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TMI Blog2016 (1) TMI 854X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee. - ITA No. 1689/Del/2013, ITA No. 6260/Del/2013 - - - Dated:- 6-11-2015 - SH. C.M.GARG, JM AND SH. PRASHANT MAHARISHI, AM For The Assessee : Rajeev Mango, C.A. For The Revenue : Sh. P. Dam Kanunjna, Sr. DR ORDER Per Prashant Maharishi, AM: 01. These are the two appeals relating to the assessee for assessment year 2008-09 where revenue is in appeal before us and in AY 2010-11 where the asessee is in appeal before us. Therefore for the sake of convenience both these appeals are disposed off by the common order. 02. In 2008-09 following grounds of appeal are taken by revenue :- 1. Whether in the facts and circumstances of the case, the Ld. CIT (A) erred in deleting the disallowance of interest expenses amounting to ₹ 24,05,333/- by holding that the assessee was having adequate interest free funds at its disposal without considering the fact that had interest free funds would been available with the assessee then the assessee would not applied for debt restricting with the financial institutions ? 2. Whether the facts and circumstances of the case and in law, the learned CIT (A) erred in deleting the disallowance of interest expens ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rding the advance to Saffron Range IT Solution Pvt. Ltd. no advances authorities are not given during the year. c) Assessee has 52.64 crores of interest free funds available with the assessee d) The purpose of the borrower on which is interest of pay is for the construction of hotel and therefore full interest is allowable. 06. We have carefully considered the rival submissions, the facts emerging are that the assessee company is running start category hotel since January, 2000. During assessment, AO noticed that assessee has outstanding loans and advances to two parties Netcradel India Pvt. Ltd. of ₹ 1,33,11,564/- and Saffron Range IT Solution Pvt. Ltd. ₹ 75,17,061/- as at 31.03.2008. As no interest has been charged on these two advances where assessee is paying interest of ₹ 3,03,56,328/-, Ao was of the view that interest bearing funds have been given to above these two parties without charging interest. Therefore AO disallowed interest @ 12.5% of ₹ 29,26,116/- . Assessee carried matter before the CIT(A) who in turn restricted the disallowance to ₹ 5,20,783/- and deleted disallowance of ₹ 24,05,333/-. Therefore revenue is before us in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the submissions made by learned counsel for the appellant because the factual position as submitted before us by learned counsel for the appellant has not been controverted by the learned Departmental Representative. The admitted facts are that the appellant-firm has been enjoying overdraft facilities from the State Bank of India, Chandni Chowk, Delhi, since long time past against the hypothecation of goods, etc., and pledge of land, building, plant and machinery and the interest paid on such overdraft account has been allowed by the Revenue year after year. Even in the assessment year 1982-83, no such disallowance had been made when admittedly substantial interest-free funds had been advanced to the sister concern. The appellant has not paid any interest to any other party either in the past or during the year under appeal. Further in the years under appeal, either the fresh advances to PNSMPL have been quite insignificant or there have been absolutely no fresh advances made by the appellant, rather during the assessment years 1990-91 to 1992-93 the appellant had received back from the sister concern more than ₹ 10 lakhs. The capital of the firm and interest-free unsecured ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... siness. It noted that to raise the presumption, there was sufficient 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. In this case this presumption is established considering the finding of fact both by the CIT (Appeals) and ITAT. From above judicial precedents it is apparent that if the assessee has interest free funds more than amount of investment made in non-interest loans, then in absence of any nexus by the revenue, disallowance of interest cannot be made. In the present case the status of the interest free funds variable with the assessee as at 31.3.2008 is as under:- Sr No Particulars Amount In Rs. 1 Share capital 35,83,28,030/- 2 Share Application money 56,23,930/- ..... X X X X Extracts X X X X X X X X Extracts X X X X
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