TaxTMI 
TaxTMI 
2021 (7) TMI 572
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....ed in the business of construction of sale and residential commercial buildings. The return of income for A.Y. 2014- 15 was filed on 31.082014 declaring a loss of Rs. 4,24,68,213/-. Against the said return of income, the assessment was completed by the Income Tax Officer, Ward 14(4), Pune (hereinafter referred to as "Assessing Officer") at a total income of Rs. 8,76,61,830/- vide order dated 23.12.2016 passed u/s 143(3) of the Income Tax Act (hereinafter referred to as "the Act"). While doing so, the Assessing Officer made disallowance of the following items : 1) Disallowance of interest of Rs. 5,15,54,324/- on the ground that the appellant company had diverted interest bearing funds to sister concerns / related parties by advancing loans....
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.... related parties. Ld.A.R. further taken us through the Charts placed at Page No.321 and 322 of the Paper Book demonstrating that interest free funds are available. He further submitted that most of the loans and advances are made during the previous year relevant to the years 2012-13 and 2013-14. The details of which are furnished at Page No.324 to 338 of the Paper Book. He further submitted that in the initial year in which advances were made, no disallowance u/s 36(1)(iii) was made, it was only for the first time during the assessment year under consideration, Assessing Officer had chosen to make the disallowance u/s 36(1)(iii) of the Act. Ld.A.R. further taken us through Page No.323 of the Paper Book demonstrating that a sum of Rs. 4,3....
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....urther submitted that when no disallowance was made in earlier years, on the principle of consistency, no disallowance can be made in the subsequent years relying on the following judicial precedents : (1) CIT Vs. Sridevi Enterprises - 192 ITR 165 (KAR) (2) CIT Vs. Givo Limited (ITA No.941/2010) of Hon'ble Delhi High Court. 7. On the other hand, ld.D.R. had placed reliance on the order of ld.CIT(A). 8. We have heard the rival submissions and perused the material on record. The issue in the present appeal relates to disallowance of interest u/s 36(1)(iii) of the Act on the ground that interest bearing funds have been diverted to the sister concerns / related parties. The Assessing Officer found that the appellant company had borrowed f....
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....ed at Page No.323 of the Paper Book, two things are clear, firstly, a sum of Rs. 51,37,56,632/- was advanced to sister concerns / related parties as on 31.03.2014 out of which only, a sum of Rs. 4,79,39,540/- were advanced to sister concerns / related parties during the previous year relevant to the assessment year under consideration and secondly, total Reserves and Surpluses available as on 31.03.2014 was Rs. 25,10,65,020/- and the Advances from Customers which are also interest free funds available are of Rs. 45,02,27,730/- which aggregate to a sum of Rs. 70,12,92,750/-. Out of which the net incremental interest free funds available during the previous year relevant to the assessment year under consideration is Rs. 29,57,23,475/-. This f....
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....d parties should not be considered. Therefore, we are of the considered opinion that applying the ratio of the decision of Hon'ble Delhi and Karnataka High Courts cited supra, the opening balance of loans and advances of sister concerns / related parties should not be considered for the purpose of making, any disallowance for the year under consideration. 12. Secondly, as regards to the incremental advances made to sister concerns during the previous year relevant to the assessment year under consideration as extracted by us, appellant company had generated incremental interest free funds of Rs. 29,57,23,475/- and the loans and advances made to sister concerns / related parties during the previous year relevant to the assessment year under....
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....ability and the profits were deposited in the over draft account of the assessee and in such a case it should be presumed that the taxes were paid out of the profits of the year and not out of the overdraft account for the running of the business. It noted that to raise the presumption, there was sufficient material and the assessee had urged the contention before the High Court. The principle therefore would be that if there are funds available both interest free and over draft and/or loans taken, then a presumption would arise that investments would be out of the interest free fund generated or available with the company, if the interest free funds were sufficient to meet the investments. In this case this presumption is established con....