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2022 (6) TMI 405 - AT - Income TaxDisallowance of interest u/s 36(1)(iii) towards interest expenditure - assessee company diverted its “interest bearing funds” for giving “interest free advances / loans” for unknown purpose - CIT-A deleted the addition - HELD THAT:- As clearly discernible that loans and advances given by the assessee, during the year under consideration, marginally increased by Rs. 6.69 crores, whereas the interest-free unsecured loans obtained by the assessee rose by Rs. 26.93 crores. Further, there was a reduction in term loan from Bank of India. During the year under consideration, the assessee has repaid amount of Rs. 75.58 crores of Export packing credit facility by availing a fresh cash credit facility from Central Bank of India. Thus, from the financials of the assessee it is evident that from the loans/credit facility availed from the aforesaid Banks there was no scope for making any payment of interest free loans and advances. Further, it is also evident that assessee had sufficient interest free funds for making any loans and advances. The aforesaid financial state of affairs of the assessee has also not been disputed by the Assessing Officer. Assessing Officer has neither denied nor brought anything contrary to the fact that the amount of secured loan with regard to term loan from banks were utilised by the assessee for the purpose of capital work in progress and the interest on the said amount was capitalised in the capital work in progress and not debited to the profit and loss account, for the year under consideration. We further find that the Assessing Officer merely on an ad hoc basis made the additions under section 36(1)(iii) of the Act, without bringing anything on record to suggest that interest-bearing funds were actually utilised for the purpose of advancing funds on which no interest was charged by the assessee. - Decided against revenue.
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