2025 (10) TMI 136

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....:- "1. Ground whether, in the facts and on the circumstances of the case and in law, the Ld. CIT(A) is correct in deleting the addition made on account of disallowance u/s 36(1)(iii) of the Act of Rs. 3,66,00,000/-?" 3. The brief facts of the case are that during the course of assessment, the Assessing Officer observed that the assessee company had given interest free advances to HCP Enterprise Ltd. for a sum of Rs. 30 crores and Rs. 50 lakhs to Prasthan Infrastructure Ltd. and accordingly, debited interest expenditure of Rs. 933.52 lakhs in the Profit & Loss Account. The Assessing Officer held that as per Section 36(1)(iii) of the Act, deduction for interest paid in respect of capital borrowed is allowable only if borrowed fund....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

.... CIT (SC) (2007) 2BB ITR 1. It is further found that the appellant proposed to carry out its business activities on these two premises and entered into an MOU with the said party on 09.09.2014 and as per the terms of the said MOU as well as looking to the market value of the said properties i.e. Plot No. 7.8 (Part) and 10 (Part). Block No. 828 valued at Rs. 19.? 3 Crores (as on 02.01.2015) & Survey No. 44, Village Varsana Gandhidham valued at 20.33 Crores in March 2014, the appellant had given interest free security deposits towards utilization of the premises as mentioned in the said MOU out of the non-interest bearing funds as mentioned in the above table. The appellant has also given a chart related to explain the source of the interest ....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....were sister concern of the assessee, invariably such advances had been used for business / commercial exigencies and therefore, no disallowance of interest was warranted. 7. We have heard the rival contentions and perused the material on record. 8. On going through the contents of the order passed by Ld. CIT(A), relief has been granted to the assessee firstly for the reason that the assessee was having substantial interest free funds available with the assessee. Secondly, since both the concerns to whom interest free funds had been granted were sister concerns, the advances were invariably use for business / commercial exigencies and no disallowance of interest was warranted. Further, in terms of the MOU, the interest free security de....