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TMI Blog2024 (7) TMI 1230X X X X Extracts X X X X X X X X Extracts X X X X ..... h a business decision cannot be questioned by any authority. Once it is held that the advances were for business purposes, non-installation of the machinery or renovation in the subsequent period due to non-viability cannot obliterate the purpose of business. The assessee decided not to go-forward with its plan of new machinery and renovation due to bad market condition. Such business decision cannot be a ground to disallow consequential expenditure. Hence, appellant is liable to succeed on the subject issue. Assessee had its own interest free capital which was more than the interest free advances - The Hon ble jurisdictional High Court in case of Gujarat Narmada Valley Fertilizers Co.Ltd. [ 2012 (8) TMI 1161 - GUJARAT HIGH COURT] held that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the disallowance is not justified for 3 reasons stated in appellant s written submissions which are reproduced on page 2 and 3 of the appellate order but not dealt within the appellate order. Your appellant prays that the disallowance be deleted Or alternatively reduced as per aforesaid submissions. 2. The facts of the case in brief are that assessee has filed his return of income (in short ROI ) on 25.11.2014 declaring total income of Rs. 4,85,370/-. The case was selected for scrutiny and notice u/s 143(2) of the Act was issued on 28.08.2015. During the year under consideration, assessee was engaged in business of manufacturing of khandsari, molasses and Ratan Gol by crushing sugarcane, cotton ginning and trading of it. After hearing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered by the AO but and it was not found tenable. On verification of balance-sheet, he noticed that assessee has shown secured loans and unsecured loans as on 31.03.2014 of Rs. 8,40,44,048/- and Rs. 1,64,05,115/- respectively. During the year under consideration, assessee has taken further unsecured loans of Rs. 66,00,000/- from Shri Ashokbhai N Savaliya and also introduced capital on which assessee is paying interest also. Considering the above facts, AO held that assessee has diverted interest bearing funds towards interest free loans and advances. As per Sec.36(1)(iii) of the Act interest expenses claimed in the profit and loss account on such interest free loans and advances amounting to Rs. 11,48,472/- i.e., @ 12% of Rs. 95,70,601/- is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is stated that advances were given for the purposes of business for renovation of the existing plant, which is not disputed. The advances given for machinery cannot be said to be not for the purpose of business. It was also argued that even if it is assumed that the advances are not for the purpose of business, the assessee had enough interest free funds available with it and as per various judicial decisions, it could be presumed that the interest free advances were made from the interest free funds available with the assessee. Alternatively, it was pleaded that the disallowance of interest @ 12% is not correct because interest expenditure is only 5.74% of the total liabilities. Hence, the interest disallowance could at best be 5.74% of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enerator of power. The Ld.AR of the assessee stated that out of 24 khandsaries only 4 are doing business and due to non-viability 20 units were closed recently. It was also submitted that the advances were subsequently received back by the appellant. It was also submitted that for the last three years, khandsary business is closed. In view of the above facts, we are of the considered view that loans and advances were given for business purposes. It is the assessee who decides as to how the business should be done and when expansions or modernization should be undertaken. Such a business decision cannot be questioned by any authority. Once it is held that the advances were for business purposes, non-installation of the machinery or renovatio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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