TaxTMI 
TaxTMI 
2016 (4) TMI 464
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....ing funds. The assessee pleaded to have invested only out of its interest free reserves for commercial expediency in order to look after its subsidiary interest. It sought to highlight its business interest and to have taken huge credits therefrom. The Assessing Officer quoted its failure in proving non-diversion of interest free funds in the impugned investments. This resulted in interest disallowance in question of Rs. 45,81,105/-. 3. The CIT(A) reverses Assessing Officer's findings. "5.3 I have carefully considered the submission of the Ld. Counsel as well as the finding of the Assessing Officer recorded in the assessment order. I have also considered the decisions relied upon by the Ld. Counsel. The Assessing Officer had not examined this issue in the proper perspective. The outcome of the decision in the case of S.A. Builders 288 ITR 1 (SC) is not at all applicable in the facts of this case. It was held by the Hon'ble Supreme Court in the case of S.A. Builders 288 ITR 1 (SC) that interest on borrowed funds cannot be disallowed if the assessee has advanced interest free loan to sister concern as a measure of commercial expediency. What is to be seen is "business purpo....
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....any. The interest payable on loan funds is allowable only if the same is paid/payable for the purposes of business. Therefore, if the investment is out of the loan funds, the proportionate interest is to be disallowed. However, if the appellant had sufficient interest free funds, the proportionate interest cannot be disallowed. The Hon'ble Bombay High Court in the case of Reliance Utilities & Power Ltd, 313 I.TR 340 (Bom.) had held that if sufficient interest free funds are .available to an assessee to meet its investments and at the same time, the assessee had raised a loan, it can be presumed that the investments were from the interest free funds available. The Assessing Officer had not examined this issue in the proper perspective. He had not tried to examine the issue properly though sufficient material was available on record. As per the audited accounts, the loan funds of Rs. 1711.90 lakhs were available as on 31.03.2006 which rose to Rs. 1971.32 lakhs as on 31.03.2007. Thus, there was an increase of Rs. 259.42 lakhs in the loan funds. I have gone through the details of loan raised by the assessee during the year under consideration. On examination, it was noticed that du....
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....hallenge read that the assessee's non-interest bearing funds are much more than the investments in question. The CIT(A) follows hon'ble Bombay high court decision in Reliance Utilities and Power ltd. 313 ITR 340 drawing presumption of utilization of non-interest bearing funds in such an eventuality. There can hardly be any dispute on the former aspect that similar investments involving commercial expediency based on facts do not invite any interest disallowance as held in SA Builders' case (supra). The Revenue does not refer to any evidence on record rebut both these factual findings. We find no reason to interfere with the CIT(A)'s order directing to delete the impugned interest disallowance of Rs. 45,81,105/- in question. This first substantive ground fails. 5. The Revenue's next substantive ground challenges the CIT(A)'s order deleting disallowance of claim for bogus/expired and damaged goods amounting to Rs. 44,07,572/-. Both parties are in agreement that tribunal's in assessment year 2006-07 ITA 2642/Ahd/2009 decides the very issue in assessee's favour as under:- "2. The assessee is engaged in the business of manufacturing and trading of drugs and pharmaceuticals. The A.....
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.... reference to any documentary evidence. Hence, their statements were not corroborated with documents/records before making any estimate. On the other hand, the Appellant had submitted before the Assessing Officer party-wise details of debit advice and claims of various parties. It was held by Hon'ble Allahabad High Court in case of CIT vs. Smt. Usha Tripathi (249 ITR 4) that the estimate of income without reference to seized documents could not be upheld. Moreover, estimate is not warranted without rejection of books of accounts u/s 145 if books of accounts were not properly maintained. In the present case, no nexus with the seized material was established for making the estimate nor books of accounts were rejected u/s 145. Keeping in view of above facts and circumstances of the case, the addition is hereby deleted. The second ground of appeal is allowed." 4. Now the Revenue is before us. The ld. CIT D.R. filed paper book which includes copy of statement of Shri Shri Kirit C. Patel, Shri Subhashchandra B. Bhavsar, copy of ledger account and confirmation of M/s. Saffroys and copy of settlement etc. Ld. CIT D.R. vehemently argued that the appellant himself admitted before the Sett....