2017 (3) TMI 1171

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....t 'the Act'). 2. Brief facts of the case are that the assessee company filed its return of income for the relevant assessment year declaring the loss of Rs. 1,75,537/- under the regular provisions of the Act and loss of Rs. 6,71,20,385/- u/s 115JB of the Act. The return was processed u/s 143(1) of the Act and assessment order was accordingly passed u/s 143(3)(ii) of the Act after making inter-alia addition of Rs. 6,63,78,465/- on account of disallowance of interest u/s 36(1)(iii) of the Act. 3. Feeling aggrieved by the assessment order the assessee carried the matter before the Ld. CIT(A) in first appeal. The Ld. CIT(A) after hearing the assessee confirmed the aforesaid addition. Accordingly, the A.O initiated proceedings u/s 271(1)(c....

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....essee submitted that the addition in question has been deleted by the ITAT, Mumbai in Quantum appeal ITA No. 8382/M/2011 for Asst. Year 2008-09 vide order dated 03/02/2016. Since the addition has been deleted the penalty order confirmed by the CIT(A) does not survive. 5. The Ld. DR did not dispute the fact that the ITAT has deleted the addition in quantum appeal. 6. We have heard the rival submissions and perused the material placed on record, including the order passed by the co-ordinate Bench in quantum appeal. We notice that the disallowance of interest of Rs. 6,63,78,465/- made u/s 36(1)(iii) of the Act on account of finance provided by way of share application/loan to its subsidiaries/sister concerns out of commercial expediency ....

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....s CIT) 118 ITR 200 (SC), or for paying tax liability (Kishanchand Chelaram vs CIT) 114 ITR 654 (Bom.), or are given over to partners for their personal use, the claim of the interest is not allowable. But for such disallowance, a finding of fact, based on relevant material, is necessary as was held in CIT vs R.K. Metal Works 112 ITR 445 (Punjab). In Veecumsess vs CIT (1996) 220 ITR 185, 190 (SC), their lordship of the Apex Court have taken a view that when the assessee carries on more than one business and one business is transferred or closed and if loan was taken earlier for the business, which subsequently closed, but if the management is common, the interest paid on that loan cannot be denied, though one of the lines of the business ....

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....he investment is made in the subsidiary company in the form of loan, advances or share application money. If the amount has been invested for the purposes of business of the assessee, then no disallowance can be made in the hands of the assessee. The Hon'ble Apex Court in Hero Cycles Pvt. Ltd. vs CIT (2015) 379 ITR 347 (SC) vide latest order dated 05/11/2015 on the issue of interest on borrowed capital, wherein, advances were made to subsidiaries, pursuant to undertaking given to financial institutions by assessee to provide addition margin to subsidiary to meet working capital for meeting cash losses, it was held that the advances were out of business expediency, therefore, interest paid on borrowing not to be disallowed u/s 36(1)(iii) of ....