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TMI Blog2014 (11) TMI 225X X X X Extracts X X X X X X X X Extracts X X X X ..... aring funds to related parties is not compelled by any commercial expediency. The assessee has also not proved before any commercial expediency in regard to any of the interest-free advances given to the related parties - The claim of the assessee that it had adequate non-interest bearing funds to give the interest-free advances is seen otherwise insofar as the non-interest bearing funds available with the assessee is in the form of profits of the year which obviously cannot be determined until the end of the year - even assuming that these funds were available, it would have to be seen in line with the cash book of the assessee - the resolution to advance the amounts to one of the concerns was held on 22.04.2002, i.e. at the beginning o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee advances? 2. The appellant/assessee is a private limited company engaged in the business of exhibition of cine films. The assessee, in the Profit and Loss Account, netted the interest payments against the interest income received and had admitted only the balance as income for the assessment years in question. It is seen from the order of the Assessing Officer that the assessee had given substantial non-interest bearing advances to related parties with outstanding balances due to the assessee. The Assessing Officer found that the total interest payment incurred by the assessee includes payment to an associated firm of the assessee. The Assessing Officer also found that the assessee was found to be diverting its funds to its associate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned counsel appearing for the assessee and the learned standing counsel appearing for the Revenue. 7. We have perused the order of the Tribunal and we find no merits in these appeals. As we find from the order of the Tribunal, in paragraph 13, the facts are very lucid and clear that the assessee had borrowed from a person by paying interest, but has given non-interest bearing advances to the same person and hence, there is no commercial expediency. For better clarity, the relevant portion of the order of the Tribunal reads as follows: 13. We have considered the rival submissions. A perusal of the assessment order clearly shows that for the assessment year 2004-05 out of an interest payment of ₹ 7,09,530/-, an amount of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of ₹ 250 lakhs was held on 22.04.2002, i.e. at the beginning of the financial year whereas the profits could be determined only during the end of the financial year. In the circumstances, we are of the view that the finding of the learned CIT(A) on this issue is liable to be reversed and we do so. In the circumstances, the disallowance of interest as made by the Assessing Officer stands restored and the finding of the learned CIT(A) stands reversed on the issue. 8. It is evident from the findings of the Tribunal that there is no commercial expediency for the assessee to pay interest. Hence, we find no error in the order of the Tribunal. Accordingly, we find no question of law much less any substantial question of law arises fo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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