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TMI Blog2019 (2) TMI 1434X X X X Extracts X X X X X X X X Extracts X X X X ..... r For the Assessee : Sh. Raj Kumar, CA For the Department : Sh. S.L. Anuragi, Sr. DR. ORDER The assessee has filed the appeal against the impugned order dated 2.2.2018 passed by Ld. CIT(A)-2, New Delhi relevant to assessment year 2014-15 on the following grounds:- 1. That under the facts and circumstances, both the lower authorities erred in law and on merits in disallowing the interest expenses of ₹ 19,66,506/- out of total interest expenses claimed at ₹ 26,22,008/- on the ground that the funds taken on higher rate of interest have been given to sister concerns at lower rate of interest. 2. That under the facts and circumstances, Ld. CIT(A) erred in law as well as on merits in enhancing the disallowance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3.8.2016 assessee was show caused that why interest on funds borrowed have been diverted @3% whereas assessee is paying interest at above 9% to its related partners. Assessee vide its letter dated 17.8.2016 has submitted the reply. After considering the reply of the assessee, the AO observed that assessee has borrowed funds @12% per annum and claimed expenses of ₹ 26,22,008/- while he has received interest on the same @3% amounting to ₹ 2,89,308/- as income and observed that the interest disallowance amounting to ₹ 19,65,506/- was added back to the total income of the assessee and assessed the income of the assessee at ₹ 44,32,916/- vide order dated 23.12.2016 passed u/s. 143(3) of the Act. Against the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was further submitted that the total loan given to sister concern was about ₹ 2,25,00,020/- while interest free funds available were ₹ 17,35,72,590/- and no interest disallowed ever in the past. In support of his contention, filed a Paper Book containing pages 1-19 in which he has attached the audited balance sheet for AY 2014-15; Ledger A/c of Murliwala AGrotech (P) Ltd. in the books of assessee; Leger a/c of Brindavan Entt. P Ltd. in the books of assessee; sub. to CIT(A) dated 23.11.2017 and sub. to CIT(A) dated 22.1.2018. To support his contention, he also relied upon the following case laws:- - CIT vs. SA Builders 288 ITR 1 (SC). - CIT vs. Tin Box Co. 260 ITR 537 (Del.) 4. On the contrary, Ld. DR heavily supported ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch (P) Ltd. and no interest charged from Brindavan Enterprises (P) Ltd. Thus the A.O. held that rate of interest charged from sister concerns was lesser by 9%. Hence he disallowed 3/4th of the interest expenses claimed in P L A/c for ₹ 26,22,008/-, 3/4th of which being disallowance calculated ₹ 19,66,506/-. In appeal, Ld. CIT(A) held that complete interest exp is liable to disallowed as the interest free funds available were nominal, hence he enhanced the disallowance by ₹ 6,55,502/-, resulting into disallowance of total interest claimed at ₹ 26,22,008/-. I note that Ld. CIT(A) is wrong in mentioning that loan given to M/s. Murliwala Agrotech (P) Ltd. reached to ₹ 21,85,61,355/- at the end of the year. Ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , during the year was only ₹ 22,00,000/-, rather Brindavan Enterprises gave interest free loans to assessee during the year and the closing loan payable by the assessee to M/s Brindavan was ₹ 2,53,218.50. Thus, the total loan given to sister concerns was about ₹ 2,25,00,020/- while interest free funds available were ₹ 17,35,72,590/-. I note that the case laws relied upon by A.O. and CIT (A) are distinguishable on facts of the case. It is also noted that Ld. CIT(A) in his order vide para no. 7.8 at page no. 13-14 has mentioned that Assessee have also been relying on the decision of the Hon ble Supreme Court in the case of SA Builders 288 ITR 1, but he did not discuss the said decision. However, the case law relied u ..... X X X X Extracts X X X X X X X X Extracts X X X X
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