2016 (1) TMI 857

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....mmissioner (Appeals) erred in confirming disallowance of Rs. 38,31,920/- and Rs. 17,11,417 under section 36(1)(iii) of the Act without appreciating that the appellant was having sufficient interest free funds and, therefore, there was no interest incurred for the advances made to its sister concern. 2. On the facts and circumstances of the case, the learned Commissioner of Income Tax (Appeals) failed to appreciate that the advances were given towards the purchase of hoods and therefore were business advances required by commercial expediency and therefore could not have been disallowed U/s.36(1)(iii) of the I.T. Act. 3. The Assessing Officer erred in disallowing Rs. 2,76,251 under section 14A of the Act without appreciating that there....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....nce to the directions of the Tribunal, the Assessing Officer took up the proceedings again. As far as interest expenditure is concerned, the Assessing Officer noticed that the assessee has given interest free loan to its sister concern Paks Veterinary Drugs Co. Ltd. amounting to Rs. 8,16,41,865. He, therefore, called upon the assessee to prove its claim that such interest free loan was advanced out of surplus interest free funds. He also called upon the assessee to prove the commercial expediency for advancing such loan. As observed by the Assessing Officer, though, the assessee claimed that it had sufficient surplus funds amounting to Rs. 39, crore out of which the interest free loan was given to the sister concern, however, he alleged tha....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

.... Ltd., [2009] 313 ITR 340 (Bom.) and the decision of Hon'ble Delhi High Court in CIT v/s Bharti Tele Venture Ltd., [2013] 313 ITR 502 (Del.). The learned counsel referring to the audited Balance Sheet of the company, a copy of which is at Page-1 of the paper book submitted that assessee had surplus funds of Rs. 39 crores on account of capital and reserve and surplus. That besides, the assessee had available with him an amount of Rs. 867.98 lakh towards advance against orders and sundry loans of Rs. 364.63 lakh. Therefore, it has substantial interest free fund available to make the advance to sister concern. He submitted as far as loan obtained from banks are concerned, they are for specific purpose, hence, could not have been diverted f....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....han enough to take care of the interest free advances to the sister concern. Moreover, as held by the Hon'ble Jurisdictional High Court in Reliance Utilities and Power Ltd. (supra) and the Hon'ble Delhi High Court in Bharti Tele Venture Ltd., (supra) when mixed funds viz. both interest bearing and non-interest bearing are available with assessee, presumption would be interest free loan has been given out of non-interest bearing funds available with the assessee. Therefore, keeping in view the aforesaid principle laid down by the Courts, when the assessee had sufficient interest free funds available with it, the plea of the assessee that it has advanced the interest free loan to the sister concern out of such non-interest bearing fun....