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2020 (10) TMI 800 - MADRAS HIGH COURTDisallowance u/s 36(1)(iii) - disallowing the proportionate part of the interest the Assessee Company paid to its Bank, under Section 36(1)(iii) - Assessee Company while having majorly only borrowed funds from its Banks and paid interest thereon, diverted substantial part of those funds to its Subsidiary Company and did not charge any interest thereon - HELD THAT:- Hon'ble Supreme Court in the case of Commissioner of Income Tax v. Reliance Industries Limited [2019 (1) TMI 757 - SUPREME COURT] in which held that if any Assessee has got Surplus Funds exceeding the advances made to its Subsidiaries, a presumption could be made that interest bearing Funds have not been diverted to its Subsidiary Company. Having heard the learned counsel for the parties, we are of the opinion that the matter is required to be remanded back to the Assessing Authority for holding enquiry into the matter as to whether the interest bearing borrowed funds were used for advancing loan to the Subsidiary Company or the Surplus Funds of the Company were so diverted. It was a case of unpaid sale price for transfer of of the Sodium Perborate Division made by the Assessee Company to its Subsidiary Company M/s.Chemasia Industries Limited and the outstanding loan liability to the 7.88 crores was also taken over by the Assessee Company. Therefore, even though borrowed funds might have been diverted, but the fact remains that the Assessee did not charge any interest on such unpaid price from the Subsidiary Company and even took over another loan liability of the Subsidiary Company. Matter deserves to be remanded to the Assessing Authority for holding an enquiry into this aspect of the matter and then consider the question of disallowance under Section 36(1)(iii).
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