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2017 (1) TMI 770 - ITAT INDOREInterest free advances to the sister concern - disallowance of interest - Held that:- The assessee has un-secured loan amounting to ₹ 5.1 crores as at the end of the previous year relevant to assessment year under consideration. The assessee has paid interest on bank charges at ₹ 69.29 lakhs. We further find that the interest free advances given to sister concern have no business link with the assessee company. The claim of the ld. Authorized Representative of the assessee that the assessee had capital reserves to the tune of ₹ 6.3 crores, hence, non-interest bearing loan, were deemed to have been utilized from the said funds, is also not found acceptable on the ground that the assessee company took a loan for the first time under C.C. account of ₹ 2.16 crores and term loan of ₹ 2.56 crores from the Bank of Baroda, during the financial year 2005-06 out of which the assessee has extended the advance to the aforesaid sister concern during the financial year 2005-06 also. This proves that the assessee needed such a huge bank loan, because share capital, reserve and profits of the Company, which stood at ₹ 8.44 crores as on 31.03.2010. Therefore, we are of the considered opinion that capital reserve standing at ₹ 6.38 crores as on 31.03.2010 stands already utilized towards investment in fixed assets. Hence, there was no surplus funds available with the assessee for making interest free advances to the sister concern. Hence, the proportionate disallowance of interest of ₹ 30.80 lakhs on advance of ₹ 2.20 crores is upheld. - Decided against assessee
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