2013 (7) TMI 806

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....urred heavy interest expenses to the tune of Rs. 59,83,543 and, on the other hand, it had given interest-free loans to R. R. Family Trust (Kashiram Textiles Ltd.) to the tune of Rs. 1.05 crores and to Sagar Textile Mills to the tune of Rs. 18.40 crores. On calling for the explanation for interest-free loans and duly considering the submissions of both sides, the Assessing Officer disallowed the interest to the extent of Rs. 18,66,000 of the interest-free loans advanced to both the parties on the ground that the same was not incurred for business expenses. 2. This decision of the Assessing Officer came to be challenged before the Commissioner of Income-tax (Appeals), which set aside the order of the Assessing Officer a....

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....e amount advanced to both R. R. Family Trust and Sagar Textiles Mils were not given during the year under consideration, but the same was given in the earlier years. The Commissioner of Income-tax (Appeals) had also taken note of the fact that there was sufficient funds available with the assessee-respondent on which there was no interest liability that had been incurred. In such circumstances, relying on the case of Torrent Financiers (supra), it found that the disallwoance was not justifiable. 6. The Tribunal on noting these details, in terms held that there was nothing contrary that could be brought on record by the Department. The assessee's equity share capital Rs. 3.85 cores and reserve and surplus of Rs. 5.52 crores ....

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....p;18.66 lakhs was not sustainable. 8. The Tribunal has correctly approached the issue which has been proposed in the present tax appeal. When there was no evidence brought on record by the Department for the Tribunal to hold otherwise than what has been concluded by way of any material, we hold that the issue is appropriately concluded in favour of the assessee and against the Revenue. 9. We may refer to the judgment of the apex court at this stage given in case of S. A. Builders Ltd. v. CIT reported in [2007] 288 ITR 1 (SC) where the question was whether interest on funds borrowed by the assessee to give an interest-free loan to sister concern should be allowed as deduction and the apex court ruled thus (pages 7 and 8): "We ....