2018 (7) TMI 1721

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....nt availability of interest to free funds to make the interest-free advances and, therefore, interest payments on borrowals could not have been proportionately disallowed. 2. That the Ld. CIT(A) has added in law and in facts in not appreciating that even otherwise, the interest-free advance S/investments were made to protect the business interests of the assessee and, therefore, no proportionate disallowance of interest expense was called for. 3. That it the Ld. CIT(A) has added in law and on facts in disallowing the claim of depreciation for an amount of Rs. 50, 50, 000/-. 2. Briefly stated facts of the case are that the assessee is a company engaged in the business of Advertising, PR activities, Outdoor Media and trading of helicopte....

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....but it has claimed depreciation at 10% against the composite value of the land and building. On such premise, Ld. AO disallowed a sum of Rs. 50,50,000/- attributable to the value of the land. 5. Aggrieved by the assessment order because of the additions made therein, assessee preferred an appeal before the Ld. CIT(A). Ld. CIT(A) by way of impugned order deleted the addition of Rs. 16,621/- added on account of the disallowance by invoking the provisions under section 14-A of the Act read with rule 8-D of the Income Tax Rules, 1962. 6. Ld. CIT(A), however, held that the borrowed funds and own funds of the assessee could have reasonably be deployed towards making investments in flats/plots etc. in the ratio of 5.30:10.71, the assessee deploy....

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....of the cast of the asset into land under building component and to disallow the deposition claimed in proportion to the land component is not warranted. 9. Insofar as the disallowance of the proportionate interest is concerned, the contentions advanced on behalf of the assessee are twofold. Firstly, that the assessee had sufficient availability of interest-free funds to make the interest-free advances and, therefore, interest payments on borrowals could not have been proportionately disallowed. Secondly, it is argued that even otherwise, the interest-free advances/investments were made to protect the business interests of the assessee and, therefore, no proportionate disallowance of interest expense was called for. 10. It is brought to ou....

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....e assessee company could in any case, utilise those funds forgiving advance to its Directors. 12. These decisions of the Hon'ble Bombay High Court and the Hon'ble Apex Court are directly applicable to the facts of the case on hand on all fours and in so far as the revenue does not disprove the contention of the assessee that they had interest free funds in their hands over and above the loans are advances given to the Directors as on such date, inasmuch as such interest-free funds are sufficient to advance such loans to the Directors, the presumption is that the loans would be out of the interest-free funds available with the assessee. 13. Further the impugned order reveals that the business expediency was also pleaded before the authorit....