2016 (7) TMI 824

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.... :- "1. The Learned Commissioner of Income Tax, (Appeals) -17, New Delhi ['CIT (A)') has erred both in law and on facts in upholding the order of Learned Assistant Commissioner of Income Tax, Circle 51 (1), New Delhi('ACIT') disallowing interest of Rs. 9,66,247/- under Section 36(1)(iii) of the Income Tax Act, 1961 ('Act'). 2. Without prejudice to our other contentions, the Learned CIT(A), has erred both in law and on facts in failing to grant proportionate relief on disallowance of interest of Rs. 9,66,247/- under Section 36(1)(iii) of the Act to the extent of availability of own interest free funds with the assessee. 3. Without prejudice to our other contentions, the learned CIT (A) has erred, both in law on f....

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....ceived from M/s. R.J. Fabrics. Assessing Officer noticed from the profit & loss account of the assessee for AY 2012-13 that it has claimed expenditure on account of payment of interest on loans amounting to Rs. 44,82,727/- @ 12% or more than 12% per annum and as such, interest bearing funds of the assessee were advanced to persons on which notional interest income has accrued to the assessee. AO observed that advances given by the assessee is squarely covered u/s 36(1)(iii) of the Act. Assessee has also not claimed that the interest free advances given to aforesaid persons for commercial expediency. AO also noticed that opening balance in case of Shri Manoj Kumar Jain as on 01.04.2011 is Rs. 11,55,000/- (Dr.) and later on throughout the fin....

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....al by challenging the impugned order passed by the ld. CIT (A) by way of filing the present appeal. 6. We have heard the ld. Departmental Representative for the revenue to the appeal, gone through the documents relied upon and orders passed by the revenue authorities below in the light of the facts and circumstances of the case. GROUNDS NO.1 & 2 7. The ld. AR challenging the impugned order contended that the assessee company has transferred certain funds to its subsidiary company without any interest out of the loan taken at interest for business expediency and relied upon the judgments cited as S.A. Builders vs. CIT (A), Chandigarh [2007] 158 Taxman 74 (SC), CIT vs. Reliance Utilities & Power Ltd. [2009] 178 Taxman 135 (Bombay) an....

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....tion of interest component under section 36(1)(iii) of the Act." 11. During the course of argument, the ld. AR only emphasized on the ratio of the judgments cited as S.A. Builders vs. CIT (A), Chandigarh , CIT vs. Reliance Utilities & Power Ltd. and CIT vs. Jugal Kishore Dangayach (supra) that "when the assessee advanced part of the funds borrowed by it from the bank to its sister concern as interest free loan for business expediency, interest has to be allowed u/s 36(1)(iii) of the Act, but failed to brought on record even an iota of material to prove that the said loan was lent to M/s. RJ Fabrics and Shri Manoj Kumar Jain for commercial expediency." Moreover, assessee has failed to explain the rationale behind maintaining two accounts ....