TaxTMI 
TaxTMI 
2014 (3) TMI 105
X X X X Extracts X X X X
X X X X Extracts X X X X
....sessee and its directors are untraceable since long and therefore the notice of hearing intimating about the present date of hearing was served on the Assessee by affixture on 17.01.2014 at its last known address. On the date of present hearing none appeared on behalf of Assessee nor any application for adjournment was moved. We therefore proceed to decide the appeal on merits ex-parte qua the Assessee. 3. The relevant facts as culled out from the material on record are as under. 4. Assessee is a company engaged in manufacturing and trading of laminated sheets. Assessee filed its return of income for A.Y. 05-06 on 30.10.2005 showing total loss of Rs. 1,55,20,120/-. The case was selected for scrutiny and thereafter the assessment was f....
X X X X Extracts X X X X
X X X X Extracts X X X X
....interconnected and are therefore considered together and are in respect of deleting the disallowance of interest expenses. 5. On verification of loans and advances given by the Assessee, A.O. noticed that Assessee had given advance of Rs. 67,62,799/- on which no interest was charged by Assessee and during the year Assessee had also raised interest bearing funds. Assessee was asked to explain as to why the interest not be disallowed to which it was interalia submitted that the loans were given in earlier years and loan given to Shri Cement and Shri Krishna Baheti was for the purpose of business. The submission of the Assessee was not found acceptable to A.O. A.O. noted that Assessee had not brought on record any evidence in support of its....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... various concerns, there would be no justification to disallow the interest claimed u/s.36(l)(iii). The Ld. Counsel vide his letter dated 26.12.2007 had explained before the Assessing Officer that the interest free advances are for business purposes. It is now the settled position of law on this issue by the decision of the Hon'ble Supreme Court in S.A. Builders vs. CIT 288 ITR 1 (SC) that interest on borrowed capital cannot be disallowed if the assessee has advanced interest-free loan as a measure of commercial expediency. The Assessing Officer had relied on the decision in Abhishek Industries 286 ITR 1 (P&H) which is not a good law after the decision of the Hon'ble Supreme Court in the aforesaid case. Even otherwise also, the appe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....isallowance of interest so made for Rs. 10,14,420/- is deleted. The third ground of appeal is accordingly allowed. 6. Aggrieved by the order of CIT(A), the Revenue is now in appeal before us. 7. Before us, the ld. D.R. relied on the order of A.O. We have heard the ld. D.R. We find that CIT(A) while deleting the addition has noted that A.O. has not disputed that the interest free loans were given in earlier years and there was no fresh advances during the year. He has further given a finding of fact that there is absence of direct nexus between the interest free advance given and the loan raised and that the major part of advances was for trading security and the balance advances were covered by the availability of interest free fundes....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... A.Y. 2002-03 by dismissing the departmental appeal vide their order dated 03/04/2007 in ITA No. 264/Ahd/2007 for the A.Y. 2002-03. Since, the facts of the year under consideration are exactly similar to that of the A.Y. 2002-03 and A.Y, 2003- 04, the addition made for Rs. 6,72,615/- is deleted by respectfully following the decision of the Hon'ble Jurisdictional Tribunal. The fourth ground of appeal is accordingly allowed. 9. Aggrieved by the order of CIT(A), the Revenue is now in appeal before us. 10. Before us, the ld. D.R. relied on the order of A.O. We have heard the ld. D.R. We find that CIT(A) while deleting the addition made by the A.O. has noted that in assessment year 02-03 similar addition was made by A.O. and the same w....