9911796707
TMI Blog2019 (4) TMI 1655X X X X Extracts X X X X X X X X Extracts X X X X ..... (1)(iii) of the Act on proportionate basis in the facts and circumstances of the case. 3.1. The brief facts of this issue are that the assessee is a public limited company engaged in the business of providing financial services to various companies and had filed its return of income for the Asst Year 2011-12 on 29.9.2011 declaring total income of Rs. 22,97,171/- under normal provisions of the Act and book profits of Rs. 50,88,348/- u/s 115JB of the Act. The ld AO observed that in the course of assessment proceedings, the assessee furnished computation of total income, balance sheet, profit and loss account, tax audit report in Form 3CA and 3CD and various other documents , as called for, by him. On perusal of profit and loss account, the ld AO observed that assessee had credited an amount of Rs. 12,96,57,884/- on account of interest income and debited an amount of Rs. 12,95,71,373/- on account of interest and finance charges as expenditure during the previous year relevant to Asst Year 2011-12. The assessee furnished the details of loans and advances before the ld AO and gave the break up of interest received in the sum of Rs. 12,96,57,884/- in the tabular form as under:- Sr. No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid on unsecured loans works out to 14.71%. Thus the assessee company had paid more interest on unsecured loans by 1.92% in comparison with payment of interest on secured loans. The assessee submitted that it had borrowed secured loans as under:- Sr. No. Name of the Party Total amount take during the year Rate of interest 1. SICOM Limited 80,00,00,000 13.26% 2. Barclays Investment and Loan (India) Ltd., 15,00,00,000 11.75% 3. Bright Brothers Limited 3,00,00,000 17.50% 4. India Infoline Investment Services Limited 15,00,00,000 12.25% Total amount 113,00,00,000 3.5. Against the above secured loans, the assessee company has given loans to parties, as under:- Sr. No. Name of the Party Total amount take during the year Rate of interest 1. Mrs. Archana Mittal 89,36,00,000 16% 2. Mega Management Services Pvt. Ltd., 161,34,25,577 14% 3. V.K. Industries Ltd., 51,11,000 12% Total Amount 251,26,55,736 3.6. With regard to other expenses such as 'Brokerage and Commission' and 'Professional Fees (Loan processing fees)' , the assessee submitted that i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds were borrowed by it on interest either from financial institutions or from other parties and out of that, substantial amounts to the extent of Rs. 89,36,00,000/- and Rs. 161,34,25,577/- were given to Smt Archana Mittal , M/s Mega Management Services Pvt Ltd respectively. He observed that the assessee is not registered as a non-banking financial company. Hence the loans advanced by the assessee were at all given as a measure of commercial expediency is to be tested. The ld AO observed that the assessee had advanced loans to its related parties either at the same rate of interest on which borrowings were made or at the rate lower than the borrowings rate. The ld AO arrived at the differential rate of interest at 1.41% and applied the same on the total borrowings and arrived at the disallowance of interest u/s 36(1)(iii) of the Act on a proportionate basis in the following manner:- Sr. No. Name of the Lender Date Amount (Rs.) No. of days on Which interest calculated @1.41% Amount (Rs.) 1. Sicom Limited 08.04.2010 10.00 Cr. 358 13,82,959 2. Sicom Limited 31.03.2010 25.00 Cr. 213 20,57,055 3. Sicorn Limited 25.11.2010 10.00 Cr. 127 4,90, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest. Accordingly, the ld CITA restricted the disallowance of interest u/s 36(1)(iii) of the Act by applying the differential rate of interest at 1.1% and arrived at the disallowance of Rs. 70,16,489/- as under:- Sr. Name of the Date Amount No. of days Amount 1 Sicom Limited 08.04.2010 10.00 Cr 385 10,78,904 2 Sicom Limited 31.08.2010 25.00 cr 213 16,04,794 3 Sicom Limited 25.11.2010 10.00 cr 127 38,27,39 4 Sicom Limited 08.11.2010 35.00 cr 144 15,18,904 5 Barclays Investment & Loan (India) Ltd., 22.07.2010 15.00 cr 253 11,43,698 6. IIFL 23.06.2010 15.00 Cr. 282 12,74,794 7. Bright Brothers Limited 25.03.2011 03.00 Cr. 07 6328 6. Aggrieved, the assessee is in appeal before us. 7. We have heard the ld DR. At the outset, it is not in dispute that the assessee had mixed funds in its kitty i.e own funds as well as borrowed funds. It is not in dispute that the assessee is engaged in financing activities. It is not in dispute that the assessee had indeed lent to various persons including sister concerns wherein interest was duly charged. Once the lending is meant in the ordinary course o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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