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TMI Blog2013 (12) TMI 1047X X X X Extracts X X X X X X X X Extracts X X X X ..... posed of by way of this common order for the sake of convenience. The sole ground of appeal of the appellant is against passing the order u/s.263 of the IT Act whereas Revenue's appeal is against deleting the disallowance of interest of Rs.1,10,40,296/- u/s. 36(1)(iii) of the IT Act. 2. The original assessment was completed by the A.O. in this case on 17.12.2007 u/s.143(3) of the IT Act. The ld. CIT-III, Ahmadabad found the above order erroneous and prejudicial to the interest of revenue for following reasons: i. Bad debt of Rs.44,48,514/- wrongly allowed. ii. Long Term Capital Loss of Rs.9,88,076/- was allowed, even there was no transfer of shares. iii. The appellant had not charged interest on fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... valid. ITA No.1207/Ahd/2012 (Revenue's appeal) 3. The ld. A.O. passed the order u/s.143(3) r.w.s. 263 for A.Y. 05-06 on 15.12.2010 ad he made addition is as under: i. Disallowance of bad debts Rs.44,48,514/- ii. Disallowance of interest expenses Rs.1,10,40,296/- iii. Disallowance of Long Term Capital Loss. Rs.9,88,076/- 4. Being aggrieved by the order of the A.O., the assessee carried the matter before the CIT(A) who had deleted all the additions and decided the appeal in favour of the appellant. When the matter is concluded at the level of A.O. as well as at the level of CIT(A), we are not commenting on the order passed u/s.263 by the CIT. We are deciding the Revenue's appeal on one issue raised by the Department. The A.O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f above that companies mentioned to diversion of income bearing fund to non-interest bearing fund. Thus, he charged interest @ 13% on the two deposits totally to Rs.8,49,25,355/- which was worked out at Rs.1,10,40,296/- and addition was made by the A.O. in the income of the assessee. 5. Being aggrieved by the order of the A.O., the assessee carried the matter before the CIT(A), who had allowed the appeal in favour of the appellant, after considering the reply of the appellant and held as under: "4.3 I have considered rival submissions. I have also perused various evidences furnished by the ld. A.R. It I seen that appellant has advanced following loans during the normal course of business. Sunrise Fincap Pvt. Ltd. 1,50,00,00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onditions were not fulfilled. It is mentioned by the A.O. in the assessment order that relinquishment of interest on ICD amounted to diversion of interest bearing funds to sister concern as non-interest bearing funds. The methodology applied by the assessing officer does not warrant disallowance of interest u/s.36(1)(iii) of the IT Act. Since capital has been borrowed for the purpose of business and the interest expenses. Were duly claimed, accordingly I am of the considered view that interest of Rs.1,10,40,26/- should not be disallowed. This ground of appeal is allowed." 6. Now the Revenue is before us. Ld. CIT D.R. relied upon the order of the A.O. and contended that it was a diversion of income by the appellant to the sister concern. He ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to pay principal on the condition that the interest during year is to be waived. All the evidences for bad financial position of both companies had been given before the A.O. He filed a paper book and claimed that the appellant company is engaged in the financial business and the funds were borrowed for the purpose of business merely because certain loans were given as ICD and interest could not be earned the expenses cannot be disallowed. The borrowings taken were part of financial business. The interest expenses were incurred was also part of business. The appellant further claimed that there was no real income and relied in case of 225 ITR 746 (SC), 98 ITR 415 (All.), 303 ITR 159 (Del) & 220 ITR 410 (Del) and requested to confirm the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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