TaxTMI 
TaxTMI 
2015 (6) TMI 760
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.... was disallowed out of the claim for prior period expenses. Learned counsel for the assessee did not press this ground keeping in view the smallness of amount involved. In view of this, all these grounds are treated as rejected. 4. In ground no. 4, assessee has challenged charging of interest u/s. 234A, B, C, & D. Learned counsel for the assessee at the very outset submitted that charging of interest is consequential in nature, therefore, this ground also does not require any specific finding, it is rejected. 5. Ground no. 3 is common with solitary substantial ground of appeal in Assessment Year 2006-07. In these grounds of appeal, grievance of the assessee is that ld. Commissioner of Income Tax(A) has erred in confirming the disallowances of interest expenses amounting to Rs. 44,65,790/- and Rs. 46,76,672/- in Assessment Year 2006-07 and 2007-08 respectively. 6. The brief facts of the case are that assessee has filed its return of income on 22-11-2006 and 05-10-2007 declaring a loss at Rs. 21,98,810/- and Rs. 96,91,459/- in Assessment Year 2006-07 and 2007-08 respectively. The case of the assessee was selected for scrutiny assessment and notices u/s. 143(2) of the income ....
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....admissible to the assessee. It is not in dispute that assesse had given a loan of Rs. 23.49 crore in Assessment Year 2006-07 and Rs. 153.52 crore in Assessment Year 2007-08 to the sister concern without charging interest. The learned counsel for the assessee has raised two fold submissions. In his first fold of submission, he contended that assessee has sufficient interest free funds available which were used for the purpose of giving interest free advances, therefore, ld. Assessing Officer ought to have not disallowed any amount out of the interest expenses claimed on the borrowed funds. In other words, the interest bearing funds were used for the purpose of business and not used for gaining interest free advances to the sister concern. 10. In his second fold of submission, he contended that if accounts are being examined minutely then it will reveal that these advances were given for the purpose of business. The commercial expediency to give these advances is involved in these transactions and, therefore, no disallowance ought to have been made. 11. Ld. Departmental Representative on the other hand pointed out that assessee failed to establish the availability of interest f....
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....ance sheet and pointed out that investment as on 31st March, 2005 stood at Rs. 82.89 crore. It increased to Rs. 100.2 crore, meaning thereby there is an increase of Rs. 18 cores in the investment in shares. If these two amounts are debited from the total reserve i.e. Rs. 18 + 24 from Rs. 90 cores of reserve and surplus then roughly Rs. 48 crores of rupees were available with the assessee which take care interest free advances of Rs. 23.59 crores. To this calculation, Ld. Departmental Representative was unable to controvert. Ld. Assessing Officer failed to appreciate the funds available with the assessee in right perspective. 16. Apart from this one aspect, it has been brought to our notice that assessee has running account with the sister concern. It has a debit balance at Rs. 30.60 crore as on 31st March, 2005 in the account of Adani Agro Pvt. Ltd and it has not paid any interest on this debit balance. Taking into consideration these facts, we are of the view that assesse has demonstrated on the record that it has sufficient interest free funds which can take care of the interest free advances. Learned counsel for the assessee while buttressing his contention placed reliance up....
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....he profits of the year and not out of the overdraft account for the running of the business. It noted that to raise the presumption, there was sufficient material and the assessee had urged the contention before the High Court. The principle therefore would be that if there are funds available both interest-free and overdraft and/or loans taken, then a presumption would arise that investments would be out of the interest-free fund generated or available with the company, if the interest-free funds were sufficient to meet the investments. 7. This approach seems to have been approved by Hon'ble jurisdictional High Court in the case of CIT Vs Raguvir Synthetics Ltd (judgment dated 5.12.2011 in Tax Appeal No. 829 of 2007 - unreported) wherein Their Lordships have, inter alia, observed as follows: As can be noted from the order of the Tribunal, the Assessing Officer disallowed the interest solely on the ground that the assessee had given interest free loans to the associate concerns, viz., R.R.Family Trust and Sagar Texile Mills and this disallowance, in appeal the CIT (Appeals) deleted by holding that the amount advanced to both R.R.Family Trust and Sagar Textiles Mils ....