TaxTMI 
TaxTMI 
2017 (4) TMI 1370
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....tion of interest amounting to Rs. 7,08,87,603/-. On perusal of the details, it was observed by the AO that a sum of Rs. 24,19,00,304/- was advanced by the assessee to its subsidiaries as interest free loan. Apart from that, a sum of Rs. 2,84,59,890/- was also given as share application money to subsidiaries. On being called upon to explain as to why the disallowance of interest should not be made for giving such amounts as loan to subsidiary companies without interest, the assessee tendered an explanation, whose relevant part have been extracted in the assessment order. Not convinced with the same, the Assessing Officer made pro rata disallowance of interest amounting to Rs. 3,07,63,223/-. The ld. CIT(A) deleted the addition, against which ....
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....nterest should be allowed so long as the capital borrowed, on which such interest is paid, is used for the purpose of business or profession. If, however, an assessee is having its own interest free surplus funds and such funds are utilised as interest free advances even for a non-business purpose, there cannot be any disallowance of interest paid on interest bearing loans. The Hon'ble Bombay High Court in CIT vs. Reliance Utilities and Power Ltd. (2001) 313 ITR 340 (Bom), has held that where an assessee possessed sufficient interest free funds of its own which were generated in the course of relevant financial year, apart from substantial shareholders' funds, presumption stands established that the investments in sister concerns were m....
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.... interest was rightly called for. The Tribunal, on appreciation of facts, recorded a finding that the assessee had sufficient funds of its own for making investment without using the interest bearing funds. Accordingly, the order of CIT(A) was upheld. When the matter came up before the Hon'ble High Court, it was contended by the Department that the shareholders' funds stood utilized in the purchase of fixed assets and hence could not be construed as available for investment in sister concern. Repelling this contention, the Hon'ble High Court observed that : "In our opinion, the very basis on which the Revenue had sought to contend or argue their case that the shareholders' fund to the tune of over Rs. 172 crore was utilized for the purpose ....
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....dictional High Court in CIT vs. Tin Box Company (2003) 260 ITR 637 (Del), holding that when the capital and interest free unsecured loan with the assessee far exceeded the interest free loan advanced to the sister concern, disallowance of part of interest out of total interest paid by the assessee to the bank was not justified. 6. Adverting to the facts of the instant case, we find that the assessee has its own share capital and reserves amounting to Rs. 188.89 crore. As against that, only sum of Rs. 24.19 crore was given as interest free loan to subsidiary companies. The amount of share capital and reserves is many times higher than the amount of interest free loan given to subsidiary companies. Guided by the ratio laid down by the Hon....
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....er alia, on the assets acquired from Delhi Society. The Assessing Officer opined that since full deduction of the cost of these assets was allowed as application of income u/s 11 of the Act, the written down value of this asset in the hands of the society was only a notional book value. The Assessing Officer canvassed a view that by taking over of the assets and liabilities of the Society on the book value of these assets, an artificial enhanced value of these assets was shown by the assessee company on which the depreciation could not be allowed. The ld. CIT(A) overturned the assessment order on this point. The Revenue is in appeal on this issue. 9. We have heard the rival submissions and perused the relevant material on record. The view ....
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....ub-section (6) has been inserted to section 11 w.e.f. 01.04.2015. The Hon'ble Delhi High Court in DIT (E) vs. Indraprastha Cancer Society (2015) 53 taxmann.com 463 (Del), has held that insertion of sub- section (6) to section 11 is prospective and, hence, no disallowance on account of depreciation can be made in years prior to the assessment year 2015-16. 12. It is noticed that the Hon'ble Delhi High Court in an earlier case in DIT (Exemption) vs. Charanjiv Charitable Trust (2014) 267 CTR 305 (Del) vide its judgment dated 18th March, 2014 has held that depreciation is not allowable in respect of assets, cost of which was earlier allowed as deduction as application of income of trust. However, the Hon'ble Delhi High Court vide its later....