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TMI Blog2022 (12) TMI 629X X X X Extracts X X X X X X X X Extracts X X X X ..... on gets established that the investments in sister concerns were made by the assessee out of interest free funds and, therefore, no part of interest on borrowings can be disallowed on the basis that the investments were made out of interest bearing funds. It is clear that where interest free funds are available with the assessee and there is net availability of funds, a presumption has to be drawn that the advance made for non-business purposes were advanced by such interest free funds available at the disposal of the assessee. We, therefore, setaside the impugned order and remit the matter to the file of the AO for examining the availability of interest free funds and then compute the disallowance of interest u/s.36(1)(iii) accordingly. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lding as security for the term loan availed by ABEL from the bank. Since production could not take place in the facility of ABEL, the assessee as a strategic partner, did not charge any interest. Not convinced, the AO computed the disallowance of interest on Rs.29.00 crore @12%, which resulted into an addition of Rs.3.48 crore. The ld. CIT(A) deleted the addition. 4. Having heard the rival submissions and perused the relevant material on record, it is seen that the assessee has set up a case before the authorities below that a sum of Rs.29.00 crore was given as advance to M/s. ABEL for business purpose. On further examination, it transpires that the shareholders of the assessee company and another group of Bapat family purchased shares i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... principle, we hold that the money was advanced for non-business purpose. 5. The ld. AR submitted that the assessee has interest free funds available at its disposal and hence, the benefit of availability of such interest fee funds should be allowed in computing the disallowance of interest. 6. The Hon'ble Bombay High Court in CIT vs. Reliance Utilities and Power Ltd. (2009) 313 ITR 340 (Bom), has held that where an assessee possessed sufficient interest free funds of its own which were generated in the course of relevant financial year, apart from substantial shareholders funds, presumption gets established that the investments in sister concerns were made by the assessee out of interest free funds and, therefore, no part of in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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