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TMI Blog2017 (11) TMI 1062X X X X Extracts X X X X X X X X Extracts X X X X ..... in favour of assessee - ITA No. 1037/JP/2016 - - - Dated:- 8-11-2017 - Shri Bhagchand, AM And Shri Kul Bharat, JM Assessee by : Shri Manish Agarwal (CA) Revenue by : Shri R.A. Verma (Addl.CIT) ORDER Per Shri Kul Bharat, J. M. This appeal by the Assessee is directed against the order of Ld. CIT (A)-2, Jaipur dated 28.09.2016 pertaining to Assessment Year 2013-14. The assessee has raised the following grounds of appeal:- 1. On the facts and in the circumstances of the case the Ld. CIT(A) has grossly erred in confirming the disallowance of ₹ 10,67,083/- made by AO by not allowing claim of bad debts u/s 36(1)(vii) and by completely ignoring the submission of assessee. Appellant prays disallowance so sustained deserves to be deleted. 2. On the facts and in the circumstances of the case and in law, Ld. CIT(A) erred in confirming the part of the disallowance of interest made by AO. 2.1 That Ld. CIT(A) erred in confirming the disallowance without considering the fact that assessee was in possession of sufficient free funds in the shape of interest free unsecured loans in addition to capital, to make interest free advances. Thus appellant pra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee reiterated the submissions as made in the written brief. He submitted that in this case the Assessing Officer was not satisfied with the claim to be allowed as a bad debt, he submitted that same deserves to be allowed u/s 37(1)(vii) of the Act being trading loss. He vehemently argued that the payment was made for the business purposes. In support of this contention, the Ld. Counsel for the assessee has made reliance on the Judgment of the Hon ble Delhi High Court in the case of the CIT vs. New Delhi Hotels Ltd. in ITA No. 1258/2010. Further, he made reliance on Hon ble Delhi High Court in the case of Mohan Meakin Ltd. vs. CIT in ITA no. 405/2007. 3.2 Ld. D/R opposed the submissions. 3.3 We have heard the rival contentions, perused the material available on record. As per the assessee the amount was given to the owner of the marble mine. Ld. Counsel drew our attention to the mining lease agreement which enclosed at Paper Book Page No. 44 to 67. Ld. CIT(A) decided the issue by observing as under:- 2.3 I have perused the facts of the case, the assessment order and the submissions of the appellant. The assessee had claimed bad debts written off of ₹ 12,14,277/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llenged the action of Ld. CIT(A) in confirming part disallowance in respect of interest paid by ignoring the fact that assessee was in possession of sufficient interest free funds in the shape of interest free unsecured loans in addition to capital, to make interest free advances. Brief facts of this ground of appeal are that during the year under consideration, assessee had debited a total interest of ₹ 60,31,507.57 to Profit Loss a/c. During the course of assessment proceedings, Ld. AO observed that assessee had made following interest free advances to sister concerns: (i) Jyoti Marbles ₹ 66,92,954/- (ii) Taj Granites Pvt. Ltd. ₹ 1,20,96,291/- ₹ 1,87,89,245/- Accordingly, Ld. AO sought explanation as to why interest to the extent of funds advanced to above two concerns may not be disallowed. In this regard, it was submitted that assessee was having interest free funds in his possession in the shape of: (i) Capital of proprietorship concern Rs.144.34 lacs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of capital borrowed for the purposes of the business or profession : [Provided that any amount of the interest paid, in respect of capital borrowed for acquisition of an asset for extension of existing business or profession (whether capitalised in the books of account or not); for any period beginning from the date on which the capital was borrowed for acquisition of the asset till the date on which such asset was first put to use, shall not be allowed as deduction.] Thus, once funds are borrowed and utilized for the purpose of business, interest thereon shall be allowed u/s 36(1)(iii). It does not put any restriction on utilization of own funds or funds in the shape of interest free unsecured loans available with assessee, nor does it anywhere mention that an assessee having own funds would not be allowed deduction u/s 36(1)(iii). The only condition for claiming deduction is that funds have been (i) actually borrowed and (ii) utilized for the purpose of business. Thus, before making disallowance, onus lies upon AO to prove nexus between interest bearing loans and interest free advances . that either funds have not been borrowed or if borrowed, have not been utilize ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing Officer did not agree as he noted that the assessee failed to correlate the two and disallowed interest amounting to ₹ 14,10,093/- on these advances. In the present proceedings, the Authorized Representative reiterated the same submissions. It was further submitted that the interest was paid on secured loans taken to finance various assets and had not been utilized for advancing interest free loans. Reliance was placed on ACIT vs Gopal Fabrics ITAT Ahemdabad order dated 29.11.13 and CIT vs Raghuram Synthetics Ltd 217 taxmann.com 178 (Gujarat),It is seen that the amount of ₹ 144.34 lakhs was available with the assessee as Proprietors capital and could have been used for advancing interest free loans to sister concerns but regarding the interest free loans available, the appellant has not been able to establish any nexus between the interest free loans and the interest free advances made on various dates. Further the exigency of advancing interest free loans to sister concerns was also not proved. In view of the above, the Assessing Officer to modify the interest chargeable after considering the amount of capital of an amount of ₹ 144.34 lakhs available w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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