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TMI Blog2019 (4) TMI 1784X X X X Extracts X X X X X X X X Extracts X X X X ..... ion, we are of the view that the CIT(A) had rightly deleted the disallowance. Hence, we reject the ground raised by the Revenue on this issue. Disallowance of interest - assessee paid interest to the creditors and no interest has been charged on debtors - HELD THAT:- U/s 36(1)(iii) to sustain a claim for deduction of the amount of interest, all that is necessary is that the capital must have been borrowed by the assessee, it must have been borrowed for the purpose of business or profession of the assessee and thirdly, that the assessee should have paid that amount by way of interest. Consideration for paying interest to trade creditors and for not charging interest from trade debtors can be different, and therefore, just because the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fund and its use. c) The appellant prays that the order of the CIT(A) on the above grounds be set aside and that of the A.O. be restored . d) The appellant craves leave to amend or alter any grounds or add a new ground which may be necessary. 3. The first issue in grounds of appeal of the Revenue is relating to the disallowance of interest of ₹.89,71,506/- u/s. 36(1)(iii) of the Act. 4. The Assessing Officer while completing the assessment u/s. 143(3) of the Act noticed that assessee raised loans of ₹.9.99 Crores from banks for working capital requirements and paid interest of ₹.89,71,506/-. Assessing Officer also noticed that assessee advanced interest free loan of ₹.23.64 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch evident from the submissions of the assessee which is extracted by the Ld.CIT(A) in his order at Page No. 9 Para 2.3:- 2.3. The appellant on 22-03-2017 filed a further written, submission, the contents of which are reproduced below: 1. In regard to proportionate disallowance of Interest on loan advanced to subsidiary company, we wish to clarify that a. loan of ₹ 23.64 crore had been advanced by the appellant company to its subsidiary - Veto Electric Components Pvt Ltd.. The details of loans advanced and repaid is indicated as follows: Particulars Amount (In Rs.) Loan advanced in FY 2010-11 7,70,02,707 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny. In view of above, Your Honour would appreciate that the presumption laid down in the case of CIT v. Reliance Utilities [2009] 313 ITR 340 (Bombay HC) apply to the facts of the present case. In the said case, the Hon'ble Bombay High Court has held as follows: If there be interest free funds available to an assessee sufficient to meet its investments and at the same time the assessee had raised a loan it can be presumed that the investments were from interest free funds available. The Principle therefore would be that if there are funds available both interest free and overdraft and/or loans taken, then a presumption would arise that investments would be out of interest free funds generated or available with the compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the decision taken by the management of the appellant company. 2. In this regard, we submit to Your Honour that it is the business decision of the appellant company whether to charge interest on debtors or not Various courts have held that the Id. Assessing Officer cannot decide whether a particular expenditure should be incurred or not but has to determine whether the expenditure claimed is legitimate or not. Thus, no disallowance of interest paid to supplier can be made u/s. 36(l)(iii) on the ground that no interest is charged on the debtors. 3. In view of the aforesaid discussion and judicial pronouncements, the advances made by the appellant company to its subsidiary for the for the purpose of the business is a meas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f interest amounting to ₹ 25,94,362/- u/s 36(1)(iii). On perusal of the assessment order I find that the Appellant has not charged interest on debtors but paid interest on overdue purchases. In this regard the Appellant submitted that this is the business policy of the Appellant and out of commercial expediency. Moreover, the Appellant has got sufficient interest free funds on account of share capital and reserves. I have carefully considered the rival submission and find that the disallowance made by the AO deserves to be deleted on the facts as well as on the case laws relied upon by the Appellant. This ground of appeal succeeds. 13. On a careful consideration of the submissions of the assessee as well as the findings of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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