TaxTMI 
TaxTMI 
2017 (1) TMI 770
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....f ITO Ward 3(1) Indore [hereinafter referred to as the AO]. 2. The assessee has taken as many as four grounds of appeal. However, the effective ground relates to maintaining the disallowance of Rs. 30,80,000/- out of interest payment on the ground that the borrowed funds have been utilized for non-business purposes. 3. Briefly stated, the facts of the case are that the AO noticed that the assessee company has shown an amount of Rs. 2,20,96,398/- under the head "advances recoverable in cash or in kind or for value to be received" in Schedule I in the balance sheet. The assessee was, therefore, specifically asked about the nature of these advances and details of interest or any other value received during the year. The AO examined the r....
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....ppeal before the CIT(A). The ld. CIT(A) noted that the first explanation of the assessee that such advance was for the business purpose does not bear out on facts. No proof ,of any purchase or sale amongst assessee and its two concerns have furnished but hence no business relation was established between the assessee and two concerns to whom interest free advance was given. Also since extending interest free loan to sister concern does not come under the business objectives of assessee and it definitely do not help the expansion of business of the assessee. The ld. CIT(A) has also relied in the case of Harrisons Malayalam Limited, (2012 25 Taxman.com 546 (Kerala), wherein it was held that interest free loan if not been given to subsidiary c....
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....gh Arora, (2012) 53 SOT 124 (Hyd) 4) Rajendra Prasad Subhash Chand, (2012) 344 ITR 533 (Raj) 5) Lachhiram Puranmal, (2001) 119 Taxman 1 (MP). 6) Abhishek Ind. Limited, (2006) 286 ITR 1 (P&H). 5. Being aggrieved, the assessee has filed appeal before the Tribunal. 6. The Ld. Counsel for the assessee submitted that the advances were given to two concerns in the earlier years, who were manufacturing the pharmaceuticals and to expand the business of the assessee. These advances were given for the manufacturing Units in the notified area. The advance to M/s. Cecil Pharmaceuticals was to the tune of Rs. 1.40 crores as on 31.03.2009, wherein the assessee held 50% shares. The advance to M/s. Pro Laboratories Private ....
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....ed at Rs. 39 lakhs both being sister concerns. We further note that the assessee has un-secured loan amounting to Rs. 5.1 crores as at the end of the previous year relevant to assessment year under consideration. The assessee has paid interest on bank charges at Rs. 69.29 lakhs. We further find that the interest free advances given to sister concern have no business link with the assessee company. The claim of the ld. Authorized Representative of the assessee that the assessee had capital reserves to the tune of Rs. 6.3 crores, hence, non-interest bearing loan, were deemed to have been utilized from the said funds, is also not found acceptable on the ground that the assessee company took a loan for the first time under C.C. account of Rs. 2....