9911796707
TMI Blog2012 (9) TMI 749X X X X Extracts X X X X X X X X Extracts X X X X ..... Tax Act, 1961 (hereinafter referred to as the Act ) for Assessment Year 1994-95 vide his order dated 27.02.2001. 2. The only issue in this appeal of assessee is against the order of CIT(A) confirming the disallowance of interest on capital borrowed for the purpose of business. For this, assessee has raised following ground: 1(i). That on the facts and in the circumstances of the case, the Ld. CIT(A)-V, Kolkata was not justified in upholding the disallowance of interest amounting to Rs.10,24,59,637/- paid on capital borrowed for the purpose of business. (ii) That on the facts and in the circumstances of the case the ld. CIT(A)-V, Kolkata erred in holding that the advances in question were made out of borrowed funds while the fact isthat the advances were made out of the appellant s own resources. (iii) That on the facts and in the circumstances of the case the Ld. CIT(A)-V, Kolkata had misconstrued the facts and erred in upholding the disallowance of interest on misconception, surmise, extraneous consideration and his action is therefore perverse and not tenable in law. 3. Brief facts leading to the above issue are that the original assessment in this case was complet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of lower authorities. Aggrieved, assessee preferred appeal before Hon ble Calcutta High Court u/s. 260A of the Act whereby Hon ble Calcutta High Court vide its order in ITA No.271 of 2005 dated 20th May, 2009 directed Tribunal to redecide the matter after considering all the materials which have been placed in the paper book and in particular with regard to the points of question of law which has been raised before it. We find that the folowing questions were raised before Hon ble High Court: (a) Whether the Tribunal was justified in law in upholding the disallowance of interest expenditure to the extent of Rs.10,24,59,637/- incurred by the appellant in respect of capital borrowed and utilized for the purposes of its business in respect of which the appellant was entitled to deduction under section 36(1)(iii) of the Income Tax Act, 1961. (b) Whether there was any material before the Tribunal to hold that any part of the interest free loans to the subsidiary and associate companies was given by the appellant out of borrowed funds and its purported findings upholding the disallowance of interest expenditure of Rs.10,24,59,637/- have been arrived at by ignoring the relevant mate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... closed these papers and these were available before AO during the course of assessment proceedings. It was also explained that in the computation of total income of assessee for AY 1992-93 the capital gain earned on the sale of the above shares of JCT Electronics Pvt. Ltd. was disclosed. The computation of income is filed at assessee s paper book pages 310 and 311. 6. Further, in the previous year relevant to AY 1993-94 the assessee advanced a sum of Rs.12.30 cr. to its subsidiary Chohal Investments Co. Ltd. out of sale proceeds of shares of Ballarpur Industries Ltd. held by it. The assessee has enclosed copy of bank statement of HSBC in which sale proceeds of such sale were deposited and from which the advance was made to Chohal Investments Ltd. These details are available at assessee s paper book page 334. The assessee has disclosed profit arising from sale of shares of Ballarpur Industries Ltd. for AY 1993-94 and these are included in Balance Sheet for the year ending 31.03.1993. These details are enclosed at assessee s paper book pages 332 and 333. The Balance Sheet and Schedule of assets are also enclosed at assessee s paper book pages 319 and 320. It was the argument of ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge 4 of assessee s paper book of Chohal Investment Ltd. page 3 of assessee s paper book of Poly Investment Ltd., page 7 of Gupta Syal Ltd., page 9 of Kishan Chand Spinning Mills Ltd., page 8 of Kedernath Kishan Chand Finance Investments Ltd. As pointed out by Ld. counsel for the assesee that in the following assessment years i.e. AY 1995- 96 to 1997-98 no such disallowance was made by revenue of the interest on borrowed funds with reference to the above said advances, we find that the statement is correct. The assessee has enclosed copies of assessment orders for these three assessment years at pages 256, 265 and 274 of assessee s paper book. The Ld. counsel has drawn our attention to the fact that the amounts outstanding against various concerns are most of it were brought forward from earlier years. This fact can be clear from the statement of opening balance and closing balance in respect of various concerns which has been reproduced from the records of the assessee as under: Sl. No. Name of Concern Opening Balance as on 01.04.93 Closing Balance as on 31.03.94 1. Chohal Investments Ltd. Rs.59,80,28,792 Rs.16,30,14 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bove such advance. In such circumstances, whether the revenue can make disallowance or not. 10. From the above facts it is clear that thre amounts advanced by assessee to the abovementioned five concerns are out of internal accruals or out of profits earned by assessee by way of sale of shares or by way of consideration received on account of sale of shares. From the facts and circumstances it is also clear that during the year except the amount of Rs.15,000/- in the case of Gupta Syal Ltd. and Rs.85,981/- in the case of Kishan Chand Spinning Mills Ltd. there is no increase in the outstanding amounts of above five concerns. This being a very negligible and small amounts and by taking the clue from this no disallowance of interest on borrowed capital can be made. Apart from that the AO from the very beginning i.e. from AYs 1991-92, 1992-93 and 1993-94 and even in subsequent assessment years 1995-96 to 1997-98 the advances were there but no disallowance of interest on borrowed capital is made by AO and accepted as it is. From the records it is noticed that assessment orders are available in assessee s paper book as mentioned above, it established that the advance to subsidiary ..... X X X X Extracts X X X X X X X X Extracts X X X X
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