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2015 (4) TMI 45 - AT - Income TaxDisallowance on account of interest - Held that:- It is apparent the networth / non-interest bearing funds available with the company were much more than the Loan & Advances given. We find that the Inventories held by the assessee company has reduced from ₹ 47.79 cores to ₹ 36.79 cores i.e. by ₹ 11 cores. The cash and bank balances have reduced from ₹ 1.29 cores to ₹ 0.40 cores i.e. by ₹ 0.89 cores. Thus we find that the funds of ₹ 11.89 cores released from the current assets became available as assessee own interest free funds as submitted by them. The Hon'ble Supreme court in the case of S A Builders Ltd. vs CIT (2006 (12) TMI 76 - SUPREME COURT OF INDIA) has held that if the borrowed funds are lent to a sister concern interest free as a measure of commercial expediency, the interest paid on the borrowed fund is for the purpose and the same should be allowed as deduction. Therefore, even if it is presumed that the interest advances were given out of borrowed funds, it will be considered as prudent business decision and to protect the earning of business income and the interest will be allowable as deduction not only under section 36 but also under section 37 of the Act. We find that the assessee had sufficient amount of money towards Share Capital, Reserve & Surplus and the Interest Free Advances given were fully covered by amount of Share Capital, Reserve & Surplus, disallowance of Interest need to be deleted and taking into consideration of the Coordinate Bench of the ITAT ’C’ Bench, New Delhi in assessee’s own case for the assessment year 2003-04 [2012 (10) TMI 317 - ITAT, DELHI] in Revenue’s appeal, we decide the issue against the Revenue by deleting the addition of 1,75,51,634/- on account of interest. - Decided in favour of assessee.
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