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TMI Blog2016 (7) TMI 1525X X X X Extracts X X X X X X X X Extracts X X X X ..... y the loans was routed through the assessee company. The income of the assessee company is only on redemption of mutual funds and no business activities are carried in the previous year. The explanations that the interest free loan provided to M/s. Empee Distilleries Ltd are out of interest free funds cannot be accepted as the financial statements of the assessee company could not support arguments of AR. Assessee company on one hand obtain Interest bearing loans from the same management company and give interest free loans to other company in the same management and set off interest charged on loan funds against income on redemption of mutual funds and whereas interest income in the hands of M/s. Empee sugars and Chemicals Ltd does not subject to tax due to Business losses. So, considering the Apparent facts, financial statement, concept of same management and chain holding of shares and tax adjustments, we found that the ld. Commissioner of Income Tax (Appeals) has examined the evidence on record vis- -vis explanations made by the assessee. We does not see any reason to interfere with the order of Commissioner of Income Tax (Appeals) on this ground Re-assessment proceeding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disallowance of fee paid to Registrar of Companies (ROC). 3. At the time of hearing, the ld. Counsel has not pressed ground No. three, being fees paid to Registrar of Companies and we adjudicate first two grounds. 4. The Brief facts of the case are that the assessee is an investment company and filed Return of income for the assessment year 2003-2004 on 01.12.2003 with total income of 74,33,900/- and the return of income was processed u/s.143(1) of the Act on 23.06.2004. Subsequently, the ld. Assessing Officer issued notice u/s.148 of the Act having reason to believe that the income escaped assessment were assessee company has diverted interest bearing borrowed funds to group companies without charging any interest. The ld. Authorised Representative filed letter dated 12.04.2010 to treat original return filed as in response to notice u/s.148 of the Act. In the scrutiny proceedings, The ld. Assessing Officer on perusal of the financial statements found that the assessee company has unsecured loan as on 31.03.2003 79,04,02,441/- as against previous year balance as at 31.03.2002 being 726,23,506/- and the assessee has debited to profit and loss account 7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evade tax and disallowed interest charges along other disallowance and passed order. Aggrieved by the order, the assessee filed an appeal before Commissioner of Income Tax (Appeals). 5. In the appellate proceedings, the ld. Authorised Representative argued the grounds on re-assessment and interest disallowance. The ld. Commissioner of Income Tax (Appeals) relied on the findings of the ld. Assessing Officer at page 5 to 7 and Highlighted that the assessee company has provided interest free loan of 76,80,01,522/- to the group companies on the concept of commercial expediency and to protect mutual interest of group companies. Further the assessee company could not explain with details compelling reasons to make interest free loan to M/s. Empee Distilleries Ltd and others. The ld. Commissioner of Income Tax (Appeals) found diversion of interest bearing fund for non business purpose and doubted the genuineness. The assessee company has received interest bearing unsecured loans from M/s. Empee Sugars Chemicals Ltd and debited the interest charges in the profit and loss account and accommodated interest fee advance to group concern M/s. Empee Distilleries Ltd. The lender compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The ld. Authorised Representative vehemently argued that the assessee company having same management and due to interse mutual trust with group companies and the concept of business expediency borrowed funds were not utilized for the purpose of advancing interest free loans. We perused the financial statements at page nos. 3 to 7 of paper book were the assessee company having common directors with other group companies and promoter shareholding. Further, on in depth analyzing M/s. Empee Distilleries Ltd holds 63.43 % of shares alongwith assessee company 2.2% of shares in M/s. Empee Sugars and Chemicals and M/s. Empee Distilleries Ltd holds 27.67% share of the assessee company. The transaction of chain Holding of shares by the assessee company and common individual share holders prove that there exist holding and subsidiary company operations having registered office at one place. We also perused the profit and loss account were the source of income of assessee company being income from mutual funds and issue revolves around whether the assessee company having obtained interest bearing loan from M/s. Empee Sugars and Chemicals Ltd granting interest free loans to another group compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d and also increase in unsecured loans compared to earlier years. The factual matrix that the assessee has not charged any interest on advances to M/s. Empee Distilleries Ltd. But claimed interest in profit and loss account for advances from group company. The ld. Authorised Representative explained that advances are made on commercial expediency and interest expenditure has to be allowed. We considering the apparent facts found on verification All the three companies are under same management and with common shareholding. We are not convinced with the concept of change of opinion as the financial statements clearly shows that the interest was paid on advances but not charged in respect of advances provided to the group company. Further increase in unsecured loans and assessee s company income is not from business activity but only out of redemption of mutual funds. Therefore, the ld. Assessing Officer was right considering the reasons for re-assessment and issued notice u/s.148 of the Act within six years and based on the information as per assessment records and hence the re-assessment proceedings are valid and we upheld the order of the Commissioner of Income Tax (Appeals) on th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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