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TMI Blog2018 (1) TMI 330X X X X Extracts X X X X X X X X Extracts X X X X ..... does not need any interference on our part, therefore, we uphold the action of the Ld. CIT(A) on this issue and reject the ground no. 1 raised by the Revenue. Disallowance of interest u/s. 36(1)(iii) - Held that:- The copy of the bank statement of Axis Bank is filed at page 75 and 76 of the paper book. The above facts prove that prior to 16.07.2008 there were no interest bearing funds taken by the assessee except vehicle loans taken in earlier years. This goes to establish that if any investment or advance was made prior to that date, the same was given out of from the assessee's own funds or out of non interest bearing funds, except the amount of ₹ 5 lacs given to Mr. Mahadev Prasad this amount of loan was given to him on 21.7.2008 and it was given out of interest bearing funds, hence, proportionate interest for eight months @ 12% was rightly considered for disallowance which amounts to ₹ 41,750/-. Keeping all we are of the considered view that the proportionate disallowance of interest on the loans and advances comes to ₹ 41,750/- only u/s. 36(1)(iii) hence, the proportionate disallowance of interest charged u/s. 36(1)((iii) was rightly deleted to the extent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cient sources of income, therefore, the share capital as well as share premium received from the said company was treated as unexplained cash credits and amount of ₹ 4,38,48,000/- was added to the total income of the assessee. Further, the AO also disallowed the claim of interest u/s. 36(1)(iii) of the Act of ₹ 69,49,060/- on the ground that the assessee company has diverted interest bearing loans to its sister concern and relatives of the Directors and also added ₹ 10,69,202/- as expenditure pertaining to earning of exempt income. Accordingly, the AO assessed the total taxable income of ₹ 7,72,06,212/- of the assessee vide order dated 25.12.2011 passed u/s. 143(3) of the Act. Against the aforesaid assessment order, assessee appealed before the Ld. CIT(A)-XIII, New Delhi, who vide his impugned order dated 11.05.2012 has partly allowed the appeal of the assessee. Aggrieved with the order of the Ld. CIT(A), the Revenue is in appeal before the Tribunal. 4. Ld. DR relied upon the Order of the AO and reiterated the contentions raised in the grounds of appeal. She also argued that despite on various occasions the Assessee was directed to produce Directors of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 4,38,48,000/- made u/s. 68 of the Act is concerned, we find that assessee company has received share capital of ₹ 31,32,000/- alongwith share premium of ₹ 4,07,16,000/- from M/s Tarun Vainizya Pvt. Ltd. During the assessment proceedings, the AO has mentioned that company was not having its own source of income in as much as that it has declared as ₹ 3,376/- as his income and does not have the sources of income, therefore, the said receipt of share capital and share premium has been treated as unexplained cash credits in the hands of the assessee company. We further find that AO observed that M/s Tarun Vanizya Pvt. Ltd. has been acquired by the management of assesseee company. The AO further asked the assessee to produce the Directors of the said company for explaining the, source of the money and to examine the genuineness of transaction made under the nomenclature of share premium vide show cause letter dated 05.12.2011. In this regard, the assessee has submitted in the submission that during the course or assessment proceedings in compliance to the directions issued by the AO, the assessee had furnished following information before the AO. 1. Confirm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has not proved that the money transferred was received through accommodation entry and it was asssessee s own money. The documentary evidences filed by the assessee before the AO satisfactorily establish that M/s Tarun Vanizya Pvt. Ltd. had applied for share capital and share premium out of its own money which was realized from sale of its investments reflected in the balance sheet. The Assessing officer has also mentioned in the assessment order that it had issued a show cause notice vide its letter dated 05.12.2011 to the assessee company for production of Director of the investor company before him. From the reading of the order it is observed that the AO has issued two show cause notices both on same date i.e. 05.12.2011 for production of the Director. During the course of appellate proceedings, the assessee has filed copy of the show cause notice dated 05.12.2011. It is seen that there is only one show cause notice received by the assessee of dated 05.12.2011 and there cannot be other show cause notice of the same date 05.12.2011. On going through the show cause notice it is seen that the AO has asked vide point No.1 about the sources of the money for investing its share capi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... crores, out of which the amount invested in the assessee company is to the tune of ₹ 4,38,50,000/-. These facts are verifiable from Paper Book page No. 50. The investment made in the form of equity shares in the assessee company was made after liquidating investments to the tune of ₹ 4,58,95,000/- which the lender company had made in various other companies which is apparent from Paper Book page no. 52 where under the head Other Investment , the investments in the previous year are reflected in the current year. These investments has been shown as NIL which means the lender company had liquidated its earlier investment and had made the investment in the assessee company. Such investments were liquidated and amounts were received through banking channels which is apparent from Paper Book page No. 46 47 which the copy of the bank account of the lender company wherein the credits appearing in the Bank Statements are for liquidation of investments. There is no deposit in the said bank account in cash except the cash deposits of ₹ 7 lacs and ₹ 6 lacs on 20.2.2009 and 21.2.2009. These cash deposit is explained by cash withdrawal of ₹ 13 lacs on 9.2.2009 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts income of return declaring the taxable income ₹ 2,53,39,948/- which fact is verifiable from the assessment order itself. The assessee company has share capital to the tune of ₹ 41.09 lacs and reserves and surpluses excluding share premium received during this year to the extent of ₹ 2,91,00,000/-. The assessee had turnover of ₹ 51.90 crores. These facts and figures depict that assessee is an existing profit making company and therefore, issuance of shares at a premium is justified. In view of the above facts and circumstances of the case, in our opinion, all the 3 ingredients required to be established u/s. 68 of the Act are established. We further find that the case laws cited by the Ld. DR are distinguishable to the facts of the present case and therefore are not applicable at this juncture. Therefore, the addition made by the AO treating the share capital and share premium as unexplained cash credit u/s 68 of the IT Act was not justified, hence, the same was rightly deleted by the Ld. CIT(A), which does not need any interference on our part, therefore, we uphold the action of the Ld. CIT(A) on this issue and reject the ground no. 1 raised by the Revenu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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