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TMI Blog2008 (9) TMI 404X X X X Extracts X X X X X X X X Extracts X X X X ..... total work in capital towards business is not more than Rs. 10 lacs. In view of this the interest attributable to Rs. 15 lacs was disallowed by the AO being not incidental to the business activities. (2) The learned CIT(A) has erred in deleting the additions of Rs. 6,65,000 made by the AO under s. 2(22)(e). It was observed by the AO that there was peak credit of Rs. 6,65,000 in the books of the assessee against loan from M/s Park Credit (P) Ltd. against which the assessee did not paying interest to the said concern. 3. The facts emerged from the record in respect of ground No. 1, are that while doing the scrutiny assessment the AO has observed that the assessee has debited its interest account worth Rs. 1,79,640. According to the AO, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e year end, it can be safely held that not more than Rs. 10 lacs of borrowed fund was used by the assessee for business purposes. Rather, it appears that most of the investment of the assessee was going towards investment where there is no scope for any allowance of interest. As per provisions of s. 36(1)(iii) of the IT Act, 1961, interest can be allowed only on the borrowings which were taken and used for the purpose of business only and from the above discussion, it is apparent that major part of the borrowings was not used by the assessee for business purpose, hence proportionate disallowance is made to the extent it was not used for non-business purpose, which is worked out at Rs. 1,07,784 (Rs. 1,79,640/25 x 15) i.e., use of fund for no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er filed a copy of the account of M/s UMIL Shares Stock Broking Services Ltd. reflecting the transactions made during the year: --------------------------------------------------------------- "Date Particulars Amount Date Particulars Amount --------------------------------------------------------------- 1-4-04 To balance 10,00,000 brought forward --------------------------------------------------------------- 14-5-04 To cheque No. 15,00,000 22-9-04 By Ch. No. 3,50,000 083813 dt. 114137 dt. 14-5-2004 21-9-2004 --------------------------------------------------------------- 22-9- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssions, on careful perusal of the material available on record and keeping in view of the fact that the assessee's opening balance of Rs. 10 lacs has reduced to Rs. 5 lacs by the end of the year, there is no justification on the part of the AO to disallow any portion of the interest. Hence, we find no infirmity in the order of the learned CIT(A) in deleting the same. This ground of the Department is dismissed. 8. In the second ground the facts emerged from the records are that on examination of balance sheet, the AO has observed that the assessee has shown loan/advance from M/s Perk Credit Properties (P) Ltd. amounting to Rs. 1 lac at the end of the year. The opening balance was shown at Rs. 6,65,000. It was further observed that the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0,000 31.3.2005 To balance c/f 3,30,000 ---------------------------------------------------- 6,30,000 6,30,000 ---------------------------------------------------- ---------------------------------------------------- Perk Credit Properties (P) Ltd. (Sundry creditor) ---------------------------------------------------- Dr. Cr. ---------------------------------------------------- 1.4.2004 1,00,000 ---------------------------------------------------- Based on these figures he contended that the entire amount is appearing in the opening balance. He reiterated the submissions made before the Revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X
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