9911796707
TMI Blog2010 (9) TMI 1287X X X X Extracts X X X X X X X X Extracts X X X X ..... ake up appeal for assessment year 2004-05 because in the order for assessment year 2003-04, the ld. CIT(A) has followed the order of this year. 2. Briefly stated, the facts of the case are that the assesseecompany filed its return of income on 29.10.2004 declaring total income of Rs. 4,92,99,470/-. The assessee debited its Profit Loss Account by Rs. 11,32,092/- as interest and finance charges, which comprised of Rs. 5,13,039/- towards bank charges and the balance of Rs. 6,19,053/- towards interest charges. In assessment year 2003-04, the Assessing Officer had disallowed such interest claimed at Rs. 35,97,424/-. As per the assessee, it had availed term loan of Rs. 7 crores from Rabo Bank, Mumbai, during the financial year 2001-02 toward ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, the Assessing Officer concluded that the loan thus obtained was diverted into the books of the subsidiary companies but the assessee did not charge any interest and the interest bearing loans were given as interest free advances. The assessee rebutted the conclusion by stating that there was no nexus between the borrowed funds and the interest free advances made to the subsidiary companies. The claim of the assessee that the borrowed funds were utilized for assessee s business and the interest paid thereon was deductible/allowable u/s 36(1)(iii) of the Act but the Assessing Officer was not agreeable. Hence, the Assessing Officer disallowed he total interest expenditure of Rs. 35,97,424/-. On the same reasoning, for assessment year 2004-0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all diverted its borrowed funds in shares so section 40A would not apply. It was also argued with reference to page 6 of the paper book that the impugned payments were made much earlier than the investment. 4. We have gone through the relevant records and have carefully perused the oral as well as the written submissions including the paper book. We are fully satisfied that this is not a case of diversion of the borrowed funds by the assessee. The assessee had more than 20 22 crores of general reserve in comparison to which loan was very meager. There seems to nexus between the expenditure and the purpose of business. The Hon'ble Supreme Court in the case of M/s S.A. Builders Ltd vs CIT(supra) has held thus: Once it is establi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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