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TMI Blog2022 (11) TMI 663X X X X Extracts X X X X X X X X Extracts X X X X ..... . Ltd and M/s. Horizon Hitech Engicon Limited, the assessee has merely mentioned that outstanding amounts for work executed. We fail to understand that if it was an outstanding against the work executed then, it should be a part of the current liability which the assessee has to pay and in case it is not an outstanding and given as an interest free advance for a work contract then, where are such work contract agreements. Neither before the ld. Assessing Officer nor before the ld. CIT(A), the assessee has been able to furnish any such details. Even before us also, general submissions have been made that the amounts have been utilized for commercial expediency purposes. It is for the assessee to prove that it is a part of commercial expedien ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 68,94,750/- after making certain disallowances/additions. The assessee challenged the addition before the ld. CIT(A) and partly succeeded and now the assessee is in appeal before the Tribunal raising the sole issue challenging the ld. CIT(A)'s finding confirming the addition for disallowance of interest made or borrowed funds which have been utilized for giving interest free loans to related parties. 3. The ld. Counsel for the assessee submitted that, interest free loans have been given in due course of business and there was a commercial expediency to give such loan and, therefore, no disallowance of interest is called for. It was also submitted that, the main business of the assessee is construction. The amount given to M/s. Govinda East ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot in dispute that the assessee has utilized such borrowed funds for giving the advances. This fact has been rightly incorporated by the ld. Assessing Officer in the assessment order wherein, the total share capital, reserve & surplus and trade payables and other liabilities are of Rs.52,82,44,606/- and total assets are worth Rs.111,41,20,264/- and so, the difference are not borrowed funds. Even the assessee has not disputed this fact that the disallowance of interest expenditure made by the Assessing Officer is on account of giving interest bearing funds as interest free advance to the following concerns:- Name of company Balance as on 31.03.2012 Remarks Govinda Eastern Developers Pvt. Ltd. 4,87,36,847/- To acquire the land of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing Officer inferred that the amount from the financial institution was not borrowed by the Appellant for its business and on the other hand, the real beneficiary were the related parties. I find that the AO's contention that advance was made out of the borrowed funds has credible basis and the Ld. AO had drawn up a detailed chart showing the utilization of the funds of the Appellant as well as availability of interest free funds with the Appellant and thus, the Ld. AO had brought out in detail, a clear-cut nexus between the borrowed funds and the funds advanced. The AO also duly recorded a finding that interest free advances were given to the sister concerns for non-business purpose. It would be pertinent to here judgment render ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nterest has been paid w.r.t. acquisition of a capital asset prior to the said capital asset being put to use and therefore the interest cost in regard thereof is liable to be disallowed in view of Explanation to Section 36(1)(iii) of the Act. I further note that the Appellant had also granted interest free loans to two other parties namely, M/s. Sigma Steel Engineers Pvt. Ltd and M/s. Horizon Hitech Engicon Limited. However, it is noted that, the Appellant has not been able to prove conclusively on record the commercial expediency of extending interest free advances or long credit periods to sister concerns more-so, when as per a Comprehensive fund utilization chart provided by the Ld. AO, the owners' equity of the Appellant is alrea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the project of the assessee company or was part of an investment in an immovable property. The onus is on the assessee to show that this deal was for commercial expediency purposes and the said sum was part of the stock in trade for the land so purchased. Even after being provided various opportunities by the lower authorities, the assessee failed to provide any details for the reason for such interest free advances. Similarly, for the amount paid to M/s. Sigma Steel Engineers Pvt. Ltd and M/s. Horizon Hitech Engicon Limited, the assessee has merely mentioned that outstanding amounts for work executed. We fail to understand that if it was an outstanding against the work executed then, it should be a part of the current liability which th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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