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TMI Blog2024 (11) TMI 531X X X X Extracts X X X X X X X X Extracts X X X X ..... called for. As in the case of CIT vs. Reliance Utilities Ltd. [ 2009 (1) TMI 4 - BOMBAY HIGH COURT] has held that if there were funds available both interest free and overdraft and / or loans taken, then a presumption would arise that the investment would be out of interest free funds generated or available with the company, if the interest free funds are sufficient to meet the investments and accordingly upheld the decision of the Tribunal in deleting the disallowance. Since in the instant case also, the assessee has sufficient own capital which is much more than the amount of interest free loans given to the various parties, therefore, no disallowance of interest u/s 36(1)(iii) is called for. The first issue raised by the assessee in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estate business. He filed his return of income on 07.10.2018 declaring total income at Rs. 52,98,930/-. The return was processed u/s 143(1) of the Income Tax Act, 1961 (hereinafter referred to as the Act ). Subsequently, the case was selected under CASS for complete scrutiny under the E-assessment Scheme, 2019. Accordingly, statutory notice u/s 142(1) of the Act was issued and served on the assessee to which, the AR of the assessee appeared before the Assessing Officer from time to time and filed the requisite details. 3. During the course of assessment proceedings the Assessing Officer noted that the assessee has debited an amount of Rs. 51,84,792/- as interest on unsecured loans. He noted that the unsecured loans were outstanding at Rs. 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ous parties. He, therefore, asked the assessee to furnish the details of such unsecured loan creditors to whom interest has been paid. After considering the various details furnished by the assessee and observing that the assessee has paid interest ranging from 17% to 23% whereas the banks are charging interest ranging from 9% to 12% on business loans, he adopted the interest rate of 15% on unsecured loans as reasonable and accordingly made addition of Rs. 4,55,190/- as excess interest paid. 6. In appeal, the CIT(A) / NFAC dismissed the appeal filed by the assessee. 7. Aggrieved with such order of CIT(A) / NFAC, the assessee is in appeal before the Tribunal by raising the following grounds of appeal: The following grounds are taken without ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sallowance made of Rs. 6.25,496/- may kindly be deleted. 5] The learned CTT(A) erred in confirming the disallowance of interest of Rs. 4,55,190/- on the ground that the assessee had paid interest on the loans taken from a few persons at a rate much higher rate than the market rate. 6] The learned CIT(A) failed to appreciate that the persons to whom higher rate of interest was paid were not related with the assessee and hence, there was no question of making any disallowance of the interest amount. 7] The learned CIT(A) erred in not appreciating that in the earlier years, the learned A.O. had accepted payment of interest at a higher rate and hence, there was no reason to take a different view in the year under consideration. 8] The learned C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rest free loans given by the assessee, no disallowance u/s 36(1)(iii) of the Act is called for. 10. So far as the second issue is concerned, he submitted that the assessee has paid interest on unsecured loans running from 17% to 23%. He submitted that the Assessing Officer has not doubted the genuineness of such unsecured loans but he has restricted the interest to 15%. He submitted that none of the parties are related to the assessee. Referring to the copy of the assessment order for assessment year 2016-17 placed at pages 57 to 59 of the paper book, he submitted that no such disallowance has been made in the order passed u/s 143(3) of the Act. Similarly, for assessment year 2017-18 also, the Assessing Officer has passed the order u/s 143( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 01.04.2017 is Rs. 4,36,06,730.78 whereas the assessee has given interest free loans / advances of only Rs. 94,70,000/-. The Hon'ble Supreme Court in the case of South Indian Bank Ltd. vs. CIT (supra) has held that when the assessee having sufficient interest free funds of their own greater than the investments, proportionate disallowance of interest paid is not called for. The Hon ble Bombay High Court in the case of CIT vs. Reliance Utilities Ltd. (supra) has held that if there were funds available both interest free and overdraft and / or loans taken, then a presumption would arise that the investment would be out of interest free funds generated or available with the company, if the interest free funds are sufficient to meet the i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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