TaxTMI 
TaxTMI 
2023 (2) TMI 692
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.... AO) and Learned Commissioner of Income Tax (Appeals) ('Ld. CIT(A)') have erred in disallowing a sum of Rs 3,27,68,625/- under section 36(1)(iii) of the Income Tax Act, 1961 ('IT Act). Prayer: The Appellant prays that the additions made under section 36(1)(iii) of the Act be deleted. 1(b) The Learned AO and Learned CIT(A) have erred in making an addition in respect of interest paid to directors on unsecured loans under section 40A(2)(b) of the Act of Rs 7,08,787/- considering it as unreasonable and excessive. Prayer: The Appellant prays that the addition made under section 40A(2)(b) of the Act be deleted." 3. Briefly, the facts of the case are as under :- The appellant is a company incorpor....
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.... -do- Total 30,83,25,000 4. Based on the above information, he formed an opinion that the interest bearing funds had been diverted to its sister concern for non-business purpose and, therefore, the proportionate interest should be disallowed u/s 36(1)(iii) of the Act. The assessee was called upon to explain the same. In response to the same, the assessee filed a detailed explanation explaining that the loans were given to the said sister concern for the business purpose to procure, aggregate the land for the business purpose of the appellant, no disallowance should be made. However, the Assessing Officer rejecting the above contention of the appellant held that the proportionate disallowance of interest should b....
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....f Rs.20.53 crores shall be used by the appellant company to make advance to Darode Jog and Associates for aggregating the lands. He also submitted that ultimately the said company could not procure any land and part of the funds were utilized, came back to the appellant and its promoters in the form of allotment of debentures. Thus, he submitted that the purpose of making the advance was only for the business purpose and, therefore, no disallowance of interest can be made in view of the law laid down by the Hon'ble Supreme Court in the case S.A. Builders Ltd. (supra). Without prejudice to the above, he submits that during the previous year relevant to the assessment year under consideration, no fresh advance was made by the appellant compan....
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....ent Managers Pvt. Ltd. i.e. third party in the form of allotment of debentures at 10%. The interest on borrowed funds had been claimed as deduction while computing the income of the assessee company. The assessee company had asserted before the Assessing Officer and the ld. CIT(A) that the advance was made by the assessee company to its sister concern, namely, Darode Jog and Associates for the business purposes i.e. procurement of lands in terms of agreement entered into by it with ASK Investment Managers Pvt. Ltd.. It is also an admitted fact that the said Darode Jog and Associates had not procured any land. Thus, the purpose of advance of loan only for business purpose is established beyond the doubt. As held by the Hon'ble Bombay High Co....