TaxTMI 
TaxTMI 
2015 (9) TMI 70
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....ng the detailed submissions made by the appellant company on disallowance of interest u/s.36(i)(iii) including the fund flow. 2. The Learned CIT(Appeals) erred in holding that the decision of S.A.Builders Limited Vs. CIT 288 ITR 001 is not applicable to the case of the appellant company. 3. The Learned CIT(Appeals) erred in holding that interest u/s.36(i)(iii) was disallowable even in case where an amount have been paid to the associate concerns in the preceding year and no disallowance was made in preceding years. 4. The Learned CIT(Appeals) erred in holding that the disallowance u/s.36(i)(iii) can be made even in case where the advances have been given to sister concern out of current account with Bank on which no interest was paid for the company. 5. The Learned CIT(Appeals) erred in confirming disallowance of Rs. 66,44,817/- u/s.36(i)(iii) of the Act. 6. The Learned CIT(Appeals) also confirming the adhoc disallowance of Rs. 312635/- out of various expenses. 7. The appellant company craves leave to add, alter or amend any of the grounds mentioned above. 2.1. Briefly stated facts are that the case of the assessee was picked up for scrutiny assessment and the a....
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.... that borrowings have been reduced from the earlier years. He further submitted that before ld.CIT(A), a fund flow statement was given, but the ld.CIT(A) has not considered the fund flow statement. He submitted that under these facts, the action of the authorities below deserves to be set aside. He further placed reliance on the judgement of the Hon'ble Supreme Court rendered in the case of S.A.Builders Ltd. vs. CIT(Appeals) & Anr. reported at (2007) 288 ITR 01 (SC). The ld.counsel for the assessee also placed reliance on the judgement of the Hon'ble Mumbai High Court rendered in the case of CIT vs. Reliance Utilities and Power Limited reported at (2009) 313 ITR 340(Mum) and also relied on the judgement of Hon'ble High Court of Gujarat rendered in the case of CIT vs. Raghuvir Synthetics Ltd. reported at (2013) 354 ITR 222(Guj.). The ld.counsel for the assessee also placed reliance on the judgement of Hon'ble Karnataka High Court rendered in the case of CIT vs. Sridev Enterprises reported at (1991) 192 ITR 165 (Kar.). The ld.counsel for the assessee further placed reliance on the decision of the Coordinate Bench (ITAT "C" Bench Ahmedabad) rendered in the case of M/s.Kinariwala Autom....
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....en for the business purposes and thirdly, the advances relate to earlier years and in earlier years, the Revenue has not made disallowance of interest expenditure. In support of the submission, the assessee had relied upon the judgement of the Hon'ble High Court of Karnataka rendered in the case of CIT vs. Sridev Enterprises [supra]. In that case, it was held by the Hon'ble High Court that it would not be equitable to permit the Revenue to take a different stand now in respect of the amounts which were the subject-matter of previous year assessments. The reliance is also placed on the judgement of Hon'ble Jurisdictional High Court rendered in the case of CIT vs. Raghuvir Synthetics Ltd.(supra), wherein the Hon'ble Jurisdictional High Court held as under:- "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. We may refer to the judgment of the apex court at this stage given in case of S.....
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....ed for earning profits." Accordingly, the question is answered in favour of the assessee by the Apex Court. In this Tax Appeal it is to be specified here that considering the material on record and keeping in view substantial interest free funds and business expediency that the CIT(A) and Tribunal held the issue in favour of assessee. There is absolutely no perversity in such findings. On the contrary, they are conforming to the well laid down guiding principle on the subject. In the premise, question of law needs to be answered in favour of assessee and against the Revenue. Tax Appeal is dismissed accordingly and stands disposed of." 6.1. The Hon'ble Jurisdictional High Court has also taken note of the ratio laid down by the Hon'ble Apex Court in the case of S.A.Builders vs. CIT(supra) and the Hon'ble High Court of Delhi in the case of CIT vs. Dalmia Cement (Bharat) Ltd. (2002) 254 ITR 377(Delhi). During the course of hearing the ld.counsel for the assessee submitted the fact that the assessee was having sufficient interest-free funds at the time of advances made to its sister-concerns can be verified from its records. The ld.Sr.DR has no objection to this proposal. Theref....
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.... 6. The Learned CIT(Appeals) also confirming the adhoc disallowance of Rs. 261500/- out of various expenses. 7. The appellant company craves leave to add, alter or amend any of the grounds mentioned above. 7.1. The facts and grounds are identical to the facts of AY 2004-05 in assessee's own case(supra). The respective representatives of the parties have adopted the arguments that were in the AY 2004-05. Therefore, taking a consistent view, ground Nos.1 to 5 are allowed for statistical purposes. The AO is directed to decide the issue in the light of the direction given in para-6.1 of this order. 7.2. Ground No.6 is dismissed as not pressed by the ld.counsel for the assessee. Ground No.7 is general in nature. As a result, assessee's appeal in ITA No.1102/Ahd/2011 for AY 2005-06 is partly allowed for statistical purposes. 8. Lastly, we take up the assessee's appeal in ITA No.1354/Ahd/2011 for AY 2006-07, wherein following grounds have been raised:- 1. The Learned CIT(Appeals) erred in disregarding the submissions made by the appellant company on disallowance of interest u/s.36(i)(iii) including the fund flow statement. 2. The Learned CIT(Appeals) erred in holding that th....
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....taking the aforesaid amounts from sister-concerns. Such ledger accounts were not filed by the A.R. The nature of transactions was not explained before the Assessing Officer also. On the other hand, amount of Rs. 80,00,000/- was written back to the P&L account for the year of the appellant. On these facts, appellant's contention that the said amount was capital receipt in nature cannot be accepted. Further, in the case of T.V.Sundaram Iyenger & Sons Ltd. (1996) 222 ITR 344 (SC), Supreme Court held that if an amount is received in the course of trading transaction, even though it is not taxable in the year of receipt as being of revenue character, the amount changes its character, when the amount becomes assessee's own money. The Court held that deposits received from customers in the course of business, unclaimed balances transferred by assessee to his P&L account were its trading receipt, even though deposits were initially treated as capital receipt. Amounts in question of Rs. 80,00,000/- were written back to P&L account by the appellant itself as income and the nature of amounts written back has not been explained with evidence. In this situation, Assessing Officer's action in ta....