TMI Blog2012 (11) TMI 6X X X X Extracts X X X X X X X X Extracts X X X X ..... is contrary to law and facts and circumstances of the case. 2.1. The CIT(A) erred in deleting the disallowance of interest on borrowed capital amounting to Rs.15,22,917/-. 2.2. The Commissioner of Income Tax(A) failed to appreciate that M/s.Apex Builders and Kalpatharu Enterprises Ltd. are engaged in the business activity of construction and deriving income from House property from the immovable assets owned by them, whereas the assessee is in the field of providing medical and surgical services and therefore, the loan given by the assessee to these entities cannot be on account of business exigency. 2.3. The Commissioner of Income Tax(A) ought to have appreciated that there is no business connection and further the assessee company has not benefited directly or indirectly through such loan given to these entities. 2.4. The Commissioner of Income Tax(A) ought to have appreciated that in the absence of any benefit and lack of business exigency, the decision of Madras High Court in the case of Hotel Savera 239 ITR 795 is not applicable to the facts of the case. 2.5 The Commissioner of Income Tax(A) failed to appreciated that the decision of the Punjab and Haryana ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bove advances were given out of assessee s own funds and therefore, no disallowance was warranted. The assessee placed reliance on the decision of C.I.T Vs. Reliance Utilisites Power Ltd., 313 ITR 340 (Bom.) and C.I.T. Vs. Hotel Savera in 239 ITR 796 (Mad.) . The Commissioner of Income Tax(A) allowed the appeal of the assessee observing as under:- 6.2. I have carefully considered the facts of the case and the submission of the ld. Authorised Representative of the assessee I have also gone through the decisions relied on by the Assessing Officer and Authorized Representative of the assessee. The Hon ble Madras High Court in the case of Hotel Savera (supra) has held as under:- In the facts of the case the Tribunal has found that the money borrowed has been inextricably mixed up with the own funds of the assessee and it was impossible to delineate whichever funds were advanced to Savera Hotels (P) Ltd, free of interest, and in that factual situation, we are of the opinion that the finding of the Appellate Tribunal that no disallowance is called for is a finding of fact and the finding of the Tribunal that it can be inferred that Savera Hotels made the advance out of its o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de. Respectfully following the above decisions, the addition is deleted and the ground is allowed. 6. The Departmental Representative submitted that there was no commercial expediency and therefore, the Assessing Officer was justified in making the disallowance of interest. For his contention, he placed reliance on the decision of Hon ble Kearala High Court in the case of C.I.T. Vs. Accelerated Freeze Drying Co. Ltd in 324 ITR 316 (Kerala) . He also argued that if the assessee had surplus funds available with it, then the same should have been utilized towards repayment of loan taken by the assessee on which the assessee was paying interest instead of giving interest-free advance to its associated concerns. For this he relied on the decision of Hon ble Madras High Court in the case of K.Somasundaram Bros. in 238 ITR 939 (Mad.) . He also relied on the decision of Hon ble Delhi High Court in the case of Punjab Stainless Steel Industries Vs. C.I.T. 324 ITR 396 (Del.) and submitted that it was held by the Hon ble High Court that when the payments were made out of Cash Credit Account shows that advances were extended out of borrowed funds and not out of the credit balance with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R 396 (Del.) . 10. On the other hand, Authorised Representative of the assessee supported the order of the Commissioner of Income Tax(A), which was passed following the decision of Hon ble jurisdictional High Court in the case of Hotel Savera 239 ITR 395 (Mds.) 11. We find that the Assessing Officer has deleted the interest on borrowed capital without recording any finding to the effect that the borrowed capital on which interest was paid by the assessee was diverted by the assessee for providing interest free advances to its sister concerns. It is not the case of the Revenue that the interest free funds available with the assessee were not sufficient to advance interest free money in question to its sister concerns. In our considered view, the onus, which was on the department for making the disallowance by bringing on record some material to show nexus between interest free advance and interest bearing borrowed capital was not at all discharged by the Revenue. Therefore, in our considered opinion, the disallowance was made by the Assessing Officer was on a wrong footing and unsustainable. The finding of the Commissioner of Income Tax (A) that that borrowed funds were utiliz ..... X X X X Extracts X X X X X X X X Extracts X X X X
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