QUANTUM REAL ESTATE AND PROPERTY DEVELOPMENT INDIA LTD,MUMBAI vs. DCIT CEN CIR 39, MUMBAI

आदेश / O R D E R PER R.C.SHARMA (A.M):

This is an appeal filed by the assessee against the order of CIT(A)- 41, Mumbai dated 08/12/2011 for A.Y.2008-09 in the matter of order passed u/s.143(3) of the IT Act. 2. In this appeal, assessee is aggrieved for disallowance of interest to the extent of Rs.50,11,602/- out of total interest of Rs.56,09,241/- u/s.36(1)(iii) of the Income Tax Act, 1961. 3. Rival contentions have been heard and record perused.

M/s. Quantum Real Estate and Property 4. Facts in brief are that assessee is engaged in business of investment and trading in real estate. During the course of scrutiny assessment the AO has noticed that the assessee company has share capital of Rs.1,00,000/- and received interest bearing loan of Rs.9,54,10,559/-. It was further noticed that the assessee has shown Rs.23,20,824/- under the head of fixed assets and Rs. 8,52,45,000/- under the head of loans and advances. The detail of the loans and advances is given at page 2 of the assessment order. Accordingly, the assessee was asked to justify the loans and advances given in view of the claim of interest of Rs. 56,09,241/- as per the provisions of section 36(1)(iii) of the I.T. Act. In response to this show cause notice, the A.R. of the assessee has submitted its reply along with the copy of sale agreement dated 24.2.2006 in which the terms and conditions of payment are given which is discussed by the A.O. in para 3.1 of the assessment order. From the perusal of the reply of the assessee, the A.O. has again asked to explain as to why the interest claimed should not be disallowed as no explanation was submitted in justification for diversion of interest bearing funds for non -business purpose. In response to this show cause notice, the A.R. of the assessee has failed to submit any reply before the A.O. The A.O. has also discussed the provisions of section 36(1)(iii)that as per this provision there are conditions that capital must have been borrowed and used for the business purpose, the interest should have been payable and if the borrowing is not for the business purpose,