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TMI Blog2015 (5) TMI 269X X X X Extracts X X X X X X X X Extracts X X X X ..... he circumstances of the case, the appellate Tribunal is right in disallowing the claim of interest payment because of the interest-free advances made to sister concern, solely impelled by commercial expediency and used by the payee company for its business only, on the ground that the advances were excessive considering the requirements of assessee's trade with that concern ? (B) Whether on the facts and in the circumstances of the case, the appellate Tribunal is right in confirming the order of the Commissioner (Appeals) disallowing the actual loss incurred due to fluctuation in currency rates in respect of advance received from a foreign buyer and demurrage payable to a foreign buyer ? Facts:- 3. For the assessment year 2001-02 the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 12.85 lakhs. Consequently, the excess foreign exchange loss claimed of Rs. 9.26 lakhs was disallowed by the Assessing Officer. As a result of the above, the Assessing Officer by an order dated 26/03/2004 passed under Section 143(3) of the Act the enhanced the appellant's income from Rs. 28.61 lakhs to 35.87 lakhs after adjusting an enhanced deduction on account of 80HHC of the Act.4. Being aggrieved by the order dated 26.3.2004 of the Assessing Officer, the appellant preferred an appeal to the Commissioner of Income of Income Tax (Appeals) [CIT(A)]. By an order dated 26/12/2005, the CIT(A) concluded as under: (a) On principle upheld the disallowance of interest on pre shipment packing credit in respect of funds diverted to its sis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the appellant to its profit and loss account was disallowed. 5. Being aggrieved, the appellant filed an appeal to the Tribunal. By the impugned order, the Tribunal upheld the order dated 26.12.2005 of the CIT(A) in its entirety as under:- (a) on account of interest paid on pre shipment packing credit to the extent the funds were diverted by the appellant to its sister concern BBPL; and (b) disallowance of the entire loss claimed on foreign exchange fluctuation while making of its account as on 31/03/2001 i.e. previous year ending relevant to Assessment Year 2001-02. 6. Being aggrieved by the impugned order dated 8.8.2007 of the Tribunal, this appeal has been filed by the appellant - assessee on the above substantial questions of law. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... finding of fact in favour of the Revenue. (ii) We proceed on the basis of the admitted position (Assessment Order dated 26.3.2004) that the appellant had enough funds of its own to make advances to M/s BBPL. However, all the authorities under the Act have come to the finding of fact that the appellant had advanced money to M/s BBPL out of the interest bearing borrowed funds. Thus no occasion to apply any presumption to the present facts can arise and therefore, the decision of this Court in Reliance Utilities & Power Ltd.(supra) proceeding on the basis that when both interest free funds and interest bearing funds are available then the presumption would be that investments etc are made would be out of interest free funds can have no applic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nced as a measure of commercial expediency. However, money can be said to be advanced to a sister concern for commercial expediency in many other circumstances (which need not be enumerated here)." We find that the impugned order has not carried out the aforesaid exercise. Neither the Revenue led any evidence to show how the borrowed funds were utilized by BBPL or the appellant given an opportunity to establish the need of the funds by BBPL for the benefit of appellant-Assesses. In the above view, we set aside the order of the Tribunal disallowing payment of interest to the extent of Rs. 17.27 lakhs and restore the issue to the Tribunal for fresh consideration. It is made clear that the Tribunal would also consider the decision of the Apex ..... X X X X Extracts X X X X X X X X Extracts X X X X
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