TaxTMI 
TaxTMI 
2015 (1) TMI 156
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....stances of the case and as per law, the Ld.CIT(A) erred in deleting the addition made on account of disallowance of interest of Rs. 43,78,306/- on interest bearing advances to subsidiary companies relying on the Supreme Court decision in the case of M/s. SA Builders v/s CIT (269 ITR 535) without appreciating the fact that the facts of the case are distinguishable in as much as commercial expendiency in advancing interest free loans is required to be shown by the assessee. 2. Whether on the facts and circumstance of the case and as per law, the Ld. CIT(A) erred in restricting the disallowance to Rs. 3,68,450/- being 5% of dividend income without appreciating the fact that the decision of Hon'ble High Court in the case of MIs Godrej & Bo....
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.... be made from the interest debited in the Profit & Loss account. The Assessing Officer rejected the assessee's contention and held that no prudent businessman will park such a huge fund without earning any income thereon. After relying upon various decisions, he apportioned the interest bearing funds for investment in subsidiary in the following manner:- Shares Capital and Reserves & surplus Rs. 1,691,423,319 Investment in subsidiaries (without interest) Rs. 514,725,308 Total borrowed funds Rs. 206,329,696 Finance cost Rs. 16,142,479 Borrowed funds used for investment in subsidiaries is Borrowed funds * investment in subsidiaries Share Capital & reserve Fund + Borrowed fund 206,329,696*514,725,308 = Rs. 55,962,56....
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.... decisions including that of S.A. Builders v/s CIT, [2007] 288 ITR 001 (SC). The assessee's submissions have been incorporated by the learned Commissioner (Appeals) in Page-3 to 6 of his order. After considering the assessee's submissions and the material on record, the learned Commissioner (Appeals) deleted the addition after giving finding of fact that the assessee had huge interest free funds to invest in subsidiary companies and were given for business purposes wherein the assessee has deep interest as holding company. He also analysed the findings of the Hon'ble Supreme Court in S.A. Builders (supra) and also the other decisions and deleted the disallowance after observing and holding as under:- 4. "2.7 So, in view of the aforesaid ob....
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.... the dividend income which worked out at Rs. 3,68,450. Consequent direction was also given for the purpose of disallowance under section 14A, while working out the book profit under section 115J. 6. Before us, the learned Department Representative strongly relied upon the findings of the Assessing Officer and submitted that when the assessee has two kinds of funds i.e., interest bearing funds and interest free funds then it cannot be presumed that only the interest free funds have been advanced to the sister concern / subsidiary companies. Thus, proportionate disallowance was made by the Assessing Officer is definitely call for. Regarding 14A, he just simply relied upon the order of the Assessing Officer. 7. Before us, when the case was c....