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2013 (7) TMI 444 - AT - Income TaxInterest on interest free loans / advances given to subsidiaries and associate concerns - CIT(A) deleted addition - Held that:- It is an undisputed fact that the assessee had granted loans and advances to its associates and the loans and advances outstanding as on 31.03.2001 to its subsidiaries and its associates was same as that on 31.03.2000 except for an increase of ₹ 0.03 lacs, which supports the contentions of the assessee that no new loans and advances have been granted to the aforesaid concern during the year. Further, from the balance sheet as on 31.03.2001, the assessee has demonstrated that it was having sufficient interest free funds at its disposal. Further, the A.O. has not brought out any tangible evidence to support his contention that interest bearing loans taken by the assessee for the purpose of its own business have been used for non business purpose and the nexus between interest bearing loans and interest free advances has not been proved by the A.O. As decided in assessee's own case [2013 (5) TMI 760 - GUJARAT HIGH COURT] there is no diversion of interest bearing funds to interest free advances - disallowance made under section 36(1)(iii) deleted - In favour of assessee. Disallowance u/s.14A - Held that:- It is an undisputed fact that no fresh investments have been made by the assessee during the year. It is also a fact that as per the balance sheet of the assessee, the interest free funds in form of capital, reserves and surplus are to the extent of ₹ 84,45,567/- lacs whereas the investments are to the extent of ₹ 22.707/- lacs. Thus, the share holder funds are far in excess of the investments. See CIT vs. Reliance Utilities & Power Ltd.[2009 (1) TMI 4 - HIGH COURT BOMBAY] & CIT vs. Hero Cycles Ltd. (2009 (11) TMI 33 - PUNJAB AND HARYANA HIGH COURT). In the present case, the A.O. has not given a specific finding with respect to the expenditure incurred by assessee for earning tax free income. Further, the interest free funds available with the assessee are far in excess of investments. Thus no addition u/s. 14A can be made. In favour of assessee.
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