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TMI Blog2021 (8) TMI 202X X X X Extracts X X X X X X X X Extracts X X X X ..... hich is brought on record by the lower authorities. We hold that there cannot be any assumption / presumption that only borrowed funds were used for making investment in capital contribution of partnership firm, unless there is mixed funds (i.e borrowed funds and own funds inextricably mixed in the same bank account). In any case, there is no dispute that assessee is a partner in Ambhe Properties (firm) - it is a duty of the assessee in the capacity of a partner to pump in sufficient capital contribution for the smooth running of the business of the partnership firm. This investment is to be considered as an investment made as a measure of commercial expediency. Obviously, the amount contributed by the partner would be certainly a busine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gainst the order of assessment passed u/s.143(3) of the Income Tax Act, 1961 (hereinafter referred to as Act) dated 23/12/2016 by the ld. Asst. Commissioner of Income Tax 27(1), Mumbai (hereinafter referred to as ld. AO). 2. The only issue to be decided in this appeal is as to whether the ld. CIT(A) was justified in confirming the disallowance made in the sum of ₹ 19,10,536/- towards interest u/s.36(1)(iii) of the Act in the facts and circumstances of the instant case. 3. None appeared on behalf of the assessee. We have heard the ld. DR and perused the materials available on record. We find that the assessee is an individual engaged in the business of trading in MS Iron and Steel products. The return of income for the A.Y.2014-1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been made by the assessee out of borrowed funds. We find that absolutely no nexus of borrowed funds vis- -vis the amount invested in partnership firm was brought on record by the ld.AO. The ld. AO merely assumed that borrowed funds have been diverted for non-business purposes by way of making investment in capital of a partnership firm from which no interest had been received by the assessee. Accordingly, he proceeded to disallow the interest paid on unsecured loans in the sum of ₹ 19,10,536/- as amount allegedly diverted for non-business purposes u/s.36(1)(iii) of the Act. We find that though the Section under which this disallowance made was not mentioned by the ld. AO in his assessment order, the disallowance was made based on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld not advance the case of the Revenue. We hold that there cannot be any assumption / presumption that only borrowed funds were used for making investment in capital contribution of partnership firm, unless there is mixed funds (i.e borrowed funds and own funds inextricably mixed in the same bank account). b) In any case, there is no dispute that assessee is a partner in Ambhe Properties (firm). Hence, it is a duty of the assessee in the capacity of a partner to pump in sufficient capital contribution for the smooth running of the business of the partnership firm. This investment is to be considered as an investment made as a measure of commercial expediency. Obviously, the amount contributed by the partner would be certainly a business ..... X X X X Extracts X X X X X X X X Extracts X X X X
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