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TMI Blog2021 (9) TMI 882X X X X Extracts X X X X X X X X Extracts X X X X ..... essee had raised interest bearing loans, then, the presumption would be that the investments in question were made by the assessee from the interest-free funds so available with it. Our aforesaid view is fortified by the judgment of CIT vs. Reliance Utilities Power Ltd. [ 2009 (1) TMI 4 - BOMBAY HIGH COURT] as observed that in case if the assessee had advanced interest-free amounts out of its mixed funds i.e interest free and interest bearing funds lying in common pool, then, the presumption would be that the amount so advanced was from the interest-free funds available with the assessee company. We are unable to persuade ourselves to subscribe to the view taken by the lower authorities who had disallowed the assessee s claim for deduction of the interest expenditure under Section 36(1)(iii) of the Act, for the reason, that as the assessee was in receipt of interest bearing funds, therefore, it was to be presumed that the interest-free funds given by it to its subsidiary company, viz. SRPL were out of such interest bearing funds. We, thus, not finding favor with the view taken by the lower authorities set-aside the order passed by the CIT(A), to the extent he had upheld th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the business of project financing and advances were given to subsidiary which was wholly and exclusive for the purpose of business, thereby notional interest cannot be disallowed on such advances; Interest under section 234B of the Act; 5. erred in levying interest under section 234B of the Act; Interest under section 234C of the Act 6. erred in levying interest under section 234C of the Act; Initiation of penalty proceeding under section. 271(1)(c) of the Act 7. erred in initialing penalty proceeding under section 271(1)(c) of me Act The appellant craves, lo consider each of the above grounds of cross objections without prejudice to each other and craves, leave to add, alter, delete or modify all or any of the above grounds of cross objections. 2. Briefly stated, the assessee company had on 30.09.2009 e-filed its return of income for A.Y. 2009-10, declaring a total income of ₹ 78,52,57,174/- under the normal provisions and book profit of ₹ 153,25,77,621/- u/s 115JB of the Act. Original assessment was framed by the A.O vide his order passed under Sec.143(3) of the Act, dated 30.11.2011, determining the total income of the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ities and Powers Ltd. (2009) 313 ITR 340 (Bom). 5. Per contra, the ld. Departmental Representative (for short D.R ) relied on the orders of the lower authorities. 6. We have heard the ld. Authorized Representative for both the parties, perused the orders of the lower authorities and the material available on record, as well as considered the judicial pronouncements that have been pressed into service by the ld. A. R to drive home his aforesaid contention. As is discernible from the orders of the lower authorities, the assessee company which is a Non-Banking Finance Company (NBFC) engaged in the business of finance such as project finance, leasing, merchant banking, investments and trading in shares, financial services and advisory business, had during the year under consideration given an interest advance of ₹ 6.57 crores to its 100% subsidiary company viz. Sicom Realty Pvt. Ltd. (SRPL). Observing, that the assessee which had raised interest bearing funds had diverted the same to the aforesaid extent for giving of interest-free advance to SRPL, the CIT was of the view that the A.O while framing the assessment had erred in not disallowing the assessee s claim for de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8,206.47 7,092.26 Borrowed Funds Rs in lakhs Particulars 31st March 2009 31st March 2008 Increase Secured Loans 2,21,089.03 1,90,553.21 30,535.82 Unsecured Loans 23,301.56 18,494.13 4,807.43 Total (B) 2,44,390.59 2,09,047.34 35,343.25 Loans Advances Rs in lakhs Loans advanced 2,53,730.81 2,03,222.75 50,508.06 Advances and deposits 17,539.31 15,725.89 1,813.42 Total (C) 2,88,043.62 2,44,895.67 43,14795 It is stated by the assessee that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r opinion the Supreme Court In Fast India Pharmaceutical Works Ltd. (supra) had the occasion to consider the decision of the Calcutta High Court in Woolcombers of India Ltd. (supra) where a similar issue had arisen. Before the Supreme Court it was argued that it should have been presumed that In essence and true character the taxes were paid out of the profits of the relevant year and not out of the overdraft account for the running of the business and in these circumstances the appellant was entitled to claim the deductions. The Supreme Court noted that the argument had considerable force, but considering the fact that the contention had not been advanced earlier it did not require to be answered. It then noted that in Wootcomber's case (supra) the Calcutta High Court had come to the conclusion that the profits were sufficient to meet the advance tax liability and the profits were deposited in the overdraft account of the assessee and in such a case it should be presumed that the taxes were paid out of the profits of the year and not out of the overdraft account for the running of the business. It noted that to raise the presumption, there sufficient material and the assesses ..... 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