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TMI Blog2009 (1) TMI 4X X X X Extracts X X X X X X X X Extracts X X X X ..... lance Sheet of the Assessee Company as at 31.03.1999 shows that the Assessee Company has no reserve or own funds for making the investments in the sister concern and therefore, borrowed funds have been utilized and interest on these borrowed funds are rightly disallowed by the Assessing Officer? 2. We may also mention that in Appeal Memo the Revenue had raised the following question:- (B) Whether on the facts and in the circumstance of the case and in law the Hon'ble Tribunal was right in holding that advances to sister concerns were for business purposes even though the Assessee Company is not in the business of investments and there is nothing on record to suggest that the advances made to sister concerns were made for business purposes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rest can be disallowed when the fund is utilized for the purpose of business. It was also pointed out that respondent had borrowed Rs.43.62 crores by way of issue of Debentures and the said amount was utilised as capital expenditure and inter corporate deposit. It was the submission that no part of the interest bearing fund have gone into investments in the two companies. In so far as funds are concerned it was pointed out that income from operation of the company was Rs.418.04 crore which was evenly distributed. Considering this, till December, 1999 the appellant had earned Rs.313.53 crore from its operation. It had raised capital of Rs.7.90 crores and had also received interest free deposit of Rs.10.03 crores. Also it had recovered Rs.39. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order of C.I.T. (Appeal) and submitted that the assessee had total interest free fund of Rs.398 crores. 10. From the facts on record the learned Tribunal was pleased to record a finding that the assessee had sufficient funds of its own for making the investment without using the interest bearing funds and accordingly upheld the order of C.I.T. (Appeal). It is this order which is the subject matter of the present Appeal. 11. At the hearing of this Appeal on behalf of the Appellant learned Counsel submits that the order of the Tribunal is perverse in as much as the Tribunal ignored the fact that the respondent assessee had no interest free funds out its own. It is pointed out that in so far as the shareholders funds are concerned, in terms ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t concerned with the balance sheet as of 31st March, 1999. What would be relevant would be balance sheet as on 31st March, 2000. Apart from that, the learned Counsel has been unable to point out to us from the balance sheet that the balance sheet as on 31st March, 1999 showed that the shareholders funds were utilised for the purpose of fixed assets. To our mind the profit and loss account and the balance sheet would not show whether shareholders funds have been utilised for investments. The argument has to be rejected on this count also. 14. Apart from that we have noted earlier that both in the order of the C.I.T. (Appeals) as also the Appellate Tribunal, a clear finding is recorded that the assessee had interest free funds of its own whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the profits were deposited in the over draft 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 was sufficient material and the assessee had urged the contention before the High Court. The principle therefore would be that if there are funds available both interest free and over draft and/or loans taken, then a presumption would arise that investments would be out of the interest free fund generated or available with the company, if the interest free funds were sufficient to meet the investments. In this case this presumption is established considering th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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