TMI Blog2012 (9) TMI 358X X X X Extracts X X X X X X X X Extracts X X X X ..... 36(1)(iii). As far as loans to the sister concern at concessional rate of interest is concerned, we are of the view that it would be just and appropriate to direct the Assessing Officer to examine the availability of overall funds – Decided in favor of assessee for statistical purposes. - ITA No.879/Bang/2010 - - - Dated:- 29-6-2012 - SHRI N. BARATHVAJA SANKAR, AND SHRI N.V. VASUDEVAN, JJ. Appellant by : Shri Saravanan, B., Jt. CIT(DR) Respondent by : Shri S. Sukumar, Advocate O R D E R Per N.V. Vasudevan, Judicial Member This appeal by the revenue is against the order dated 09.04.2010 of the CIT(Appeals)-I, Bangalore relating to assessment year 2005-06. 2. Grounds No. 1, 4 5 are general and do not require any specific adjudication. Grounds No.2 3 raised by the revenue reads as follows:- 2. The learned CIT(Appeals) has erred in deleting the addition made by the Assessing Officer on account of disallowance of interest amounting to Rs.6,65,673/- being the difference of interest charged at only 5% on the advance made to the sister concern and the interest calculated at the rate of 8.51% payable on borrowed funds, only on the ground that advance was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the investment had been made in the earlier years and as on 01.04.2005 a sum of Rs. 1,99,83,661 was shown as advance to the sister concern. As on 31.03.2005 the same was Rs.1,82,12,553. In other words there was no money advanced to the subsidiary company during the previous year relevant to AY 05-06. The AO was of the view that the borrowed funds on which interest was paid had been utilized for making investments in the subsidiary company. 6. When confronted, the assessee submitted that the investment in the subsidiary company was made out of its own funds and borrowed funds on which interest was paid was not utilized. It was further pleaded that the investment in the subsidiary was owing to commercial expediency as the subsidiary was formed with the business plan to enable the assessee to enter biotechnology business. The assessee also submitted that the amount was given as advance to the subsidiary and was not utilized by issuing shares. 7. The AO called upon the assessee to prove as to how the investments in the subsidiary were out of its own sources. The assessee explained that the investments in question were made over the period of time and it is not possible to work ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urred for the purpose of earning tax free income. 9. Aggrieved by the aforesaid addition made by the AO, the assessee preferred an appeal before the CIT(Appeals). As far as the disallowance of interest of Rs.6,65,673 is concerned, the ld. CIT(A) accepted the plea of the assessee that interest free loans were given to the sister concern owing to commercial expediency. As far as the addition made by the AO by invoking the provisions of section 14A of the Act is concerned, the ld. CIT(A) accepted that the advances were given to sister concern owing to commercial expediency and that there was no material on record to suggest that the borrowed funds were used for making investments in the sister concern. 10. Aggrieved by the relief granted by the ld. CIT(A), the revenue has preferred the present appeal before the Tribunal. The ld. DR on the issue of disallowance of interest on loans to GEBL submitted that there was no evidence on record to show any commercial expediency which prompted the assessee to give loans to the sister concern at a concessional rate of interest. He also relied upon the decision of the Hon ble Punjab Haryana High Court in the case of Abhishek Industries Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,593.74 Total 1,808.02 2,013.09 Working capital borrowing 793.21 1,440.57 It was the submission that there was sufficient interest free funds available to justify investment in the subsidiary and concessional loans to the sister concern. 13. We have considered the rival submissions. From a perusal of the order of the AO and the CIT(Appeals), it is clear that the loan to the sister concern at concessional rate of interest as well as the investment in the subsidiary had not taken place during the previous year. As rightly contended on behalf of the assessee, the revenue has accepted the fact that the loan to the sister concern at concessional rate of interest and the investment in the subsidiary were either out of own funds or were owing to commercial expediency. Even otherwise, we find that the investment in the subsidiary was only in the nature of an advance for the purchase of shares. Shares had not been actually allotted and this fact is clear from the submission of the assessee before the AO, which is recorded at last paragraph of page 5 and 1st paragraph of page 6 of the assessment order. In such circumstances, it ca ..... X X X X Extracts X X X X X X X X Extracts X X X X
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