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TMI Blog2016 (6) TMI 168X X X X Extracts X X X X X X X X Extracts X X X X ..... earned which is duly offered for taxation in the return of income filed by the assessee company with the Revenue and the assessee company has advanced interest free funds to the tune of ₹ 14.22 crores to the suppliers and the ledger extracts and audited balance sheets to this effect are duly placed in the paper book. The advances to the suppliers of ₹ 14.22 crores have been stated by the assessee company to be made for purposes of business keeping in view the commercial expediency and it is not brought on record by the Revenue that these interest free advances to suppliers are not made for the business purposes except making a bald statement that the interest is not incurred for the purposes of business and the interest is excessive. In any case , the assessee company has demonstrated that there are sufficient interest free funds available with the assessee company of ₹ 25.41 crores as per audited Balance Sheet filed in the paper book which is sufficient enough to cover the interest free advances to suppliers to the tune of ₹ 14.22 crores and presumption shall apply unless rebutted that the interest free funds available with the assessee company are utilized ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er a grace period of one month. The A.O. allowed 7% interest on the average of opening and closing outstanding balances and the excess interest of ₹ 22,23,298/- was disallowed by the AO terming it as an excessive and not incurred for business purposes, vide assessment order dated 08-12-2010 passed u/s 143(3) of the Act. 5. Aggrieved by the assessment order dated 08-12-2010 passed by the A.O. u/s 143(3) of the Act, the assessee company preferred an appeal before the first appellate authority i.e. CIT(A). 6. Before the CIT(A), the assessee company submitted that the assessee company has taken advances from customers for the goods sold to the customers as per prudent business practices keeping in view the nature of product and risk of obsolescence. There was an un-appropriated advance of ₹ 27,86,92,809/- which was outstanding to be payable as on 31st March, 2008 i.e. the end of the relevant previous year. The party-wise details are as under:- GTL Limited ₹ 14,61,75,000/- Commune Equipments Pvt. Ltd. ₹ 2,00,00,000/- Global Management Services and Projects Pvt. L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... produced by the assessee company before the CIT(A) to prove the contention that the funds have been utilized and deployed for the purpose of business and for placing inter-corporate deposits. The assessee company submitted that it has non-interest bearing funds to the tune of ₹ 25.41 crores while interest bearing funds are available to the tune of ₹ 14.62 crores and the assessee company has deployed interest earning inter-corporate deposits of ₹ 25.80 crores and interest free advances to suppliers of ₹ 14.23 crores. Thus , it was submitted that the assessee company has with it the sufficient non-interest bearing funds for granting interest free advances to the suppliers. The CIT(A) after careful consideration of the rival submissions and examination of the records held that the assessee company has to prove that the interest bearing funds were utilized for the purpose of business especially when the A.O. held that the interest bearing funds were used by the assessee company for non-business purposes. The expenditure can only be allowed if it is incurred wholly and exclusively for the purpose of business as per the mandate of Section 37 of the Act. Mere p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is agreed upon. The ld. Counsel also drew our attention to page 45 of the paper book whereby detailed computation of working of interest payable by the assessee company to GTL Limited is disclosed , which also provided for credit for grace period interest. He also drew our attention to the TDS certificate issued by the assessee company whereby tax was deducted at source on the total interest of ₹ 1,24,24,430/- payable by the assessee company to GTL Limited which is placed in paper book page 46. He also drew our attention to the ledger account extract of various suppliers to whom the interest free advances have been paid which are placed at paper book page 51-62. He also drew our attention to the submission made before the authorities below which is also placed on record to contend that this interest expenditure is an allowable expenditure which should be allowed. He also drew our attention to the assessment orders for the assessment year 2009-10, 2010-11 and 2011-12 which are placed in paper book pages No. 76-96 filed with the Tribunal , whereby no disallowance has been made by the Revenue on account of interest payable to GTL Limited, the assessment orders for assessment ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... above and the disallowance of ₹ 22,23,298/- towards interest expenditure payable to GTL Limited should be deleted. 9. The ld. D.R., on the other hand, relied upon the orders of authorities below and submitted that the advances have been received from customer GTL Limited for which interest has been paid. He submitted that the authorities below have rightly disallowed the interest expenditure of ₹ 22,23,298/- as the same was excessive and not incurred wholly and exclusively for the purposes of the business. The interest free advances to suppliers of ₹ 14.22 crores have been given and no justification was provided for giving interest free advances to suppliers. The funds are moving to and fro in the accounts of supplier as per ledger accounts submitted by the assessee company. 10. The ld counsel for the assessee submitted in rejoinder that that after search on Global Telecom Limited group and other associates entities, the assessment has been framed in the case of the assessee company for the assessment year 2009-10 and 2010-11 u/s 143(3) read with Section 153C of the Act vide separate orders both dated 15-03-2013 and for assessment year 2011-12 assessment has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lacious as no finding of fact is arrived at by the AO that the funds so received by the assessee company from time to time as advance from GTL Limited on which interest is payable as per contractual obligations has been diverted for nonbusiness purposes or are utilized for any other purposes other than business purposes. The assessee company has on the other hand brought on record evidences that own funds/interest free funds to the tune of ₹ 25.41 crores are available with it which is reflected in the audited balance sheet, that the assessee company has deployed inter-corporate deposit to the tune of ₹ 25.79 crores on which interest income of ₹ 1.28 crores has been earned which is duly offered for taxation in the return of income filed by the assessee company with the Revenue and the assessee company has advanced interest free funds to the tune of ₹ 14.22 crores to the suppliers and the ledger extracts and audited balance sheets to this effect are duly placed in the paper book. The advances to the suppliers of ₹ 14.22 crores have been stated by the assessee company to be made for purposes of business keeping in view the commercial expediency and it is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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