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TMI Blog2019 (11) TMI 25X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal raises a single issue, i.e., the sustainability in law of the disallowance of interest on borrowed capital u/s. 36(1)(iii) of the Act, effected in a sum of Rs. 12.72 lacs, in the facts and circumstances of the case. 3. The brief facts of the case are that the assessee-individual is engaged, through three proprietary concerns, as a dealer in petroleum products (M/s. Khanna Petros Mart, Pathankot) and as contract engineers (through M/s. Khanna Engineers, Pathankot and M/s. DC Khanna & Sons, Chamba). He filed his return of income for the relevant year at Rs. 2,09,738 on 07/01/2015. During the assessment proceedings, initiated by the issue of notice u/s. 143(2) on 28/8/2015 (served on 05.9.2015), it was observed by the Assessing Office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd Sh. Gurdas Garg and the decision of hon'ble Apex Court in the case of S A builders P Ltd are not of any help to the appellant. The AO has analyzed each and every advance made by the appellant and the assessment order and rightly concluded that the total advances of Rs. 99,13,472/- were made otherwise than for business purposes. Further, the assessee has not brought material on record to discharge its onus for proving that the advances made by it were purely for business purposes. Therefore, the AO was justified in concluding that the amount of Rs. 99,13,472/- was advanced by the appellant otherwise than for business expediency and was therefore justified in making disallowance of Rs. 12,72,216/- u/s. 36(l)(iii) of the Act which is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ear - which may be different at different times of the year and, accordingly, it is not the figures available at the year-end but during the year, on an average, that are relevant. Further, the significance of a credit in the balancesheet, particularly from the standpoint of its' application, as that of interest-free capital, could only be ascertained in relation to other sums, positive or negative, i.e., representing the source/s of or application/s of funds, including the purpose for which the same have been raised or, as the case may be, stand applied. Sure, where the funds are not dedicated, i.e., contracted for a specific purpose, it is open for the assessee to appropriate the same against a particular application, i.e., as may suit hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Total 239.32 Total 239.32 [(*) (Amount in Rs. lacs); (@) denotes the impugned advances] The NWC in the instant case is at a positive sum of Rs. 69.56 lacs (Rs. 82.10 lacs - Rs. 12.54 lacs) as at the year-end. There is also no indication of it being at a negative sum at any time during the year. The interest-free capital (as at the yearend) with the assessee is, thus not, as contended, Rs. 72.96 lacs, but Rs. 60.42 lacs (Rs. 72.96 lacs - Rs. 12.54 lacs). Further, the secured loans (Rs. 166.36 lacs) assumed by the assessee, as apparent from their profile at Schedule VII to the balance-sheet as on 31.3.2013 (PB pages 1-28), is toward financing the working capital, which is thus over-financed by Rs. 96.80 lacs (Rs. 166.36 lacs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the borrowed capital financing the non-business advances may thus be reasonably taken at 96% (as against 100% by the Revenue). Sure, some variables, as the unsecured and secured loans as at the beginning of the year, or indeed the average for the year, may well be different. Why, the non-business advances itself may well be, for all we know, at a higher figure (than as at year-end), absorbing such interest-free or, as the case may be, interest bearing capital. However, it was for the assessee to set up a case in this regard. In fact, even no contention to this effect, i.e., that the figures as at the beginning of the year are at a material variance, stands raised. In fact, what stands stated in the preceding paragraphs, was discussed dur ..... X X X X Extracts X X X X X X X X Extracts X X X X
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