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TMI Blog2025 (4) TMI 1453X X X X Extracts X X X X X X X X Extracts X X X X ..... meaning of section 36(1)(iii) of the Act. 3. In the alternative, the NFAC ought to have noticed that the appellant had common funds out of which investment was made towards purchase of shares and hence the mere fact that loans were borrowed cannot be basis for assuming that only interest bearing funds were utilised. 4. The NFAC ought to have noticed that advances given M/s United Steel Allied Industries Pvt. Ltd. (USAIPL) in the course of business on 31.03.2016 cannot be treated as advance without any business purpose since the tax authorities overlooked the fact that M/s USAIPL is a group company and the appellant company maintained a running account for obtaining interest free advances and also providing interest free advances from time to time. 5. The NFAC ought to have not confirmed the disallowance of deemed interest expenditure owing to the ratio laid down in the decision of the Hon'ble Supreme Court in the case of S.A. Builders v. CIT 288 ITR 1 (SC) and ACIT vs. Tulip Star Hotels Ltd. (2012) (SC). 6. For these and other grounds that may be urged at the time of hearing. appellant prays that the Hon'ble Tribunal may be pleased to delete the arbitrary additions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (-) negative "Reserves and Surplus" during the year under consideration and earlier years, which indicates that the assessee company had given Loans and Advances from the borrowed funds to group companies viz., M/s United Steel Allied Ind Private Limited and M/s Kamineni Health Care Private Limited. Therefore, the nature and character of the amount in Balance Sheet will not change in the FY-2015-16 and it is undisputedly loans and advances given to it's group concern, for which, interest has not been charged and on the other hand the assessee has paid huge finance cost of Rs. 1,87,05,189/- on account of loans taken. Therefore, the Assessing Officer by relying upon the decision of Hon'ble Punjab and Haryana High Court in the case of CIT, Patiala vs., M/s Punjab Tractors, in ITA No.458 of 2015 (O&M) dated. 03.02.2017, noted that once it is established that the assessee had raised certain loans for business purposes, on which interest liability is being incurred and on the other hand, the funds were advanced to sister concern for non-business purposes on interest free basis, then the interest payable by the assessee to financial institutions to that extent cannot be held to have been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vestment from two of it's Directors viz., K. Suryanarayana and K. Indira amounting to Rs. 4.03 crores and the same has been invested in another group company i.e., M/s. Kamineni Health Care Pvt. Ltd., and, therefore, the question of treating the said investment as loans and advances within the meaning of sec.36(1)(iii) of the Act does not arise. Learned Counsel for the Assessee further referring to the amounts given to M/s. United Steel Allied Ind Private Limited submitted that the said transaction is a normal current account between the group companies in the ordinary course of business and, therefore, treating the same as loans and advances for the purpose of sec.36(1)(iii) of the Act is not correct. Although, the learned CIT(A) directed the Assessing Officer to compute the interest for actual period of loan i.e., one day, but, the learned CIT(A) has factually erred in considering the said advance as loans and advances to compute interest u/sec.36(1)(iii) of the Act. Therefore, he submitted that the addition made by the Assessing Officer and sustained by the learned CIT(A) should be deleted. 8. Shri Srinath Sadanala, Sr. AR for the Revenue, on the other hand, supporting the orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Assessing Officer as loan for the purpose of sec.36(1)(iii) of the Act is in fact, an investment in another group company, but, not a loan. Therefore, in our considered view, the Assessing Officer is erred in invoking the provisions of sec.36(1)(iii) of the Act for the amount invested in M/s. Kamineni Health Care Pvt. Ltd. Further, assuming for a moment it is a loan and advance for the purpose of sec.36(1)(iii) of the Act, but, the fact remains that the assessee has given said loan and advance out of it's own interest free funds available in the form of fresh investment received from two of it's Directors. Further, no interest bearing funds have been used for the purpose of giving amount to M/s. Kamineni Health Care Pvt. Ltd. and, therefore, on this count also, the addition made by the Assessing Officer towards disallowance of interest u/sec.36(1)(iii) of the Act cannot be sustained. We, therefore, delete the addition made by the Assessing Officer towards interest on amount given to M/s. Kamineni Health Care Pvt. Ltd. 10. Coming back to loan and advances given to M/s. United Steel Allied Ind Private Limited. There is no dispute with regard to the fact that the appellant-compa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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