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TMI Blog2019 (1) TMI 1664X X X X Extracts X X X X X X X X Extracts X X X X ..... me is to be allowed on ground of commercial expediency. Furthermore, it is observed that the Assessing Officer could not obtain any details and analyze the same while deciding the issue against the assessee. Accordingly, we do not find any infirmity in the findings of the Ld. CIT(Appeals) and relief provided to the assessee is, therefore, sustained. Hence, grounds raised by the Revenue are dismissed. - SHRI R.S. SYAL, VP AND SHRI PARTHA SARATHI CHAUDHURY, JM For The Revenue : Shri Pankaj Garg For The Assessee : Shri Nikhil Mutha ORDER PER PARTHA SARATHI CHAUDHURY, JM : This appeal preferred by the Revenue emanates from the order of Ld. CIT(Appeals)-3, Pune dated 05.09.2016 for the assessment year 2012-13 as per following grounds of appeal on record: 1. On the facts and circumstances of the case, the Ld. CIT(A) has erred in deleting the entire addition of ₹ 91,60,470/- made on account of disallowance of interest expenses u/s.36(1)(iii) of the IT Act, ignoring the facts that the assessee has not submitted any documentary evidence to prove that interest free funds were available with it at the time(date) when the amounts were advanced to its sister concerns. 2. On the facts an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent order, while disallowing the interest on interest free loans/advances given to the sister concerns held as under: In response to the above, assessee submitted ledgers of these subsidiary in the books of company. The submission of the assessee duly considered. It can be seen from submission that the assessee company has not justified the business purpose of expediency of the amount advance. The loan is given to its related parties. As stated above, the assessee company has huge interest burden. Since the assessee has failed to establish that the fund were utilized for the purpose of the business of the assessee, this same calls disallowances of proportionate amount of interest. Interest on borrowed money in allowed as a deduction from business, only if it satisfies the condition that it is for the purpose of business or profession. Where the money borrowed was diverted for giving interest free loans to subsidiaries, the proportionate interest attributable to such loans could be legitimately disallowed by the Assessing Officer. It was so held to in S A Builders Ltd. Vs. CIT [2004] 269 ITR 535 (P H). The assessee in the present case has not be able to bring any material on record ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s vis-a-vis the contention of the appellant that there was sufficient interest free surplus balance with the assessee to the extent of ₹ 34,03,68,623/- and also there was business expediency for advancing interest free unsecured loans to its sister concerns as well besides the fact that the loans availed from various banks were all for the purpose of vehicle purchase with funds being directly disbursed to the vendors. The appellant has given various charts calculating and establishing the fact that the loans were advanced by the appellant out of its own funds and not borrowed funds. It has specifically given the details regarding Reserve and Surplus available with it vis-a-vis the interest free advances given to the subsidiaries/sister-concerns establishing the fact that it had sufficient funds of its own from 'which the loans and advances were given to them. The appellant also by furnishing a chart of borrowing from the banks and utilization of the same directly for vehicle purchases had established the fact that the borrowed funds were utilized directly for the disbursement to the vendors. It, therefore, cannot be said that the appellant had on both the above scores fai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the subsidiary to various company and at that time the assessee company not only refunded back the entire loan given to the subsidiary by the assessee but which was refunded with interest. In the year in which the interest was received, the same was shown as income and offered for tax. ii) So far as the loans to the Directors are concerned, the assessee had a credit balance in the bank account when the said advance of ₹ 34,00,000/- was given. The company had reserve/surplus to the tune of almost ₹ 15,00,00,000/- and therefore, the assessee company could in any case utilize those funds for giving advances to its Directors. On the basis of the aforesaid discussion, the Supreme Court allowed the appeal thereby setting aside order of the High Court and restoring order of the Appellate Tribunal wherein the appellate Tribunal had upheld the deletion order of the interest by the CIT(A). 5.14 I also find that the appellant has cited the decision of the Bombay High Court in the case of CIT Vs. Reliance utility and Power ltd. (supra) contending that it had sufficient funds available with it form which investments in loan were given to the sister concerns. S A Builder Ltd.' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iii) of the Act, on account of interest free advances given to subsidiaries / sister concerns, which apparently are in favour of the appellant and as the AO could not obtain the details and analyze the same while deciding the issue against the appellant, I hold that the disallowance made u/s.36(1)(iii), being proportionate interest on the interest attributable to such advances, was not justified as per law. I therefore, delete the entire addition made of interest amount of ₹ 91,60,470/-. Ground no.1 raised by the appellant is accordingly allowed. 4. We have perused the case records and analyzed the facts and circumstances of the case. We find that the Ld. CIT(Appeals) has passed his decision on both factual matrix as well as judicial pronouncement in the case of CIT Vs. Reliance Utilities and Power Ltd. (supra.). The Hon'ble Bombay High Court has held that where the assessee had adequate interest free funds by way of proprietary capital or by way of interest free deposit for customers, there is an inference that borrowed funds are not diverted for non business purposes. In such circumstances there can be no disallowances. 5. Further, in the case of CIT Vs. Neelkanth Systh ..... X X X X Extracts X X X X X X X X Extracts X X X X
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