2012 (7) TMI 931

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....t the average amount of loan for the year ending 31.3.2006 was at Rs. 7,41,76,000/-. Considering the total amount of interest paid by the assessee to bank on the overall interest bearing funds, the AO computed proportionate disallowance on interest at Rs. 45,78,389/- as relatable to such interest free loan advanced by the assessee to its sister concerns amounting to Rs. 7.41 crore. The Ld. CIT (A) deleted the addition by relying on the judgment in the case of M/s. S.A. Builders vs. CIT (2007) 288 ITR 1 (SC). 3. After considering the rival submissions and perusing the relevant material on record, we find that the ratio decidendi of this judgment is that interest on borrowed loans advanced to a sister concern without interest is allowable as....

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.... loan is far short of interest free funds available with the assessee in the form of Shareholders' funds. The Hon'ble jurisdictional High Court in the case of CIT vs. Reliance Utilities and Power Limited (2009) 313 ITR 340 (Bom.) has held that if there are interest free funds available to an assessee sufficiently in excess of its investment and at the same time the assessee has also raised a loan, it can be presumed that the investments were from interest free funds available. In view of the fact that the interest free funds advanced by the assessee to its subsidiary company are much less than the interest free funds available with it in the shape of Share capital along with Reserve and surplus, in our considered opinion there can be no que....