2018 (12) TMI 1450

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....i) of the Act. 3. During the course of the scrutiny assessment proceedings the Assessing Officer noticed that the assessee had taken secured loans of Rs. 9.90 crores and Rs. 16.17 lacs on which it has paid interest amounting to Rs. 54.22 lacs. The Assessing Officer further found that the assessee has given interest free amounts to related parties as under :- (i) Suresh Goel : Rs. 7,42,30,474/- (ii) M/s Suresh Goel & Sons, HUF : Rs. 3,98,61,150/- 4. The Assessing Officer was of the opinion that the assessee has diverted interest bearing funds to its relatives on which no interest has been charged. The assessee was asked to explain why proportionate interest should not be disallowed. 5. In its reply the assessee explained that the amou....

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....at since interest of Rs. 43,21,601/- has already been recovered from Suresh Goel and Sons HUF in respect of the debit balance made available to Suresh Goel & Son s HUF, the said del it balance should be excluded for computing the withdrawals to compute the diversion of borrowed funds and further, credits have to be allowed of the investment made by the other remaining partners of Rs. 3,46,22,122/- and if that principle is adopted then net diversion of funds would be computed at Rs. 3,96,08,352/- and on that oasis, the disallowance of interest would be recomputed at Rs. 20,14,327/-, as would be evident from charthereunder: Sr. No. Particulars Amount (Rs.) I Total allegedly funds diverted for non business purpose at the close of year (A)....

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....ee advances was not examined by the Assessing Officer, therefore, the decision in A. Y. 2010-11 is not binding for the year under consideration. 9. We have carefully considered the orders of the authorities below. There is no dispute that while making the addition the Assessing Officer has relied upon the findings given in A. Y. 2010-11. We find force in the contention of the Ld. Counsel. A similar disallowance was made in A. y. 2010-11 and the Tribunal in ITA No.3589/Del/2014 held as under :- 6.2 "I find that the lower authorities have failed to appreciate that the only condition for claiming deduction under section 36(1)(iii) of the Act is "commercial expediency" of the expenditure incurred and once the said condition is fulfilled no f....

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....h Court of Madras while following the Hon'ble Apex Court judgment as aforesaid, has held that where assessee having borrowed money, utilized it as advance to its managing director for purchase of land for business purpose, interest paid on said borrowing was to be allowed as deduction. The finding of the Hon'ble High Court was as under:- "10. The Supreme Court in the case of S. A. Builders Ltd. v. CIT (Appeals) [2007] 288 ITR I, has considered the question of payment of interest on the borrowed money. In that case, the borrowed money was lent to the sister concern without charging interest and it was held that the Revenue must look into the transaction whether the transfer of funds to the sister concern was from the point of view of comme....