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TMI Blog2023 (5) TMI 541X X X X Extracts X X X X X X X X Extracts X X X X ..... as it is expected to earn interest income on every lending and the same should be more than the interest paid on its borrowings - HELD THAT:- This action of the revenue is not justified in the eyes of law. Once the borrowing is utilised for the purpose of business by the assessee, the interest paid on such borrowing would be squarely eligible for deduction u/s. 36(1)(iii) of the Act, irrespective of the fact whether assessee had received interest at lower rate than its borrowing rate or received nil interest. This aspect is very well settled by the decision of Hon ble Supreme Court in the case of Reliance Industries Ltd. [ 2009 (1) TMI 4 - BOMBAY HIGH COURT] and S.A Builders Ltd. [ 2006 (12) TMI 82 - SUPREME COURT ] In any case, the issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income of Rs. 1,10,56,045/- on loans and advances given by it. The ld. AO observed that assessee is engaged in the business of lending and hence it could not have earned lesser interest income than the interest paid on the loans borrowed. In other words, the ld. AO observed that assessee had diverted borrowed funds for advancing interest free loans to certain parties and accordingly proceeded to disallow excess interest paid in the sum of Rs. 8,23,459/- (1,18,79,501 - 1,10,560,45) in the assessment. This action of the ld. AO was upheld by the ld. CIT(A). 4. The ld. AR before us placed on record the consistent stand taken by it with regard to claim of deduction towards interest expenditure as well as offer of interest income in various yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terest paid on its borrowings. 7. The ld. AR argued that whether the assessee is engaged in the business of NBFC or otherwise, the ratio laid down by this Tribunal in assessee's own case could be squarely applicable in the instant case. It is not in dispute that assessee is engaged in the business of lending. The assessee is at liberty to advance loans at the rate of interest depending upon the requirement of the parties and the business requirement of the assessee. The assessee would be free to decide the rate of interest to be charged on its lending to each party. In the instant case, there is absolutely no dispute that the borrowings made by the assessee where utilised for the purpose of business of lending by the assessee. The only gri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds of the assessee company is much more than the interest free funds advanced to sister concerns and others, therefore, no disallowance is called for u/s 36(1) (iii). I find some force in the above argument of the Id. counsel for the assessee. It is an admitted fact that nothing has been brought on record that any specific interest bearing borrowed funds has been diverted by the assessee to the related parties from whom no interest has been charged. since the net owned funds of the assessee company in the instant case is much more than the interest free advances given to related parties and since the Revenue has not brought on record any specific instance of interest bearing borrowed funds being diverted to the related parties free of inter ..... X X X X Extracts X X X X X X X X Extracts X X X X
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