TMI Blog2014 (7) TMI 385X X X X Extracts X X X X X X X X Extracts X X X X ..... owance has already been restored by the Tribunal in the own case of the assessee for the preceding assessment years to the file of the AO thus, the matter is to be remitted back to the AO for fresh adjudication - The AO will also decide the alternative issue relating to the above interest disallowance u/s 43(B) of the Act Decided in favour of Assessee. - ITA No.1856/M/2011 - - - Dated:- 26-6-2014 - Shri D. Karunakara Rao And Shri Sanjay Garg,JJ. For the Petitioner : Dr. K. Shivaram, A.R. For the Respondent : Shri Jeevanlal Lavidiya, D.R. ORDER Per Sanjay Garg, Judicial Member: The present appeal has been filed by the assessee against the order of the Commissioner of Income Tax (Appeals) [(hereinafter refer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sister concerns and vice versa. The assessee submitted that neither it had charged any interest from sister concerns nor it had paid any interest to sister concerns. The assessee further stated that net advance to sister concerns had come down during the relevant year and, therefore, no disallowance of interest was called for. 3. The AO, however, rejected the contentions of the assessee. According to the AO, onus was on the assessee to show that all the borrowed funds had been used for the purpose of business. In the case of the assessee, there were no accumulated profits from which assessee could have advanced interest free funds. The assessee had therefore, utilized borrowed funds for giving interest free advances. The AO accordingly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns/firms of the assessee group. Therefore, the aforesaid decision of Supreme Court is not applicable on the facts of this case. On the other hand, the action of Assessing Officer is supported by the decision of Madras High Court in the case of M/s. K. Sondram Brothers Vs. CIT 238 ITR 939, wherein it was held that business money should always remain in the business. However, in present case the appellant has paid heavy interest on loans taken from financial institutions and on the other hand it has advance of interest free loans to group concern which is not permissible in the eyes of income tax laws because the same is against the business principles. Therefore, the Assessing Officer was fully justified in making disallowance of interest. O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the record, we find that the aspect of commercial expediency as directed by the Hon'ble Supreme Court in the case of S.A. Builders Ltd. Vs. CIT cited supra has not been looked into either by the Assessing Officer or the CIT(A). The ratio laid down by the Hon'ble Supreme Court in the S.A. Builders Ltd. Vs. CIT (cited supra) is applicable to the facts of the present case. However, the matter is set aside to the file of the Assessing Officer to look into the commercial expediency of advancing interest bearing funds, as interest free advances, to the parties. The Assessing Officer shall afford reasonable opportunity of hearing to the assessee. The ground of appeal raised by revenue is allowed for statistical purposes. Keeping in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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