depreciation on car claimed by the Respondent of Rs. 58,625/-" 10. Brief facts regarding disallowance of car is that the car was purchased in the name of Shri Yogendra Kumar Gupta director of the assessee company. It was claimed before AO and before CIT(A) that car was purchased out of the funds of the assessee company and also used for the business purposes of the assessee company only. To prove this point assessee produced complete audit accounts and balance sheet for the year ended 31-03-2007. The assessee has disclosed this car in the business asset and claimed depreciation. We find in the exactly similar circumstanced coordinate Bench of this Tribunal in the case of Mehta Equities Ltd. v. The ACIT in ITA No.570/Mum/2015 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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