TaxTMI 
TaxTMI 
TaxTMI 
2020 (10) TMI 800
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....r concern proportionate interest on such diversion is to be made?" 2. The relevant findings of the learned Tribunal in favour of the Assessee and by which the learned Tribunal dismissed the Appeal of the Revenue and upheld the order of the learned Commissioner of Income Tax (Appeals) dated 20th July 2016 in favour of the Assessee are quoted below for ready reference:- "The Brief facts of the case that the asseesee company is in the business of manufacture. of Hydrogen Peroxide and filed its Return of Income for the assessment year 2012-13 on 30.09.2012 with total loss of Rs. 8,55,03,164/- and the case was selected for scrutiny under CASS and notice U/s.143(2) of the Act was issued. In compliance to the notice, the Ld. AR of the assessee appeared on various dates and filed the details. The Ld. AO on perusal of the financial statements found that the assessee has claimed an amount of Rs. 6,08,56,000/- as interest and financial charges pertaining to the interest on term loans, working capital and other financial expenses. Whereas the assessee company having borrowed the funds and paying interest, has also provided interest free loans to its sister concerns and the Ld. AO found that....
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....t without considering the fact that the assessee has provided interest free advances and the assessee could not substantiate that the own funds were utilized for the purpose of providing the interest free advances and supported the arguments with the judicial decisions. Contra, the Ld.AR relied on the orders of the Ld. CIT(A) and supported with the Tribunal decisions. 6. We heard the rival submissions, perused the material on record and judicial decisions. The sole substantial ground of Revenue being disallowance U/s.36(1)(iii) of the Act was deleted by the Ld. CIT(A) relying on the judicial decisions. We find the similar issue in the assessee's own case for the AY 2008-09 in ITA No.911/Mds/2013 held at para 9 & 10 as under: "9. We have heard both the parties and carefully perused the materials available on record from the orders of the Ld. Assessing Officer, it is apparent that the assessee has share capital of approximately Rs. 43.30 crores and reserve and surplus of Rs. 35.61 crores as on 31/03/2008 and further from the balance sheet it is apparent that the assessee has share capital of Rs. 43.30 crores and Rs. 37.30 crores reserves & surplus as on 31/03/2007, thus the asses....
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....nsiderations, i.e out of commercial expediency of the assessee. That being the factual position reflected from the record of the assessee, the onus that lay on it stood discharged. There was no ground to interfere with those findings. 10. Considering the above decisions of the Hon'ble High Court of Bombay in the case CIT Vs. Reliance Utilities And Power Ltd & the decision of Hon'ble High Court of Delhi in the case CIT Vs. Bharti Televenture Ltd., which are identical to the facts of the case before us, we are of the opinion that the Ld. Assessing Officer has erred by disallowing the interest expenditure incurred by the assessee on the premises that interest bearing funds have been diverted to the sister concerns. Therefore, we hereby delete the addition made by the Ld. Assessing Officer, which was further confirmed by the Ld. CIT(A) on this issue. Thus, the ground No.3 raised by the assessee in its appeal is allowed in its favour and consequently the ground Nos.2.1 & 2.2 raised by the Revenue is decided against the Revenue." 7. We respectfully follow the Co-ordinate bench decision in assessee's own case and dismissed the Revenue appeal. 8. In the result, the Revenu....
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....or commission; (iii) the amount of the interest paid in respect of capital borrowed for the purposes of the business or profession." 5. The learned Senior Standing Counsel Mrs.R.Hemalatha appearing for the Revenue has urged that the Assessee Company while having majorly only borrowed funds from its Banks and paid interest thereon, diverted substantial part of those funds to its Subsidiary Company and did not charge any interest thereon from the Subsidiary Company, and therefore the learned Assessing Authority was justified in disallowing the proportionate part of the interest the Assessee Company paid to its Bank, under Section 36(1)(iii) of the Act to the tune of Rs. 4,43,25,189/- which is computed in para 2 of the Assessment Order dated 12.3.2015 which is also quoted below for ready reference:- "2. To keep the issue of proportionate interest disallowance alive, it is proposed to consider the assessee's action of diverting the loans and advances to the sister concern and reducing the profit with entire interest expenditure as not maintainable. This coupled with the assessee's submissions, which lack evidences, that are required to prove that the interest free loans gi....
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....ssessee Company to its Sister Concerns. 8. The learned counsel for the Assessee submitted that no interest was charged from the Subsidiary Company on such outstanding amount of unpaid consideration for transfer of its Sodium Perborate Division. Further he submitted that the Assessee Company had a Share Capital to the extent of Rs. 43,30,75,000/- and Reserve and Surplus to the extent of Rs. 35,61,38,000/-, totalling to Rs. 78,92,13,000/- out of which, interest-free funds was available with the Assessee Company and therefore, relying upon the decision of the Hon'ble Supreme Court in the case of Commissioner of Income Tax v. Reliance Industries Limited reported in (2019) 307 CTR (SC) 121 in which the Hon'ble Supreme Court has held that if any Assessee has got Surplus Funds exceeding the advances made to its Subsidiaries, a presumption could be made that interest bearing Funds have not been diverted to its Subsidiary Company. 9. Having heard the learned counsel for the parties, we are of the opinion that the matter is required to be remanded back to the Assessing Authority for holding enquiry into the matter as to whether the interest bearing borrowed funds were used for advancin....