TaxTMI 
TaxTMI 
2025 (7) TMI 749
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.... the assessment year 2017-18. 2. In this appeal, the assessee has raised the following grounds: - "Being aggrieved by the order of the Ld. Assessing Officer (AO) and the National Faceless Appeal Centre, Delhi (NFAC"), the Appellant begs to prefer the present appeal on the following grounds which are without prejudice to each other: 1. On the facts and circumstances of the case and in law, the NFAC erred in upholding the disallowance of interest made by the AO under Section 36(1)(iii) of the Act. 2. On the facts and circumstances of the case and in law, the NFAC erred in not following the order of this Hon'ble Tribunal in the Appellant's own case for AY 2010-11, which is followed by the Hon'ble Tribu....
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....see is against the disallowance of interest paid under section 36(1)(iii) of the Act. 4. The brief facts of the case pertaining to this issue, as emanated from the record, are: The assessee is engaged in the business of outdoor media advertisement services. For the year under consideration, the assessee filed its return of income on 30.11.2017, declaring a total income of Rs. 37,20,080. The return filed by the assessee was selected for scrutiny, and statutory notices under section 143(3) and section 142(1) of the Act were issued and served on the assessee. During the assessment proceedings, upon perusal of the books of accounts of the assessee, it was observed that the assessee has paid a total interest of Rs. 2,55,38,048/- during the ye....
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....4.12.2019 passed under section 143(3) of the Act disagreed with the submissions of the assessee and held that the assessee has not been able to justify its argument that no nexus exists between interest-free advances and interest-bearing borrowed funds. The AO further held that the assessee has to prove that the loans on which interest was paid were utilised for the purpose of its business. Accordingly, the AO disallowed the interest amounting to Rs. 56,05,710/- paid by the assessee on working capital loan under section 36(1)(iii) of the Act. 6. The learned CIT(A), vide impugned order, granted partial relief to the assessee and directed the AO to reduce the disallowance by the amount already disallowed by the assessee under section 43B. ....
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....l 39,22,56,341 8. Thus, the opening balance of interest-free loan and advances by the assessee to its subsidiary companies as on 01.04.2016 was Rs. 32,36,55,341. Out of the same, the assessee received interest-free loan of Rs. 4.43 crore during the under consideration. Thus, the total amount of outstanding interest-free loans advanced to the subsidiary company as on 31.03.2017 was Rs. 27,93,55,341. From the aforesaid details, as taken note by the AO in the assessment order, it is further evident that during the year under consideration, the assessee advanced interest-bearing loans to its subsidiary companies amounting to Rs. 6,14,50,000. Except for the aforesaid loan, it is evident tha....
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....rred interest of Rs. 6.71 crore. It was further noted that the assessee has advanced interest free loan to its subsidiary. The AO issued show-cause notice for interest disallowance under section 36(1)(iii). The assessee filed detailed submission vide reply dated 30.11.2017 as recorded in para-7.2 of the draft assessment order. In the reply the assessee submitted that the advance to the subsidiaries was given for commercial expediency and that the assessee had sufficient interest free funds available with it. The AO disregarded the contention of the assessee. The AO made disallowance under section 36(1)(iii) by taking view that assessee is unable to justify the commercial necessity for making interest free advances to its subsidiaries nor be....
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....ng officer's action. Against this order assessee is in appeal before the ITAT. 22. We have heard both the sides and perused the records. Learned counsel of the assessee reiterated that in assessee's own case ITAT for assessment year 2009 - 10 to assessment year 2012 - 13 has held that no disallowance in this regard is warranted as the interest free loan advanced to the subsidiaries was out of commercial expediency. Furthermore, the tribunal had also held that assessee's interest free funds to grant loans were sufficient and in this regard it had placed reliance upon Hon 'ble Bombay High Court decision in the case of CIT vs HDFC bank. In these circumstances learned counsel contended that no disallowance in this regar....