Shri John Jacob Vs JCIT (ITAT Indore)
Assessee had produced books of account and audited statements, which proved that the assessee had sufficient surplus in his capital account to give interest free loan. Further that, the AO as well as CIT(A) had not brought anything on record to show that money so advanced was out of the borrowed funds. Hence, the direction was given to the AO to delete the disallowance of interest.
FULL TEXT OF THE ITAT JUDGMENT
Appeal by the assessee is directed against the order of CIT(A) – 31 ,New Delhi, Camp at Bhopal dated 29.08.2016, pertaining to assessment year 2010-11. The assessee has raised the following grounds of appeal :-
- That the Ld. CIT(A) has erred in law and on facts in confirming the addition of Rs. 6,39,274/- to the total income of the appellant.
2. That the Ld. CIT(A) has erred in law and on facts in confirming the addition, ignoring the fact that the ld. AO failed to prove a one to one correlation between the amount of interest free advances given by the appellant and the amount of borrowed funds.
3. That the Ld. CIT(A) has erred in law and on facts in confirming the addition on account of notional interest ignoring the fact that the appellant had sufficient surplus in his Capital Account to give interest free loan and the advances were not out of borrowed funds.
4. That the Ld. CIT(A) has erred in law in not following the ratio of the judgement by the High Court of Madhya Pradesh in the case of R. D. Joshi & Co. vs. CIT, (2001) 118 Taxmann 394 ( HC,MP).
2. Briefly stated, the facts of the case are that the case of the assessee was picked up for scrutiny assessment and the assessment u/s 143(3) of the Income-tax Act, 1961 ( hereinafter referred to as the “Act”) vide order dated 1st March, 2013, was framed. While framing the assessment, the AO made the additions on account of disallowance of interest on TDS, disallowance out of commission expenses at Rs. 6,23,807/-, disallowance out of commission expenses on account of non-deduction of tax of Rs. 28,700/-, disallowance out of interest of Rs. 6,39,274/- and other small disallowances being personal in nature. Against this, the assessee preferred the appeal before the Ld. CIT(A), who after considering the submissions confirmed the addition of Rs. 6,39,274/- made on account of disallowance of interest expenses. Aggrieved by this, the assessee is in present appeal.
3. The Ld. Counsel for the assessee vehemently argued that the authorities below were not justified in making the addition on the ground that the assessee has reiterated the submissions as made in the written submissions :-
“The facts of the case are that the Ld. AO has made a disallowance of interest of Rs. 6,39,274/- being a notional interest on the interest free advance of Rs. 61,20,000/-.
The Ld. AO has ignored the fact that the appellant had proprietary capital of Rs. 1,63,98,930/- against the advance given to Aliamma Jacob for a sum of Rs. 61,20,000/-, details of which are as follows :-
Proprietor’s Capital on 1 .4.2009:
