TaxTMI 
TaxTMI 
2016 (11) TMI 950
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....ely. Since the common issue is involved in both the appeals and these were heard together, therefore, for the sake of convenience a common and consolidated order is being passed. 2. In I. T. A. No. 125(Asr)/2015 for the assessment year 2012-13, the assessee has raised the following grounds of appeal : "1. That the worthy Commissioner of Income-tax (Appeals) has erred in confirming the disallowance of proportionate interest amounting to Rs. 91,30,928 under section 36(1)(iii) on account of investment made in various sister concerns as share application money. 2. That the worthy Commissioner of Income-tax (Appeals) has failed to consider that the said advance was made for business expediency and the Commissioner of Income-....
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.... scrutiny. During the assessment proceedings, the Assessing Officer observed that the assessee had made substantial investment as share application money/advances and had not recovered any interest on such investments. The Assessing Officer held that such investments were for non-business purposes and, therefore, he disallowed bank interest amounting to Rs. 91,50,928 and Rs. 54,10,225 found debited in the profit and loss account in these two years. The disallowance was made under section 36(1)(iii) of the Act. The learned Commissioner of Income-tax (Appeals) also confirmed the action of the Assessing Officer by observing similar findings. The findings of the learned Commissioner of Income-tax (Appeals) in I. T. A. No. 125(Asr)/2015 as conta....
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....he appellant. In the circumstances, the judgment of the hon'ble Punjab and Haryana High Court in the case of CIT v. Abhishek Industries Ltd. [2006] 286 ITR 1 (P&H) is clearly applicable. It is also important to appreciate that similar disallowance made in the case of the appellant's sister concern, i.e., M/s. Bright Enterprises for the assessment year 2005-06 had been upheld by the hon'ble Income-tax Appellate Tribunal, Amritsar Bench as pointed out earlier. In the circumstances, the disallowance made is confirmed." 5. Aggrieved the assessee is in appeal before us. 6. The learned counsel for the assessee contended that the learned Commissioner of Income-tax (Appeals) has erred in confirming the disallowance of interest amo....
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....orised representative further submitted that the assessee was having sufficient own funds from where the investments were made and in this respect our attention was invited to (paper book page-1) where the charts showing interest-free fund as available with the firm as on March 31, 2012, as on March 31, 2010, were placed. The learned authorised representative further argued that since the sister concerns whom the assessee had advanced loans are in the same line of business activity, the Revenue could not disallow interest on borrowed capital on the ground that loan was advanced for non-business purposes, and reliance in this respect was placed on the case law of Industrial Feeders v. Asst. CIT, Chennai as reported in [2016] 68 taxmann.com 9....
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....he assessee amounting to Rs. 49,43,04,638, the assessee had advanced to Rs. 20,32,60,000, therefore, one fact is clear that in I. T. A. No. 196(ASR)/2015, there was sufficient non-interest borrowing funds out of which the assessee had advanced/ invested in the sister concerns. 10. Similarly, we find that for the assessment year 2012-13 the capital of the firm as per the balance-sheet placed at (paper book-page 3) was Rs. 13,21,61,500 and the interest-free current liabilities were to the tune of Rs. 91,37,20,514 making the total availability of interest-free funds to the tune of Rs. 104.58 crores. The assessee in this year had made investments in the group concerns as noted by the Assessing Officer to the tune of Rs. 53.76 crores. Therefo....
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....eld to be an expense on account of commercial expediency. A financial benefit of any nature derived by the subsidiary on account of the amounts advanced to it by the holding company would not merely indirectly but directly benefit its holding company. There would be a direct benefit on account of advance made by the assessee to its sister company, if it improved the financial health of the sister company and made it a viable enterprise. But it was not necessary that the advance results in a positive tangible benefit. Thus, the assessee was entitled to the deduction under section 136(1)(iii) of the Income-tax Act, 1961." 11. We further find that the hon'ble Supreme Court in the case of Hero Cycles Pvt. Ltd. v. CIT [2015] 379 ITR 347 (....