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2014 (3) TMI 892 - ITAT HYDERABADAddition u/s 40(a)(ia) of the Act - TDS on interest paid for delayed payment of purchase consideration to raw material suppliers located in Singapore and Malaysia - Details of interest portion contained in purchase invoice not considered – Held that:- The decision in CIT Vs. Vidyut Corporation [2010 (4) TMI 229 - BOMBAY HIGH COURT] followed - the amount paid by the purchaser on account delay in payment of sale price also constitutes a component of sale price and is a part of sale consideration - there was no infirmity in the order of the CIT(A) in deleting the disallowance made by the AO u/s 40(a)(ia) of the Act – the order of the CIT(A) sustained - Decided against Revenue. Disallowance of interest u/s 36(1)(iii) on the ground that the assessee failed to establish any commercial expediency and as the assessee diverted the borrowed funds to the related parties as interest free advances - OD account increased - Assessee contended that that own funds were given to sister concerns – Held that:- The AO was silent on the interest free funds received by the assessee from its sister concerns – if the assessee has got surplus funds which do not carry interest and also as other borrowals like bank overdraft etc., the presumption is that the interest free and own funds are advanced to the sister concerns – thus, the charging of notional interest does not arise – Relying upon Reliance Utilities and Power Ltd. [2009 (1) TMI 4 - HIGH COURT BOMBAY] - if there were funds available both interest-free and overdraft and/or loans taken, then a presumption would arise that investments would be out of interest free funds generated or available with the company, If the interest free funds were sufficient to meet the investments - Since the orders of the revenue does not contain the fact on the existence of the excess or own and interest free funds of the assessee - AO is required to study the funds position before the making of interest free advances - The AO shall also apply the 'principle of presumption' in correct perspective and in accordance with the law in force – thus, the matter is remitted back to the AO for examination of the fund flow statement – Decided in favour of Revenue.
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