AI Drafter 
TaxTMI 
TaxTMI 
2026 (5) TMI 1476
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.... not extended by the appellant but was acquired as a recoverable asset as part of a composite Business Purchase Agreement dated 14.03.2017, and thus, the very basis of alleging a diversion of funds is factually incorrect and legally misconceived. 3. That the Ld. CIT(A) has erred in holding that the appellant failed to establish the commercial expediency of the advance, thereby erroneously substituting his own business judgment for that of the appellant, contrary to the settled principles laid down by the Hon'ble Supreme Court in the case of S.A. Builders Ltd. v. CIT (288 ITR 1) and other judicial precedents, 4. That the Ld. CIT(A) has erred in placing undue reliance on the judgment in the case of CIT v. Abhishek Industries Ltd. (286 ITR 1), the facts of which are clearly distinguishable from the appellant's case 5. That the Ld. CIT(A) has acted beyond his jurisdiction by re-characterizing the nature of the addition from 'deemed interest income', as determined by the AO, to a 'disallowance of interest expenditure under Section 36(1)(iii) of the Act', thereby making out an entirely new case for the Revenue which is impermissible in l....
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....tended that the amount of Rs. 63,46,31,505/- which was shown against M/s. Unitech Machines Ltd. was part of outstanding liabilities in the name of UM Power Ltd. which was consistently brought forward in the hands of the assessee since the acquisition of auto division unit of M/s. Unitech Machines Ltd. by the assessee company. 5. It was also contended that the amount of Rs. 63,46,31,505/- outstanding in the name of M/s. UM Power Ltd. as on 31.03.2022 consists of two components i.e. one is reflected in short term loans and advances of Rs. 37,43,24,934/- and Rs. 25,86,03,847/- is forming part of trade receivables. Therefore, it was contended before the AO that no part of the amount of Rs. 63,46,31,505/- shown against liabilities of M/s. UM Power Ltd. be considered as interest free loan and advances as it relates to brought forward balance pursuant to the Business Transfer Agreement for the acquisition of automotive division on slump sale basis. 6. It was also contended that this Business Transfer Agreement which took place for F.Y. 2017-18 and was consistently brought forward the said liabilities even for the A.Y.2022-23 and in none of the years any interest was disallowed with ....
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....nding in the name of M/s UM Power Ltd. 2. The assessment in the present case is framed as per order dated 18-03-2024 passed u/s. 143(3) r.w.s 144B of the Income Tax Act, 1961 ("the Act") whereby the total income of the assessee has been assessed at a sum of Rs. 5.44.50.469/- by make an addition of Rs. 10,15,41,040/- and after adjusting the returned loss of Rs. 4,70,90,571/-, The CIT(A) has upheld the addition as per order dated 02-09-2025 passed by National Faceless Appeal Centre (NFAC) 3. The present appeal has been filed to assail the addition made by the AO and sustained by Ld. CIT(A) of a sum of Rs. 10,15,41,040/- being notional interest by treating the amount of Rs. 63,46,31,505/-outstanding in the name of M/s UM Power Ltd. as shown in note no. 16 of audit report of the assessee for FY 2021-22. 4. That the amount of Rs. 63,46,31,505/- relates to M/s Unitech Machines Ltd. and is brought forward from the audited balance sheet of M/s Unitech Machines Ltd. prepared on 28-02-2017 for the purpose of determining assets and liabilities of IM/s Unitech Machines Ltd. in respect of auto division of M/s Unitech Machines Ltd. as the assessee had purchased auto di....
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....red as interest free loan and advance by the assessee to its related parties as the aforementioned amounts were brought to the balance sheet of the assessee in pursuance to aforementioned BTA. 13. To demonstrate that amount of Rs. 63,46,31,505/- as being brought forward balance in the name of M/s UM Power is consistent figure from balance sheet of FY 2017-18 and there is no change in such balance as on 31-03-2022. All the balance sheets of the assessee for FY 2017-18; 2018-19; 2019-20: 2020-21 and 2021-22 are made part of the present paperbook to show such consistency. 14. That it is also pertinent to note that the facts regarding BTA were duly examined by the AO during the scrutiny proceedings of the assessee in regard to AY 2017-18 and an assessment order 26-12-2019 was passed u/s. 143(3) of the Act, the copy of which is enclosed. Further the quarry raised by the AO with regard to BTA and submission of the assessee in this regard are also enclosed to show that this aspect was examined by the AO. The assessment order passed u/s. 143(3) of the Act for AY 2017-18 has attained finality which show that the purchase by the assessee of auto division of M/s Unitech Mach....
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....red into by the assessee for purchase of automotive division on slump sale basis. 14. Even otherwise we observed that the total interest expenditure incurred for the assessment year under consideration is Rs. 20,48,191/- only and in which case there cannot be any disallowance of Rs. 10.15 crores on notional basis. In this circumstances we direct the AO to delete the addition made towards deemed interest and re-compute the income accordingly. 15. In the result, appeal of the assessee is allowed. Order pronounced in the open court on 13.05.2026. ============= Document 1 NOTES TO FINANCIAL STATEMENTS FOR THE PERIOD ENDED ON FED 28 TH, 2017 UNITECH MACHINES LIMITED 1074 "AUTO Particulars 446 287 . 376224 534 Related.Parties UM Power Limtes 1 Gessup Logia oc 44 274 524134 Tesla Others Advance Recoverable un Cuer or in find or for value le tre mec 374,938 124 Considered Goud Considered Doubtful 47,702 I naes ans Duces ba d ih @@vahce 14.772.564 25/ 652,251 200,424.52) 47,705 411 788201 Less : Provaron for Doubtful Advances NOTES TO FINANCIAL STATEMENTS FOR THE PERIOD ENDED ON FED 28 TH, 2017 UNITECH MACHINES LIMITED 1074....
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....HERO MOTOCORP LID .- II 4,35,61.451.53 07.10.27561 HIERO MOTOCORP LTD. NEEMRANA 2,55,42.879.41 07.10.13321. HERO MOTOCORP LTD. P-I 4.73,73.281.64 07.10.13204 HERO MOTORS LTD. GZB. 6,459.00 07.10.13359 HERO PUCH (TOOLS A/C) 37.17,706.00 07.10.27569 JS KOREA CO. LTD. 2.81,335.39 07.10 27590 JUNE ZENG PROJECT COORDINATOR DC MOLD (H 63,853.36 07.10.13680 KHAN ENTERPRISES 6h Machines 11.113.57 07.10.13327 KINETIC MOTOR CO. LTD. 15.74,574.87 07.10.13344 LIFE LONG INDIA LIMITED Ltd 20.88,551.87 Document 4 CODE PARTICULARS AMOUNT 07.10.13690 LIFELONG INDIA LIMITED UNIT-III 12,34,622.82. 07.10.13586 LOTIA MOTORS LTD. (PUNJAB) 64.725.92 07.10.13655 LUMAX INDUSTRIES LIMITED 36,636.51 07.10.13722 LUMAX INDUSTRIES LIMITED (HARIDWAR) 13,30.821 36 07.10.13681 LUMAX INDUSTRIES LTD. DHARUHERA 82.271.35 07.10.13444 LUMAX INDUSTRIES LTD. GURGAON SYSTEMS PV 15,75,684.40 07.10.13719 MAGNETI MARELLI UM ELECTRONIC 2.75,23,955.26 07.10.13696 MAHINDRA & MAHINDRA 1.55,763.19 07.10.13708 MAHINDRA & MAHINDRA 5,26,609.27 07.10.13726 MAHINDRA & MAHINDRA (ZAHEERABAD) 20,25,149.16 07.10.13663 MAHINDRA TWO-WHEELERS LTD 43,30,288.85 07.10.27542 MAI....