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TMI Blog2024 (9) TMI 1436X X X X Extracts X X X X X X X X Extracts X X X X ..... dentical issue has held that where assessee had advanced the funds to its wholly owned subsidiary company for the purpose of business, no interest paid on borrowed funds could have been disallowed u/s.36(1)(iii) of the I.T. Act. Decision of Hon ble Supreme Court in the case of S.A. Builders [ 2006 (12) TMI 82 - SUPREME COURT] and the decision of Moonrock Hospitality (P) Ltd. [ 2021 (9) TMI 1033 - ITAT DELHI] we are of the opinion that no disallowance of interest paid on borrowed funds could have been disallowed. We, therefore, set-aside the order of the CIT(A) and direct the AO to delete the addition. Grounds raised by the assessee are accordingly allowed. - Shri Rama Kanta Panda, Vice President And Ms. Astha Chandra, Judicial Member For the Assessee : Shri Nikhil S. Pathak For the Revenue : Shri Ramnath P. Murkunde ORDER PER RAMA KANTA PANDA, V.P. : This appeal filed by the assessee is directed against the order dated 25.01.2024 of the CIT(A)/NFAC relating to the Assessment Year 2016-17. 2. Although a number of grounds have been raised by the assessee, however, these all relate to the order of the ld. CIT(A)/NFAC in confirming the disallowance of interest of Rs. 80,21,369/- made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly because the addition was agreed by the AR, no addition can be made since there is no estoppel against law. The assessee relied upon the decisions of Hon ble Supreme Court in the case of S.A. Builders Ltd. Vs. CIT reported in 158 Taxman 74, Hero Cycles Pvt. Ltd. Vs. CIT reported in 379 ITR 347 and various other decisions in order to justify its case that the disallowance of interest was not warranted. It was further submitted that the rate of interest charged by the assessee from its sister concern and the rate at which the amount was borrowed is same and, therefore, there was no reason on the part of the AO to make the disallowance. The assessee further submitted that it had interest free funds to advance the funds to its sister concern and therefore, there was also no reason to make any disallowance of interest expenditure while computing the income of the assessee. 5. However, the ld. CIT(A) was not satisfied with the arguments advanced by the assessee and upheld the addition made by the AO by observing as under : 5. Decision: 5.1 It is apposite to refer to para 5 of the impugned order wherein the following has been recorded- . . . . . . therefore, there is no cause for the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... away from a party the relief that he is entitled to where the tax is levied or collected without authority of law. In the case on hand, it was obligatory on the part of the Assessing Officer to apply his mind to the facts disclosed in the return and assess the assessee keeping in mind the law holding the field. 7.1 Referring to the decision of Pune Bench of the Tribunal in the case of DCIT Vs. M/s. Phadnis Clinic Pvt. Ltd. in ITA No.1666/PUN/2018, order dt. 21.09.2022 for the A.Y. 2011-12, he submitted that in this case also the addition was agreed by the AR of the assessee. The Tribunal, referring to the decision in the case of Bharat Heavy Electricals Ltd. Vs. Mahendra Prasad Jakhmola Ors in Civil Appeal Nos. 1799 to 1800 of 2019 wherein the Hon ble Supreme Court has held that concessions on mixed questions of fact and law cannot decide cases as the evidence, as a whole has to be weighed and inferences drawn therefrom, deleted the addition made by the AO on the ground that AO cannot preclude the assessee to agitate the same issue in appeal. 8. So far as the decision relied on by the ld. CIT(A) in the case of Rameshchandra Co. Vs. CIT reported in 35 Taxman 153 (Bombay) is concerne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us. We find the AO in the instant case made addition of Rs. 80,21,369/- being the difference between the amount of interest paid on borrowed capital and the amount of interest charged from the sister concern on account of loans advanced out of the borrowed capital. We find the ld. CIT(A) sustained the addition made by the AO, the reasons of which have already been reproduced in the preceding paragraphs. It is the submission of the Ld. Counsel for the assessee that merely because the assessee had agreed for the addition before the AO there is no estoppel against law. It is also his submission that the assessee had sufficient funds of its own. Further, the amount was advanced to a wholly owned subsidiary and therefore, such advancement would amount to commercial expediency and therefore, no disallowance of interest is warranted. It is also his submission that the case law relied on by the ld. CIT(A) is distinguishable and not applicable to the facts of the present case. 13. We find some force in the above arguments of the ld. Counsel for the assessee. So far as the case of the Revenue that the assessee had agreed for the addition before the AO and therefore cannot agitate the matter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the statement made by the counsel cannot be accepted as an admission so as to bind the respondent. Further, the Hon ble Supreme Court referred to a decision in the case of C.M. Arumugam Vs. S. Rajgopal reported in (1976) 1 SCC 863 which held that a question involving mixed question of law and fact and a concession made by the party on such a question at the stage of argument before the High Court, cannot preclude him from reagitating it in the appeal before the Supreme Court. The relevant portion of the findings of the Hon ble Supreme Court reads as under: What is clear from the evidence that was led by the parties is that the aforesaid gate passes were issued, as has been stated by the appellant s witness, only at the request of the contractor for the sake of safety and also from the administrative point of view. The idea was security, as otherwise any person could enter the precincts of the factory. This evidence was missed by the Labour Court when it arrived at a conclusion that a direct relationship ought to be inferred from this fact alone. Further, as has been correctly pointed out by Shri Sudhir Chandra, the appellant has, not only in the first review, but also in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct and law, a concession made by a lawyer or his authorised representative at the stage of arguments cannot preclude the party for whom such person appears from re-agitating the point in appeal. In C.M. Arumugam v. S. Rajgopal [(1976) 1 SCC 863], this Court held: 8. . That question is a mixed question of law and fact and we do not think that a concession made by the first respondent on such a question at the stage of argument before the High Court, can preclude him from reagitating it in the appeal before this Court, when it formed the subject-matter of an issue before the High Court and full and complete evidence in regard to such issue was led by both parties . It would be perverse to decide based only on a concession, without more, that a direct relationship exists between the employer and the workmen. Equally perverse is finding that the extended definition of employer contained in the Act would automatically apply. The extended definition contained in section 2(i)(iv) of the Uttar Pradesh Industrial Disputes Act reads as follows: 2. Definitions. (i) Employer includes- (iv) where the owner of any industry in the course of or for the purpose of conducting the industry contracts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the assessee has diverted its interest bearing funds towards non- interest bearing advances to a related concern. I find, the ld.CIT(A) upheld the action of the AO disregarding the argument of the assessee that loan had been advanced on account of commercial expediency and, therefore, no disallowance could be made in the light of the decision of the Hon'ble Supreme Court in the case of SA Builders Ltd. (supra). It is the submission of the Id. Counsel that when the assessee has borrowed money and invested the same in its subsidiary companies with a view to acquire control of a new asset, such interest paid on borrowed capital has to be allowed u/s 36(l)(iii) of the Act. 13 . I find merit in the above arguments of the Id. Counsel for the assessee. The Hon'ble Delhi High Court in the case of Tulip Star Hotels Ltd. {supra) has held that where assessee is engaged in the business of owning, renting and managing hotels, borrowed money and invested the same in iis subsidiary company with a view to acquire control of a new hotel, such interest paid on borrowed capital is allowable u/s 36(1)(iii) of the IT Act, 1961. 14 . 1 find, the Hon'ble Bombay High Court in the case of Re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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