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TMI Blog2018 (4) TMI 1128X X X X Extracts X X X X X X X X Extracts X X X X ..... if the interest-free funds were sufficient to meet the investments. In the assessee’s case presumption was established considering the fact that assessee has its own capital at ₹ 1,23,06,344/- whereas the interest free advances were given to the tune of ₹ 11,41,000/-. As presumed that these interest free advances have been given out of its own capital and hence, no disallowance should be made. - Decided in favour of assessee - ITA No. 91/Kol/2016, ITA No. 188/Kol/2016 - - - Dated:- 20-4-2018 - Shri N. V. Vasudevan, JM And Dr. A. L. Saini, AM Assessee by :Shri N. M. Bhansali, Advocate Revenue by :Shri Saurabh Kumar, Addl. CIT(Sr. DR) ORDER Per Dr. Arjun Lal Saini, AM The captioned cross-appeals filed by the Assessee and Revenue, pertaining to Assessment Year 2010-11, is directed against an order passed by the Commissioner of Income Tax(Appeals)-10, Kolkata, in Appeal No.649/CIT(A)-10/Cir-50/13-14/Kol, dated 10.11.2015, which arises out of an assessment order passed by the assessing officer u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the Act ), dated 20.03.2013. 2. Since these cross-appeals relate to the same assessee, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g payment to him in violation of section 40A(3), as well asSec.194C due to not deducting tax on payment to him, the payment of ₹ 33,00,009/- to him is disallowable u/s 40A(3) as well as 40(a)(ia). 4. On facts and circumstances of the case and in law, the CIT(A) erred indeleting the entire amount of disallowance of interest on borrowed fund dueto giving of interest free advance to related concerns by applying the test ofsource of funds and not the purpose for which advance was given. 5. On facts and circumstances of the case, the CIT(A) erred in not consideringthe fact that interest free advances to both related concerns were givenwithout any commercial expediency and for non- business purpose. 6. On facts and circumstances of the case, the CIT(A) even after finding thatthe interest free advance to related concerns was given to the extent of ₹ 11,41,000/- during the year under consideration, erred in not sustainingthe disallowance of interest relating to such advance. 5.Ground Nos.1(a) 1(b) of assessee s appeal in ITA No.91/Kol/2016 and Ground Nos.1, 2 3 raised by the Revenue s appeal in ITA No.188/Kol/2016 relate to same identical issue, tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act and, therefore, no disallowance u/s 40A(3) of the act is called for. During the appellate proceedings, the ld. CIT(A) also called a remand report from the Assessing Officer on this issue. In the remand report, the Assessing Officer stated that payments were made for different truck drivers at the Bangladesh border by Sri Dipu Banerjee and others which are under prescribed limit. The assessee claimed that the said person, Sri Dipu Banerjee was an agent of the assessee, through whom the payments were made to various truck drivers in the Bangladesh border. In support of his claim, the assessee has filed a copy of agreement of Sri Dipu Banerjee. In the remand report, the Assessing Officer stated that out of ₹ 42,47,229/- only a sum of ₹ 33,00,009/- has been paid to Sri Dipu Banerjee, who in turn paid the amount to truck drivers. The assessee in the remand hearing submitted that the payment made to Sri Dipu Banerjee and others in exchange of their service as agent was accounted as handling charges paid to Sri Dipu Banerjee. The assessee could not furnish the entire payment vouchers in support of his payment as handling charges to these agents. Therefore, in remand p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he counsel has pointed out that the ld. CIT(A) has failed to observe that the payment to other persons at ₹ 9,47,220/- were below the prescribed limit u/s 40A(3) of the Act, therefore, there was no necessary to make an agreement with the other persons. The amount paid to other persons at ₹ 9,47,220/-, therefore, does not attract the provisions of section 40A(3) of the Act, as the amount was paid below the prescribed limit to other persons. Therefore, the addition restricted by ld. CIT(A) should be deleted. 5.5 On the other hand, the Ld. DR for the Revenue has primarily reiterated the stand taken by the Assessing Officer, which we have already noted in our earlier para and is not being repeated for the sake of brevity. 5.6 We have given a careful consideration to the rival submissions and perused the materials available on record, we note that out of ₹ 42,47,229/-, the ld. CIT(A) deleted the addition at ₹ 33,00,009/- holding that the payments were made to one Sri Dipu Banerjee who was the agent of the assessee and claim has allowed under Rule 6DD(k) of I.T. Rules. We note that balance amount which was paid to other persons by the assessee to do the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PCL 31.03.2010 Rs.77,70,037/- Term Loan 31.03.2010 Rs.27,88,713/- Other 31.03.2010 Rs.64,348/- The Assessing Officer noted that an amount of ₹ 22,05,408/- was shown by the assessee in his Profit Loss A/c as bank interest. During the assessment proceedings, the assessee submitted that he had given the loans and advances to his two sons, namely, (i) Sri Saikat Chowdhury and (ii) Sri Saibal Chowdhury. The Both sons are connected with Business. Shri Saikat Chowdhury is running a proprietorship business under the name and style M/s. S.S. Tyre World and both sons are the partners of M/sSunny International, a Partnership Business. The assessee submitted before the Assessing Officer that mother of Sri Saibal Chowdhury and Sri Saikat Chowdhury had expired and because of the sad demise both the sons needed additional capital to survive. Therefore, in these circumstances, the assessee had given interest free advance to help them. After considering the submissions of the assessee, the Ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T(A), the Revenue is in appeal before us. The Ld. DR for the Revenue has primarily reiterated the stand taken by the Assessing Officer, which we have already noted in our earlier para and is not being repeated for the sake of brevity. On the other hand, ld Counsel for the assessee has defended the order passed by the ld CIT(A). 6.4 We have given a careful consideration to the rival submissions and perused the materials available on record, we note that the assessee has its own capital as on 31.03.2010 to the tune of ₹ 1,23,06,344/-, the details of own funds and application of funds are given below for ready reference: Application of funds Capital account 1,23,06,344/- Fixed assets 6,13,752/- Secured loan Deposit 5,000/- From bank 1,06,23,098/- Advances to relatives 19,78,243/- Current liabilities 52,74,878/- Sundry debtors 2,55,55,468/- ..... X X X X Extracts X X X X X X X X Extracts X X X X
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