TaxTMI 
TaxTMI 
2015 (7) TMI 1102
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....) deleting the addition of Rs. 70,93,991/- on account of finance charges/interest on borrowed funds which the assessee could not prove with evidence at the time of assessment that the borrowed funds are wholly exclusively used for business purpose or diverted to give interest free advance to sister concern. 4. Brief facts of the case are that the assessee company claimed finance charges/interest of Rs. 70,93,991/- on borrowed funds. The Assessing Officer observed that the assessee company has given huge interest free advances to the sister concerns. According to the Assessing Officer, the assessee company has not proved whether the borrowed funds are wholly and exclusively used for business purpose or diverted to giving of interest free ad....
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....se of debentures and not for any other purpose by the assessee. Further no evidence was brought on record by the Revenue to show that the assessee has advanced interest bearing funds to its subsidiaries as interest free advance. In absence of such evidence being brought on record, we do not find any good and justifiable reason to interfere with the order of the Commissioner of Income Tax (Appeals) which is hereby confirmed and the ground of appeal of the Revenue is dismissed. 9. Ground No.3 of the appeal is directed against the order of Commissioner of Income Tax (Appeals) deleting the addition of Rs. 15,37,40,627/- made on account of interest free loans advanced to the sister concerns. 10. Brief facts of the case are that the Assessing O....
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....ely different than the one relied upon by the A.O. The appellant is a holding company and has major stakes in its subsidiaries. The sources of subsidiaries, income are not interest. The appellant company has its own reserves in excess* of 1000 crores. Giving loans to its subsidiaries is its business requirement. The appellant placed reliance on the decision of Hon. Bombay High Court in the case of CIT-7 Vs. Reliance Communications in Appeal No.3 155 of 2009 and delivered on 28.03.2012. In this case, the Hon. High Court of Bombay relied on the decision of Hon Supreme Court in the case of S.A. Builders in Civil Appeal Nos. 5811 & 5812 of 2006, reported in (007) 288 ITR 1 (SC). In the case of Reliance Communications, the Hon. High Court decide....
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....r the guarantees which those institutions were required to execute under the EPCG Scheme. The funds which were invested in the wholly owned subsidiary were again for the purposes of the business of the assessee. There is evidently a significant interest of the assessee in the business of its subsidiary since both the assessee and the subsidiary are engaged in providing telecommunication services. Consequently, we are not inclined to interfere with the order of the Tribunal. There is a finding of fact that interest free funds borrowed are not utilized for the purposes of both the transactions. But quite apart from that, the finding is 4 Compact Oxford Reference Dictionary pages 11 and 436. VBC 15/15 itxa 3155.09-28.3 that the funds were depl....
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....d has held that where interest free borrowed funds are advanced as interest free loans to its subsidiaries for business expediency, the interest cannot be disallowed. Commissioner of Income Tax (Appeals) held that in the case of the assessee, business expediency exists and interest free own funds have been advanced. No interest expenses have been claimed by the assessee on this account. Therefore, he deleted the notional interest of Rs. 15,37,40,627/-. The Hon'ble Gauhati High Court in the case of Highways Construction Co. Pvt. Ltd. Vs. CIT reported in 199 ITR 702 (Gau.) held as under:- "ii) That there was no finding of fact to the effect that actually the loan had been granted to the managing director or any other person on interest, or ....