TaxTMI 
TaxTMI 
2021 (9) TMI 836
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.... of disallowance of interest. While upholding the disallowance Ld. CIT(A) has failed to appreciate that the disallowance could not be made: a. as the interest paid by the assessee is eligible for deduction u/s 36(l)(iii) of the Act. b. as interest free funds available with the assessee were sufficient to cover the interest free advances made by the assessee and thus, the disallowance was not called for as per law laid down by Hon'ble Supreme Court in the case of CIT vs. Reliance Industries [2019] 410 ITR 466(SC) and other decisions relied upon before the Ld. CIT(A) which have been arbitrarily ignored by Ld. CIT(A) on the ground that they are not applicable to the facts of the present case. c. as the disallowance also could not be ....
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....as on 31.03.2016 after repayment of Rs. 68,75,741/- during the year under consideration. The assessee has also raised unsecured loan of Rs. 25,00,000/- during the Financial Year 2015-16 relevant to Assessment Year under consideration from Smt. Sweta Gupta. It was further noticed by the Assessing Officer that the assessee has given loan/advance to sister concerns/related parties. It was further noticed by the Assessing Officer on the P&L Account that the assessee had raised interest bearing loans and paid interest of Rs. 46,29,509/- and claimed deduction for the same. The Assessing Officer disallowed the claim on the ground that the interest free loan was given to the related parties for non-business purposes. Therefore, he made addition of ....
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..... 7. I have heard the rival contentions and perused the material available on record and gone through the orders of the authorities below. The only dispute is with regard to allowability of interest expenses as claimed by the assessee. The submissions of the assessee are three folds, firstly the disallowance by taking resort to section 14A of the Act cannot be made as the assessee has not earned any exempt income; secondly when the assessee is having interest free fund the expenditure of interest incurred on borrowed funds, cannot be disallowed merely on the ground that the assessee is required to prove nexus between the interest free advances/loan given to the related parties; and thirdly without prejudice to other submissions, the intere....