TaxTMI 
TaxTMI 
2018 (5) TMI 434
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....is order dated 27.03.2015 for assessment year 2012-13. The grounds raised by the Revenue per its appeal are as under:- "1. That on the facts and in the circumstances of the case, the Ld. CIT(A) has erred by deleting disallowance of interest paid of Rs. 38,65,837/- made by the AO being not incidental to the business activity of the assessee. The Ld. CIT(A) has not appreciated the clear findings given by the AO in para 2.2 at page-2 of the assessment order. 2. Whether in the facts and circumstances of the case, the interest on borrowed funds is to be disallowed as not meant for business purpose when funds have been diverted as investment in shares of group companies. Reliance is placed on the following judgment: ....
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....count. The AO was of the view that the borrowed fund for Rs.2,57,72,250/- has not been utilized for the business of assessee. Therefore, the amount of interest expense claimed by the assessee corresponding to the investment made in its sister concern was not eligible for deduction u/s. 36(1)(iii) of the Act. Therefore, the AO disallowed the same and added to the total income of assessee. 4. Aggrieved, assessee preferred an appeal before Ld. CIT(A). The assessee before Ld. CIT(A) submitted that all the investments were made in sister concern for the purpose of holding the controlling interest in those companies. Therefore, the investments are in the nature of strategic investment and therefore no disallowance can be made out of interest e....
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.... in the sister concern. Ld. CIT(A) after considering the submission of assessee deleted the addition made by AO by observing as under:- "3.2 The submission of the assessee has been considered in the light of the facts of the case and the ratio of the case laws referred to. The assessee is a dealer of Hyundai Motors. The balance sheet of the assessee company reflects brought forward investments in the capital of four sister / group companies aggregating to Rs. 2,57,72,250/-. No fresh investment was made during the year in question. The AO, however, held that the assessee had diverted interest bearing funds towards investments in the shares of the sister / related companies and disallowed proportionate interest @ 15% even though ther....
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....d perused the materials available on record. In the instant case, the AO has alleged that assessee has diverted its interest bearing fund by giving non-interest bearing advances to its sister concerns. Therefore, the AO made the disallowance of interest expenditure as claimed by assessee corresponding to the interest free advance made by it to its sister concerns. However, the view taken by the AO was reversed by Ld. CIT(A) by observing that own fund of assessee exceeds the amount invested in its sister concerns. It is undisputed fact that the own fund of assessee exceeds the amount of investment made in sister concerns as discussed in the order of ld. CIT-A. Therefore, the presumption can be inferred that the own fund has been used in maki....