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TMI Blog2015 (2) TMI 205X X X X Extracts X X X X X X X X Extracts X X X X ..... n the footing that if total interest-free advances including debit balances of partners do not exceed the total interest-free funds available with the assessee, no interest is disallowable on account of utilisation of fund for non-business purposes and if it exceeds, the proportionate disallowance can be made. We are in complete agreement with the findings of fact arrived at by the Tribunal. - Decided in favour of assessee. - Tax Appeal No. 620 of 2006, Tax Appeal No. 625 of 2006 - - - Dated:- 17-12-2014 - KS Jhaveri And K. J. Thaker,JJ. For the Appellant : Mr. Varun K Patel For the Respondents : Mr B S Soparkar Mrs Swati Soparkar, Advs. JUDGMENT ( Per : Honourable Mr. Justice KS Jhaveri ) 1. Being aggrieved and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ears in question. During the course of assessment proceedings the Assessing Officer made disallowances/addition with regard to interest amount and stamp charges. 2.1 Being aggrieved by the same, the assessee filed appeal before CIT(A). The CIT(A) partly allowed the appeals. The assessee as well as revenue therefore preferred appeals before the Tribunal. The Tribunal deleted the disallowance of interest amount which is being challenged by the revenue in the present set of appeals. 3. Mr. Varun Patel, learned advocate appearing for the revenue contended that the Tribunal has not assigned any reasons for allowing the appeals filed by the assessee and therefore the appeals may be remanded to the Tribunal for reconsideration of the matters ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all be deemed to be capital borrowed within the meaning of this clause; 5.1 An identical issue had come up before this Court in the case of Amod Stamping (supra) and this Court has observed as under: [3.2] Similar observations are made by the learned ITAT with respect to the assessment years 2005-06 and 2006-07. In the case of Reliance Utilities and Power Ltd. (Supra), the Bombay High Court has held that if there are funds available both interestfree and overdraft and/or loans taken, then a presumption would arise that investments would be out of the interest-free funds generated or available with the company, if the interest-free funds were sufficient to meet the investments and therefore, interest was deductible. Similar view has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction and the Apex Court ruled thus: We have considered the submission of the respective parties. The question involved in this case is only about the allowability of the interest on borrowed funds and hence we are dealing only with that question. In our opinion, the approach of the High Court as well as the authorities below on the aforesaid question was not correct. xxx In our opinion, the High Court in the impugned judgment, as well as the Tribunal and the Income Tax Authorities have approached the matter from an erroneous angle. In the present case, the assessee borrowed the fund from the bank and lent some of it to its sister concern (a subsidiary) on interest free loan. The test, in our opinion, in such a case is really whet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in favour of the assessee by the Apex Court. In this Tax Appeal it is to be specified here that considering the material on record and keeping in view substantial interest free funds and business expediency that the CIT(A) and Tribunal held the issue in favour of assessee. 6. The question raised in the present appeals is squarely governed by these two abovementioned decisions. In view of the above, we are of the opinion that the Tribunal was justified in holding that interest free funds were available with the assessee and thereby deleting the disallowance of interest made by the Assessing Officer u/s. 36(1)(iii) of the Act. The Tribunal has rightly considered that the assessees have clearly demonstrated that it had interest free funds a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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