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TMI Blog2015 (6) TMI 760X X X X Extracts X X X X X X X X Extracts X X X X ..... riod expenses. Learned counsel for the assessee did not press this ground keeping in view the smallness of amount involved. In view of this, all these grounds are treated as rejected. 4. In ground no. 4, assessee has challenged charging of interest u/s. 234A, B, C, & D. Learned counsel for the assessee at the very outset submitted that charging of interest is consequential in nature, therefore, this ground also does not require any specific finding, it is rejected. 5. Ground no. 3 is common with solitary substantial ground of appeal in Assessment Year 2006-07. In these grounds of appeal, grievance of the assessee is that ld. Commissioner of Income Tax(A) has erred in confirming the disallowances of interest expenses amounting to Rs. 44,65,790/- and Rs. 46,76,672/- in Assessment Year 2006-07 and 2007-08 respectively. 6. The brief facts of the case are that assessee has filed its return of income on 22-11-2006 and 05-10-2007 declaring a loss at Rs. 21,98,810/- and Rs. 96,91,459/- in Assessment Year 2006-07 and 2007-08 respectively. The case of the assessee was selected for scrutiny assessment and notices u/s. 143(2) of the income tax act were issued on 09-10-2007 and 18-09-2008 wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esse had given a loan of Rs. 23.49 crore in Assessment Year 2006-07 and Rs. 153.52 crore in Assessment Year 2007-08 to the sister concern without charging interest. The learned counsel for the assessee has raised two fold submissions. In his first fold of submission, he contended that assessee has sufficient interest free funds available which were used for the purpose of giving interest free advances, therefore, ld. Assessing Officer ought to have not disallowed any amount out of the interest expenses claimed on the borrowed funds. In other words, the interest bearing funds were used for the purpose of business and not used for gaining interest free advances to the sister concern. 10. In his second fold of submission, he contended that if accounts are being examined minutely then it will reveal that these advances were given for the purpose of business. The commercial expediency to give these advances is involved in these transactions and, therefore, no disallowance ought to have been made. 11. Ld. Departmental Representative on the other hand pointed out that assessee failed to establish the availability of interest free funds, therefore, Assessing Officer has rightly disallowe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere is an increase of Rs. 18 cores in the investment in shares. If these two amounts are debited from the total reserve i.e. Rs. 18 + 24 from Rs. 90 cores of reserve and surplus then roughly Rs. 48 crores of rupees were available with the assessee which take care interest free advances of Rs. 23.59 crores. To this calculation, Ld. Departmental Representative was unable to controvert. Ld. Assessing Officer failed to appreciate the funds available with the assessee in right perspective. 16. Apart from this one aspect, it has been brought to our notice that assessee has running account with the sister concern. It has a debit balance at Rs. 30.60 crore as on 31st March, 2005 in the account of Adani Agro Pvt. Ltd and it has not paid any interest on this debit balance. Taking into consideration these facts, we are of the view that assesse has demonstrated on the record that it has sufficient interest free funds which can take care of the interest free advances. Learned counsel for the assessee while buttressing his contention placed reliance upon the order of ITAT passed in ITA No. 3408/Ahd/2010 rendered in the case of Paresh Lalchand Shah vs. ITO wherein similar issue was considered by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ient material and the assessee had urged the contention before the High Court. The principle therefore would be that if there are funds available both interest-free and overdraft and/or loans taken, then a presumption would arise that investments would be out of the interest-free fund generated or available with the company, if the interest-free funds were sufficient to meet the investments. 7. This approach seems to have been approved by Hon'ble jurisdictional High Court in the case of CIT Vs Raguvir Synthetics Ltd (judgment dated 5.12.2011 in Tax Appeal No. 829 of 2007 - unreported) wherein Their Lordships have, inter alia, observed as follows: As can be noted from the order of the Tribunal, the Assessing Officer disallowed the interest solely on the ground that the assessee had given interest free loans to the associate concerns, viz., R.R.Family Trust and Sagar Texile Mills and this disallowance, in appeal the CIT (Appeals) deleted by holding that the amount advanced to both R.R.Family Trust and Sagar Textiles Mils were not given during the year under consideration, but the same was given in the earlier years. CIT (Appeals) had also taken note of the fact that ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment Year 2007-08 is concerned, assessee has liquidated its investment of Rs. 100 crore, therefore, a sum of Rs. 100 crore was available with the assessee. During the course of hearing, we have confronted the ld. counsel to show that on liquidation of investment, assessee had realized 100 crore. Because, if the value of shares was diminished on account of fluctuation in market, then how credit of Rs. 100 crore can be given for quantifying the interest free funds with the assessee. Ld. counsel showed us the realization of the investment at Rs. 100 crore accounted in the accounts. Similarly, it has reserve and surplus of Rs. 165 crore. If Rs. 24 crore taken out from this which was added on account of revaluation in the last year, then, the sum at Rs. 141 crore will be available to the assessee. If the investment realized by the assessee out of liquidation of Rs. 100 crore in the shares is added with interest free funds at Rs. 141 crore, then, assessee has the funds of Rs. 241 crore. It has given interest free advances of Rs. 153.52 crore only. It has demonstrated that it has more interest free fund than the one given to the sister concern. There is no dispute on facts between both ..... X X X X Extracts X X X X X X X X Extracts X X X X
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