TaxTMI 
TaxTMI 
2014 (5) TMI 314
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....sed:- "1. On the facts and in the circumstances of the case and in law the learned CIT(A) erred in deleting the addition of Rs. 19,38,913 (wrongly written as Rs. 18,38,913 in the grounds of appeal) representing interest attributable to interest free loans advanced out of interest bearing loan without appreciating the fact that the assessee failed to prove the nexus between the interest bearing loans and the interest free advance." 2. Facts in brief:- The assessee company is engaged in the business of finance, service relating to accounting, project management, legal, finance procurement and compliance. The Assessing Officer noted that the assessee has taken huge loans during the year and has also re-paid some of them. The loans taken were....
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....sallowed under section 36(1)(iii). Another decision of the Bombay High Court in CIT v/s Reliance Utilities and Power Ltd., [2009] 313 ITR 340 (Bom.), was also relied upon. A detail chart of the interest free funds available and the interest free loans which were given was also submitted. Alternatively, it was argued that the interest which has been paid and claimed as expenditure were wholly and exclusively for the purpose of business, hence, no disallowance should is called for. 4. The learned Commissioner (Appeals), after examining the material placed on record, noted that the assessee has taken interest bearing loans on which interest to the tune of Rs. 1,82,74,880, was paid which has been claimed as deduction. Apart from the interest b....
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....s including share capital was only Rs. 4,49,191. Thus, the availability of own funds was quite meager up to 31st March 2005. Thereafter, the assessee had advanced huge interest free loans to some persons in the month of April 2005 itself. He further submitted that the nexus between the interest free loans received and interest free loans given has to be substantiated by the assessee. In support of his contentions, he strongly relied upon the decision of the Kerala High Court in CIT v/s Harrisons Malayalam Ltd., [2012] 25 Taxman.com 546 (Ker.). 7. The learned Counsel, on the other hand, submitted that insofar as the observations and findings of the Assessing Officer are concerned that the assessee has accepted before the Assessing Officer t....
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....h 2006 was at Rs. 29,76,48,648, whereas the interest free loans given to various persons during the year was at Rs. 19,60,10,696 and as on 31st March 2006, the closing balance was only Rs. 9,39,79,832. Besides this, he submitted that the assessee has huge profit in this year and after tax the net profit was Rs. 5,81,26,556. Thus, he submitted that the availability of interest free loan, reserve and surplus including current profit were sufficient to meet the requirement of interest free advance / loans given by the assessee. He further submitted that the interest free loans were not given to any related parties but to outsiders wholly and exclusively during the course of the business. The interest, which has been paid are only for the busin....
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....has also given interest free loans in the month of April. Besides this, if the availability of over all interest free loans has to be seen, then the assessee has received more than Rs. 71.95 crores out of which interest free loan during the year given was at Rs. 19,60,10,696. From these facts, a presumption can be drawn that the interest free loan has been given out of these interest free unsecured loans received by the assessee. Thus, we do not find any reason to deviate from the conclusion drawn by the learned Commissioner (Appeals). Besides this, it is also noted that the assessee has also given huge loans which are interest bearing and on which the assessee had shown interest income of Rs. 1.96 crores. The interest which has been incurr....