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TMI Blog2022 (6) TMI 405X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 crores of Export packing credit facility by availing a fresh cash credit facility from Central Bank of India. Thus, from the financials of the assessee it is evident that from the loans/credit facility availed from the aforesaid Banks there was no scope for making any payment of interest free loans and advances. Further, it is also evident that assessee had sufficient interest free funds for making any loans and advances. The aforesaid financial state of affairs of the assessee has also not been disputed by the Assessing Officer. Assessing Officer has neither denied nor brought anything contrary to the fact that the amount of secured loan with regard to term loan from banks were utilised by the assessee for the purpose of capital wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... crore shown in earlier year, assessee continued to divert its interest bearing funds for giving interest free advances / loans for unknown purpose. 3. The only issue arising in present appeal is with regard to deletion of disallowance of interest under section 36(1)(iii) of the Act. 4. The brief facts of the case pertaining to this issue, as emanating from the records are: The assessee is engaged in business of trading of locally man-made grey fabrics as well as manufactured/processed finished fabric through outside processor, whenever considered expedient. For the year under consideration, assessee filed its return of income on 01/10/2011 declaring total loss at Rs. 10,92,25,828. During the course of assessment proceedings, fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urpose. Further, the Assessing Officer noted that interest-bearing funds form 54.48% of the total funds of the assessee. Accordingly, the Assessing Officer worked out the disallowance of Rs. 8,08,01,969 under section 36(1)(iii) of the Act, as under: Loans and advances given interest-free Rs. 98,87,66,137 Amount considered for charging interest (being 54.48% of the above loans and advances) Rs. 53,86,79,791 Interest chargeable at 15% Rs. 8,08,01,969 5. In appeal before the learned CIT(A), assessee, by referring to the schedules to balance sheet, submitted that total loans and advances given by the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at hand, it is relevant to note the following data from the schedules to balance-sheet as on 31/03/2011, which is forming part of the paper book at page nos. 7 9: Particulars Balance as on 31.03.2011 (Amount in Rs.) Balance as on 31.03.2010 (Amount in Rs.) Schedule 2 Term Loan from Bank of India 41.89 crore 50.09 crore Export Packing credit from Central Bank of India 0 75.58 crore Cash credit facility from Central Bank of India 75.02 crore 0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry to the fact that the amount of secured loan with regard to term loan from banks were utilised by the assessee for the purpose of capital work in progress and the interest on the said amount was capitalised in the capital work in progress and not debited to the profit and loss account, for the year under consideration. We further find that the Assessing Officer merely on an ad hoc basis made the additions under section 36(1)(iii) of the Act, without bringing anything on record to suggest that interest-bearing funds were actually utilised for the purpose of advancing funds on which no interest was charged by the assessee. 13. In view of the above, we find no infirmity in the impugned order passed by the learned CIT(A) deleting the disal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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