In this case Assessing Officer noted that from the perusal of the balance sheet and Annexures it was noted that the assessee has taken loans from banks, amounting to RS. 8,32,93,610/- in the form of secured loan and also from other parties, amounting to Rs. 56,20,479/- in the form of unsecured loans. The Assessee has also taken loans of RS. 4,63,90,000/- in his personal capacity and has used it in his business of share trading. The assessee is paying interest thereon, amounting to RS. 1,66,86,977/- to banks and Rs. 2,02,45,961/- to others. Further, the assessee has advanced interest free friendly loans to various parties. This amounts to Rs. 42,52,300/-. The assessee was asked to explain why proportionate disallowance not be made from the interest expenditure.
We have carefully considered the submissions and perused the records. We find that from the figures of the opening and closing capital of the assessee it is evident that assessee has sufficient own funds to cover the interest free loans / advances of Rs. 42,52,300/-. We also find that the Assessing Officer has not been able to dispute the assessee’s submission that assessee had adequate own funds out of which interest free loans and advances were given. Under this situation when the interest free loans / advances have been give out of the assessee’s own funds, no disallowance is called for. Similarly, again on similar facts in A.Y. 2007-08, Ld. Commissioner of Income Tax (A) deleted the similar additions by the Assessing Officer and the decision of the Ld. Commissioner of Income Tax (A) was not challenged by the Department in higher forums. Under the circumstances, we do not find any infirmity in the order of the Ld. Commissioner of Income Tax (A). Accordingly, we uphold the same.