AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2016 (1) TMI 854
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.... "1. Whether in the facts and circumstances of the case, the Ld. CIT (A) erred in deleting the disallowance of interest expenses amounting to Rs. 24,05,333/- by holding that the assessee was having adequate interest free funds at its disposal without considering the fact that had interest free funds would been available with the assessee then the assessee would not applied for debt restricting with the financial institutions ? 2. Whether the facts and circumstances of the case and in law, the learned CIT (A) erred in deleting the disallowance of interest expenses amounting to Rs. 24,05,333/- by relying upon the judgment of Hon'ble Delhi High Court in Bharti Televentures 331 ITR 502 even the assessee failed to prove its commercial expend....
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....ubmitted that CIT (A) has erred in confirming the disallowance of Rs. 5,20,783/- only and deleting the disallowance of Rs. 24,05,333/-. He further submitted that the amount of advances given to Netcradel India Pvt. Ltd. and Saffron Range IT Solution Pvt. Ltd. were for non-business purposes and therefore interest @ 12.5% computed on this advances should be disallowance. 05. Ld. AR before us submitted that CIT(A) has rightly deleted in the interest disallowances for the following reasons : a) The advances the amount outstanding with respect to Netcradel India Pvt. Ltd. is for the purpose of the business and therefore no interest disallowance can be imputed for the same. b) Regarding the advance to Saffron Range IT Solution Pvt. Ltd. no a....
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....found any nexus of the interest bearing funds diverted to non-interest bearing advances. When the matter was before CIT(A), CIT(A) has examined the issue on each transaction wise and found that amount of interest of Rs. 5,20,783/- out of total interest expenditure of Rs. 2,92,611 is not for the purpose of the business. This disallowance confirmed by the CIT is based on assessee conceding that amount of loan of Rs. 10 lakhs on 07.03.2008 and Rs. 6 lakhs on 31.03.2008 given to M/s Netcradel India Pvt. Ltd. is out of borrowed funds taken from HSBC and IDBI. Similarly an interest amount of Rs. 1,56,916 pertaining to saffron IT Solutions Private Limited as there was a nexus of the fund as loan from HSBC. For the balance amount CIT (A) has delete....
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....en enjoying overdraft facilities from the State Bank of India, Chandni Chowk, Delhi, since long time past against the hypothecation of goods, etc., and pledge of land, building, plant and machinery and the interest paid on such overdraft account has been allowed by the Revenue year after year. Even in the assessment year 1982-83, no such disallowance had been made when admittedly substantial interest-free funds had been advanced to the sister concern. The appellant has not paid any interest to any other party either in the past or during the year under appeal. Further in the years under appeal, either the fresh advances to PNSMPL have been quite insignificant or there have been absolutely no fresh advances made by the appellant, rather duri....
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....se (supra) had the occasion to consider the decision of the Calcutta High Court in Woolcombers of India Ltd.'s case (supra) where a similar issue had arisen. Before the Supreme Court it was argued that it should have been presumed that in essence and true character the taxes were paid out of the profits of the relevant year and not out of the overdraft account for the running of the business and in these circumstances the appellant was entitled to claim the deductions. The Supreme Court noted that the argument had considerable force, but considering the fact that the contention had not been advanced earlier it did not require to be answered. It then noted that in Woolcombers of India Ltd.'s case (supra) the Calcutta High Court had come to t....
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....see as at 31.3.2008 13,49,73,868/- From above analysis it is apparent that assessee has huge interest free fund available with it and therefore the disallowance u/s 36(1) (iii) on account of advances given to other parties from of interest cannot be disallowed. Therefore we confirm the order of CIT (A) in deleting the disallowance of Rs. 24, 05,333/- on account of amounts advanced to sister concerns without charging interest. Hence appeal of the revenue is dismissed. 07. In the result appeal of the revenue is dismissed. ITA NO 6260/Del/2013 A Y 2010-11 (Assessee's Appeal) 08. This appeal is preferred by assessee against the disallowance of club membership fees of Rs. 1,32,092/- holding that these are of personal nature and ag....