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Income Tax Appellate Tribunal, E Bench, Mumbai
Before: Shri P K Bansal & Shri Pawan Singh
Per P.K. Bansal, Vice President
This appeal has been filed by the assessee against the order of the CIT(A)-8, Mumbai dated 28.02.2014 for A.Y. 2010-11.
None appeared on behalf of the assessee even though hearing has been fixed from time to time on the request of the assessee. We, therefore, decided to dispose off this appeal after hearing the learned D.R.
We noted that the assessee has taken the following grounds of appeal: -
“1. On the facts and in the circumstances of the case and in law the Hon'ble CIT(A) erred in upholding the disallowance made by the Ld AO on account of legitimate interest made on funds borrowed and used for the purposes of business of Rs. 9,79,232/- without appreciating that the assessee has debited a sum of Rs.516,368/- only in Profit fit Loss A/c on account of claim of interest by doing so the Ld AO has sought to tax deemed interest income which is wrong and the reason assigned for doing so are wrong and contrary to the provision of Income Tax Act and rules made there under.”
Shri Shashikant Damani 4. After hearing the learned D.R. and going through the orders of Tax Authorities below we noted that the AO while framing the assessment found that the assessee has claimed an amount or `5,16,318/- as interest on secured loans taken by him. The AO further noted that the assessee had given interest free loans to the tune of `92,03,307/-. Therefore the AO computed interest @10.64% on `92,03,307/- which comes to `9,79,232/- and disallowed the same while computing the income under the head “Income from Business”. When the matter went to the CIT(A), the CIT(A) confirmed the disallowance.
We noted that the assessee had paid interest of `5,16,368/- to HDFC Bank on loan availed by him of an `48,53,950/-. Thus the assessee has paid a total interest `5,39,543/- which the assessee had debited to the Profit & Loss Account on a loan of `48,53,950/-. The assessee has also claimed deduction for a sum of `5,39,543/- under Section 36(1)(iii) of the Income Tax Act but the AO noted that the assessee has also debited the said interest in its Profit & Loss Account and claimed the same as deduction under Section 36(1)(vii) but the AO after noting that the assessee has given interest free loan for a sum of `93,60,865/- and computed interest thereon and thus calculated the disallowance at `9,79,232/- instead of restricting it to `5,16,368/-. If the assessee has claimed deduction of `5,16,368/- under Section 36(i)(iii) the disallowance made thereon, even if it is assumed that assessee has utilised borrowed money for advancing interest free loan, cannot be more than `5,18,368/-. We accordingly reduce the disallowance of `9,79,232/- to `5,16,368/-. Thus the ground taken by the assessee is partly allowed.
In the result, the appeal filed by the assessee is partly allowed.