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TMI Blog2016 (4) TMI 734X X X X Extracts X X X X X X X X Extracts X X X X ..... side to the file of A.O. for re-determination of the issue de-novo after considering the cogent material/evidences of the assessee firm to be brought on record by the AO to prove its contentions that the interest free funds have been advanced by the assessee firm to the sister concern of the assessee firm and to that extent the assessee firm will be entitled for relief. Further, the A.O. shall also consider the plea of the assessee firm that the interest have been paid on specific and dedicated borrowings such as for acquiring car etc. on which in our considered view, no disallowance of interest paid on dedicated and specific borrowings is warranted. Needless to say that the AO shall give proper and adequate opportunity of being heard in accordance with principles of natural justice in accordance with law - I .T.A. No. 8271/Mum/2011, I .T.A. No. 4969/Mum/2012 - - - Dated:- 3-3-2016 - SHRI SAKTIJIT DEY, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER For The Assessee by Shri S.C. Tiwari For The Revenue by : Shri Rakesh Ranjan ORDER PER RAMIT KOCHAR, Accountant Member These are two appeals by the assessee firm directed against two separate orders ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reply, the assessee firm explained that the loans have been forwarded to the sister concern and the interest has not been charged because the said concern is a sick company. The assessee firm submitted that the loan was forwarded for commercial expediency out of the current account, ING Vysya Bank Ltd. and not from the overdraft. The assessee firm relied on the judgment of Hon'ble Bombay High Court in the case of CIT v. Bombay Samachar Ltd., 74 ITR 723(Bom. HC) and submitted that the interest should be allowed as all the conditions have been met as per section 36(1)(iii) of the Act. The A.O. rejected the contentions of the assessee firm holding that assessee firm has not shown any unsecured loan or over draft facility from the ING Vysya Bank in the details filed. The capital of the assessee firm is not sufficient to forward interest free loan to the sister concern and the loan has been forwarded from the borrowed funds. The AO held that no business expediency could be established from the details filed by the assessee firm. The sister concern of the assessee firm is not doing any business for the last nine years. The assessee firm s total sources of funds including partner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be justified. The assessee firm has also made a without prejudice submission wherein it has been contended that the opening capital account of the partner was ₹ 3,75,03,204/- and the assessee firm had given interest free loans of ₹ 4,86,96,890/- to the sister concern, hence, the maximum interest that could be disallowed would be the difference on loan and the partner's capital . The CIT(A) held that AO has worked out the disallowance exactly in the way the assessee firm has submitted . The interest @12% worked out to ₹ 16,75,668/- which was restricted to the actual claim of the expenditure of interest of ₹ 10,85,012/- vide CIT(A) appeals orders dated 05-10-2011 whereby the appeal of the assessee firm was dismissed. 6. Aggrieved by the orders of the CIT(A) dated 05-10-2011, the assessee firm is in appeal before the Tribunal. 7. The ld. Counsel for the assessee firm contended that the assessee firm has advanced loan to the sister concern M/s World Wide Commodities Pvt. Ltd. which has been advanced in the earlier years . The said loan amount is advanced from time to time and also received back from time to time from the said sister concern. The ld. Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ws relied upon. We have observed that the assessee firm has advanced an amount of ₹ 4,86,96,890/- to its sister concern World Wide Commodities Pvt. Ltd. free of interest. There is a loan account with the said sister concern whereby loan payments have been made from time to time by the assessee firm to the said sister concern and the loan so granted were also received back partly from the said sister concern from time to time. We have observed that apart from these to and fro movement of funds between the assessee firm and the said sister concern, there is no business transaction entered by the assessee firm per-se with the said sister concern except movement of funds which is observed by us from the loan account of the assessee firm with the said sister concern from 01-04-2000 to 31-03-2009 placed in the paper book filed with the Tribunal at page 1-15. No business commercial expediency has been shown by the assessee firm for grant of the said amount of loan. The assessee firm has charged interest from sister concern on the loans to sister concern in the financial year 2000-01 only which was also reversed in financial year 2003-04 but still the assessee firm continued to grant ..... X X X X Extracts X X X X X X X X Extracts X X X X
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