TaxTMI 
TaxTMI 
2011 (10) TMI 698
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.... provisions of section 14A. 3. Briefly stated, assessee invested an amount of ₹ 6.80 crores upto A.Y. 2004-05 and ₹ 8 crores by A.Y. 2006-07 in the joint venture company with M/s. Taiyo Kagaku Co. Ltd., Japan. The joint venture company is engaged in the business of manufacturing of hydrocolloids, etc. and purchases raw material from assessee company. Therefore assessee's contention is that the amount invested in M/s. Taiyo Kagaku Co. Ltd. in various assessment years is for the purpose of business and as such the principles established by the Hon'ble Supreme Court in the case of CIT vs. S.A. Builders Ltd. 288 ITR 1 would apply to the facts of the case. Further it was submitted that assessee has its own funds for investing in....
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....ng, terms loans and cash credit for working capital requirements and none of these amounts were diverted for investment in joint venture company. It was further submitted that the original investment was made in A.Y. 2002-03 to some extent and interest claim in that year was fully allowed. Not only that in A.Y. 2005-06 the interest claim was also allowed consequent to the order of the CIT(A), which was accepted and not contested. It was the submission that the amounts were invested in joint venture company which resulted in business to assessee company. It was further submitted that M/s. Taiyo Lucid Pvt. Ltd. procures its entire raw material from the assessee company. The total sales made by the assessee company to M/s. Taiyo Lucid Pvt. Ltd....
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....ing credit, bill discounting in the course of its business, the question of disallowance under section 36(1)(iii) does not arise unless it is established that the borrowed funds are diverted for investment in subsidiary companies. This aspect was not examined by the A.O. at all. Amounts cannot be disallowed on proportionate basis unless the facts are examined. It is also one of the contentions that the investments in subsidiary company is for the purpose of business. The Hon'ble Bombay High Court in the case of CIT vs. Reliance Utilities and Power Ltd. 313 ITR 340 held that if there are funds available both interest free and over draft then a presumption would arise that the investments would be out of interest free funds generated or a....