TaxTMI 
TaxTMI 
2017 (3) TMI 1254
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....tical. However, the facts are being extracted from ITA No.219 of 2013. 2. ITA No.219 of 2013 has been preferred by the appellant-revenue under section 260A of the Income Tax Act, 1961 (in short, "the Act") against the order dated 19.3.2013, Annexure A.3 passed by the Income Tax Appellate Tribunal, Amritsar Bench, Amritsar (in short, "the Tribunal") in ITA No.274/(Asr)/2012, for the assessment year 2008-09, claiming following substantial questions of law:- "i) Whether on the facts of the case, the ITAT has erred in holding that no interest payment is disallowable under section 36(1)(iii) on interest free loan given to sister concern ignoring the facts that the assessee has a mixed fund wherein both its internal generation and borrowed ....
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....end of the relevant year. These advances remained outstanding in the name of the subsidiaries throughout the year and there was no business transaction of any nature with the subsidiaries involved against the advance given to these concerns. The assessee submitted that the loans were extended out of surplus and interest free funds. The Assessing officer not satisfied with the reply held that there was no commercial expediency in advancing interest free loan to the sister concerns. Thus, the Assessing officer by applying the rate of 7.5% for making disallowances under section 36(1)(iii) of the Act on the same rate at which the assessee had charged interest from its sister concerns and hence disallowed Rs. 1,45,91,805/-. With regard to the ex....
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....sessee company had given interest free loans and advances amounting to Rs. 2297.83 lacs upto the end of the relevant year including Rs. 704 lacs during the relevant year to its three subsidiary companies. The Assessing officer did not make any disallowance in respect of expenditure incurred on borrowed funds under section 36(1)(iii) of the Act in relation to interest free loans and advances given to the said three subsidiary companies in the earlier years. After perusing the cash flow statement of the assessee company for the assessment year in question, the Tribunal observed that the assessee company had received substantial proceeds from preferential issue of shares capital amounting to Rs. 99999.98 lacs. It had also received dividend inc....
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....hes that interest free funds available with the assessee were sufficient for the aforesaid investments and interest free advances which has not been disputed by the AO or the learned CIT(A). We have already held that the assessee company for the assessment years 2001-02 to 2006-07 in our order dated 8.3.2013 that in case of mixed pool funds, presumption should be drawn in favour of the assessee regarding utilization of interest free funds or borrowed funds in a manner which is most favourable to the assessee company. In view of the same, it is to be presumed that interest free funds available with the assessee company during the impugned year were utilized for giving interest free advances of Rs. 7.04 crores given to the subsidiary companie....
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....'ble Karnataka High Court in the case of CIT vs. Sridev Enterprises reported in 192 ITR 165 and the decision of the Hon'ble Delhi High Court in the case of CIT vs. Givo Limited in ITA No.941/2010. In that view of the matter, having held that the borrowed funds had no nexus with interest free advances given to the subsidiary companies in earlier years (on account of no disallowance having been made in the assessment of earlier years) and during the relevant assessment year (on account of positive overall cash flow statement of the relevant year), it is not necessary to go into the issue whether interest free advances given by the assessee company to the subsidiary companies was on account of commercial expediency or not. We are not in agreem....