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TMI Blog2024 (3) TMI 517X X X X Extracts X X X X X X X X Extracts X X X X ..... earned Commissioner of Income Tax (Appeals), [in short the ld. CIT(A) ], Surat, National Faceless Appeal Centre (in short the NFAC ), dated 29.08.2023, which in turn arises out of an assessment order passed by Assessing Officer u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the Act ), dated 17.12.2019. 2. The grounds of appeal raised by the assessee are as follows: [1] On the facts and in the circumstances of the case, as well as law on the subject, the Learned Commissioner of Income Tax (Appeals) erred in confirming the action of the Learned Dy/Asst Commissioner of Income Tax in disallowing interest expense of Rs. 52,30,972/- claimed u/s. 37 of the I.T. Act, 1961. [2] On the facts and in the circumstances of the case, as well as law on the subject, the Learned Commissioner of Income Tax (Appeals) erred in confirming the addition made by the Learned Asst. Commissioner of Income Tax, Circle - 1(3), Surat on account of Notional Rent of Rs. 3,04,000/-. Your assessee therefore prays that looking to the facts and circumstances of the case the addition made by The Learned Asst. Commissioner of Income Tax, Circle-1(3) to the tune of Rs. 55,34,972/- sustained by the Lea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he year under consideration, should not be deductible u/s 37 of the Act. Thus, addition of Rs. 52,30,972/- was confirmed by ld CIT(A). Aggrieved, by the order of ld CIT(A), the assessee is in appeal before us. 6. Learned Counsel for the assessee, argued that assessee has its own funds which are more than interest free advances given by it. For that, Ld. Counsel for the assessee took us through the balance sheet of the assessee, wherein we have noted that own free funds are more than interest free advances. Therefore, ld Counsel contended that the loans and advances were given out of interest free funds and hence additions should not be made in the hands of the assessee. 8. On the other hand, Learned Senior Departmental Representative (ld. Sr. DR) for the Revenue, argued that assessee has failed to establish any one-to-one relation between the unsecured loans/bank loans and the interest-bearing advances. The disallowance u/s 37 of the Act, was due to diversion of interest-paid funds to non-business, personal avenues, therefore, ld DR contended that addition made by the Assessing Officer may be upheld. 9. We have heard both the parties and carefully gone through the submissions put f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2014-15 in the assessee's own case along with computation of income and audit report was submitted by assessee (Refer Page No. 85 86 of PB Page No.87 to 117 of PB). Thus, we note that Revenue has accepted the claim of the assessee in previous years in respect of interest received on loans and advances and interest paid on borrowings. 11. We have gone through the balance sheet of the assessee for AY.2017-18 and found that own funds are more than the interest free advances, therefore no disallowance should be made in the hands of the assessee. For that, we rely on the judgment of Co-ordinate Bench of ITAT, Ahmedabad in the case of DCIT vs. Sylvannus Builders Developers Ltd., in ITA No.1923/Ahd/2019, for AY.2015-16, order dated 08.05.2023, wherein it was held as follows: 7. Regarding ground no. 2 disallowance of interest expenditure u/s. 36(1)(iii) of the Act, the Ld. CIT(A) has held that the assessee had surplus interest free funds surplus of nearly Rs. 52,51,80,178/- and this is far excess of the interest free advances of Rs. 32,43,89,592/-. This is uncontrovented by the Revenue. Therefore the addition made u/s. 36(1)(iii) is not sustainable. 7.1. It is settled principle of law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any material, the assessee was eligible for allowance of interest. The facts of the assessee s case are identical to the facts before the Hon ble jurisdictional High Court in the case of Raghuvir Synthetics Ltd(supra); we, therefore, respectfully following the above decision of Hon ble jurisdictional High Court, uphold the order of the CIT(A) and reject the Grounds Nos. 2 3 of the Revenue s appeal. 13. Based on the facts narrated above, we note that assessee`s own funds are more than the interest free advances, therefore no disallowance should be made in the hands of the assessee, hence, we delete the addition of Rs. 52,30,972/-. 14. In the result, ground No.1 raised by the assessee, is allowed. 15. Ground No.2 raised by the assessee relates to addition on account of notional rent of Rs. 3,04,000/-. 16. Brief facts qua the issue are that during the course of assessment proceedings; it was noted by Assessing Officer that there are 3 properties owned by the assessee, at Bunglow No.6, [Claimed to be Self-occupied], Piplod, Surat; Flat No.3, Vrundavan, Athwalines Surat (30% share) Devraj Residency Althan, in respect of which no actual/deemed rent have been shown by the assessee. Howeve ..... X X X X Extracts X X X X X X X X Extracts X X X X
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