TaxTMI 
TaxTMI 
2012 (11) TMI 6
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....owed capital amounting to Rs.15,22,917/-. 2.2. The Commissioner of Income Tax(A) failed to appreciate that M/s.Apex Builders and Kalpatharu Enterprises Ltd. are engaged in the business activity of construction and deriving income from House property from the immovable assets owned by them, whereas the assessee is in the field of providing medical and surgical services and therefore, the loan given by the assessee to these entities cannot be on account of business exigency. 2.3. The Commissioner of Income Tax(A) ought to have appreciated that there is no business connection and further the assessee company has not benefited directly or indirectly through such loan given to these entities. 2.4. The Commissioner of Income Tax(A) ought....
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....pathanu Enterprises Ltd. Both these concerns are controlled either by the promoters or their relatives. The said transaction took placed on 31.05.2003 and it was squared up on 31.03.2004. No interest was received on such advance. The assessee had paid interest during the corresponding period of Rs.17,60,28,111/- and the average amount of loan taken by the assessee was Rs.163,68,68,586/- on which the average interest rate paid by the assessee was @ 10.75%. Applying the decision of the Hon'ble Punjab & Haryana High Court in the case of C.I.T. Vs. Abhishek Industries Ltd. reported in 286 ITR, the Assessing Officer made an estimated disallowance of interest of Rs.15,22,917/- on Rs.1.70 crores @ 10.75% per annum for 10 months. 4. Being aggrie....
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....disallowance is called for is a finding of fact and the finding of the Tribunal that it can be inferred that Savera Hotels made the advance out of its own funds and not the borrowed capital is sustainable in law. Further there is no finding by the income-tax Officer or the Appellate Assistant Commissioner that the money borrowed has been spent for non-business purposes. The addition made by the Income-tax Officer was on the basis that the money advanced to Savera Hotels (P) Ltd., should carry notional interest of 10%. And in that view he disallowed the amount of Rs.72,769. The Appellant Assistant Commissioner held that the advance to Savera Hotels (P) Ltd.would have come proportionately out of the own funds as well as borrowed funds is n....
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....and Power Ltd. 313 ITR 340 has held that if there be interest free funds available to assessee sufficient to meet its investments and at the same time the assessee had raised a loan, it can be presumed that investments were made from interest free funds available and no disallowance can be made. Respectfully following the above decisions, the addition is deleted and the ground is allowed." 6. The Departmental Representative submitted that there was no commercial expediency and therefore, the Assessing Officer was justified in making the disallowance of interest. For his contention, he placed reliance on the decision of Hon'ble Kearala High Court in the case of C.I.T. Vs. Accelerated Freeze Drying Co. Ltd in 324 ITR 316 (Kerala). He also ....
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....ied the same on the above amounts advanced. He submitted that the decision of Hon'ble Punjab & Haryana High Court in the case of C.I.T. Vs. Abhishek Industries Ltd.(supra) was over-ruled by the Hon'ble Supreme Court in the case of Munjal sales Corporation Vs CIT (SC) 298 ITR 298(SC). Therefore, the decision in the case of Abhishek Industries Ltd.(supra) relied on by the Assessing Officer was no longer a good law. 8. We have heard the rival submissions and perused the orders of lower authorities and materials available on record. In the instant case, the assessee advanced Rs.1.70 crores as interest free advance to its sister concerns namely, M/s.Apex Builders and M/s.Kalpathanu Enterprises Ltd. Further, it is also not in dispute that the ....
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....available with the assessee were not sufficient to advance interest free money in question to its sister concerns. In our considered view, the onus, which was on the department for making the disallowance by bringing on record some material to show nexus between interest free advance and interest bearing borrowed capital was not at all discharged by the Revenue. Therefore, in our considered opinion, the disallowance was made by the Assessing Officer was on a wrong footing and unsustainable. The finding of the Commissioner of Income Tax (A) that that borrowed funds were utilized for the specific projects for which they were borrowed and interest free advances were given out of own interest free funds were not disputed before us by the Revenu....