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TMI Blog2020 (4) TMI 213X X X X Extracts X X X X X X X X Extracts X X X X ..... o make out a case of business connection, we are of the considered view that the case laws relied upon the by the assessee in the case of S.A builders Ltd. vs CIT (supra) has no application to the facts of the present case. Coming back the second arguments of the assessee in the case of Reliance Utilities and Power Ltd [ 2009 (1) TMI 4 - BOMBAY HIGH COURT] - The assessee has made an alternative argument, in light of above judgment that if own funds is in excess of loans and advance or there is mixed funds, including own funds, then the presumption goes in favour of the assessee that loans and advances given is out of interest free funds. In this case, on perusal of facts available on record, including financial statements of the assessee, we find that for the year under consideration, the assessee has incurred losses from its business. Further the net worth of the assessee has been reduced substantially due to losses incurred from the business. At the same time, the long term borrowings and short term borrowings are increased substantially. From the above, it is very clear that there is no interest free fund available with the assesee to explain loans and advances given to sist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : Shri. Kailash Mangal, DR ORDER PER G.MANJUNATHA, Accountant Member: These two appeals filed by the assessee are directed against separate, but identical orders of the Ld. Commissioner of Income Tax (Appeals)-17, Mumbai, both dated 19/09/2018 for the Asst. Years 2013-14 and 2014-15. Since, the facts are identical and issues are common, for the sake of convenience, these appeals were heard together and are disposed-off by this consolidated order. ITA.No.7232/Mum/2018 for AY 2013-14:- 2. The assessee has, more or less raised common grounds of appeal for both assessment years. Therefore, for the sake of brevity, the grounds of appeal filed for the AY 2013-14 are reproduced as under:- 1. The Learned Commissioner of Income Tax (Appeals) erred in confirming the addition made by the learned assessing officer on the ground that there was no commercial expediency in advancing loans to sister concerns and therefore the ratio of the Apex Court in S.A. Builders Ltd. Was not applicable in the appellant s case. 2. Without prejudice to Ground No.1 and strictly in the alternative, the Learned Commissioner of Income Tax (Appeals) failed to appreciate t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under consideration the long term borrowing were increased to ₹ 4,00,52,040/- from ₹ 2,40,27,850/-, whereas the short term loans and advances were increased to ₹ 3,34,26,600/- to ₹ 2,61,92,760/-. He, further noted that the financial statement for the year end shows that there is no utilization of the loans taken for the purpose of business other than diverting them to give loans and advances to sister concerns without charging any interest. Therefore, he opined that the case laws relied upon by the assessee, in the case of SA builders Ltd. vs CIT (supra) has no application and accordingly, by taking note of rate of interest paid by the assessee towards loans borrowed from banks and other sources, adopted 15% rate of interest per annum on the total interest free loans given to sister concerns and worked out interest disallowances of ₹ 50,13,990/-. However, by taking note of the fact that a sum of ₹ 20,73,421/- has already been disallowed u/s 40(a)(ia), the balance sum of ₹ 29,40,569/- has been disallowed u/s 36(1)(iii) of the Act. 5. Being aggrieved by the assessment order, the assessee preferred an appeal before the Ld.CIT(A). Before th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tated in para 4.1 of his order, has confirm the additions made by the Ld. AO towards interest of ₹ 29,40,569/-. Aggrieved by the Ld.CIT(A) order, the assesee is in appeal before us. 7. The Ld. AR for the assesee submitted that the Ld.CIT(A) was erred in confirming interest disallowances u/s 36(1)(iii) towards loans and advances given to sister concerns, without appreciating the fact that there is a commercial expediency in advancing loans to sister concerns and the ratio laid down by the Hon ble Apex Court, in the case of S.A Builders Ltd. (supra) has squarely applicable to assessee case. The ld. AR, further submitted that although, the assessee has made an alternative plea, in light of the decision of Hon ble Bombay High court, in the case of Reliance Utilities and Power Ltd (supra), but the Ld.CIT(A) rejected arguments without explaining how said judgment is not applicable to the facts of the assessee case. The Ld. AR further referring to financial statements filed for the year submitted that the assessee has interest free funds of ₹ 203.58 crores, which is available for explaining loans and advances, but the Ld. AO has rejected the explanation furnished by the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the facts of the present case. 10. Coming back the second arguments of the assesee, in light of decision of Hon ble Bombay High court, in the case of Reliance Utilities and Power Ltd. The assessee has made an alternative argument, in light of above judgment that if own funds is in excess of loans and advance or there is mixed funds, including own funds, then the presumption goes in favour of the assesee that loans and advances given is out of interest free funds. In this case, on perusal of facts available on record, including financial statements of the assesee, we find that for the year under consideration, the assessee has incurred losses from its business. Further the net worth of the assesee has been reduced substantially due to losses incurred from the business. At the same time, the long term borrowings and short term borrowings are increased substantially. From the above, it is very clear that there is no interest free fund available with the assesee to explain loans and advances given to sister concerns. Therefore, we are of the considered view that the ratio laid down by the Hon ble Bombay high court, in the case of Reliance utility power ltd, is also not applicable ..... X X X X Extracts X X X X X X X X Extracts X X X X
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