TMI Blog2015 (6) TMI 760X X X X Extracts X X X X X X X X Extracts X X X X ..... 41 crore, then, assessee has the funds of ₹ 241 crore. It has given interest free advances of ₹ 153.52 crore only. It has demonstrated that it has more interest free fund than the one given to the sister concern. There is no dispute on facts between both the Assessment Years. Therefore, considering the discussion in Assessment Year 2006- 07, no disallowance is sustainable in this year also. These grounds of appeals are allowed and disallowance at ₹ 44,65,790/- as well as ₹ 46,76,672/- in Assessment Year 2006-07 and 2007-08 are deleted. - Decided partly in favour of assessee. - ITA Nos. 869 & 881/Ahd/2011 - - - Dated:- 16-6-2015 - Shri Rajpal Yadav and Shri Anil Chaturvedi, JJ. For the Petitioner: Shri Vijay Ranjan, A.R. For the Respondent: Shri Nimesh Yadav, Sr.D.R ORDER PER : RAJPAL YADAV, JUDICIAL MEMBER :- The present two appeals are directed at the instance of assessee against separate orders of even date i.e. 18-02-2011, passed by ld. Commissioner of Income Tax(A)-VI, Ahmedabad in Assessment Years 2006-07 and 2007-08 2. The issues involved in both the appeals are common, therefore, we heard them together and deem it app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the interest expenses are not admissible to the assessee. He issued a notice vide order sheet entry 22-12-2008. The assessee has submitted its explanation vide letter dated 26-11-2008. It was contented that assessee has interest free funds of ₹ 23.75 crore which is more than loans given to the sister concern and therefore no disallowance ought to be made. 7. In Assessment Year 2007-08, it revealed to the Assessing Officer that asessee has debited interest expenditure of ₹ 46,76,972/-. The opening balance of the unsecured loan was ₹ 39.41 crore which was enhanced to ₹ 73,11,37,602/-. Thus, there was an increase in the unsecured loan amounts, simultaneously the amounts in advances given to sister concern without charging interest have also been increased from ₹ 23,75,00,209/- to ₹ 1557778397/-. The Assessing Officer disallowed the interest expenses claimed by the assessee. 8. The appeal to the Commissioner of Income Tax (Appeals) did not bring any relief to the assessee. 9. With the assistance of ld. representatives, we have gone through the record carefully. There is no dispute with regard to the position of law that section 36(1)(III) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 90,79,68,256 67,12,66,323 Current Liabilities 4,47,516 55,55,606 Unsecured Loan 29,34,37,311 31,60,75,000 Total 1,21,18,53,083 1,00,28,96,929 Interest free 23,75,00,209 13. The ld. Assessing Officer has observed that the funds referred by the assessee were not available with it, because, it has invested above referred funds in shares of ₹ 100.28 cores and created fixed asset of ₹ 7.10 cores. He further observed that from the perusal of schedule (b) of balance sheet, it reveals that assessee has increased its reserve and surplus by an amount of ₹ 24 crores in the form of re-evaluation of reserve account, meaning thereby no cash-in-flow was available. 14. Let us ascertain the position. The Schedule B with the balance sheet reads as under:- SCHEDULE B RESERVES SURPLUS As at 31.03.2006(Rs.) As at 31.03.2005(Rs.) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee can be said to have been used for the purposes of its business, or, in other words, whether the interest free advances by the assessee can be presumed to have been made out of the interest bearing funds. On this issue, we find guidance from a judgment of Hon'ble Bombay High Court in the case of CIT Vs Reliance Utilities Power Ltd (313 ITR 340) wherein it is held that in a situation in which interest free funds available with the assessee are more than the interest free advances to the subsidiary companies, the presumption has to be that the interest free advances are given out of the interest free funds available to the assessee. While holding so, Their Lordships have observed as follows: If there be interest-free funds available to an assessee sufficient to meet its investments and at the same time the assessee had raised a loan it can be presumed that the investments were from the interest-free funds available. In our opinion the Supreme Court in East India Pharmaceutical Works Ltd.'s case (supra) had the occasion to consider the decision of the Calcutta High Court in Woolcombers of India Ltd.'s case (supra) where a similar issue had arisen. Before the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was not justifiable. The Tribunal on noting these details, in terms held that there was nothing contrary that could be brought on record by the Department. The assessee's equity share capital ₹ 3.85 cores and reserve and surplus of ₹ 5.52 crores also were noted by the Tribunal. It found that the interest free fund available with the assessee was far greater than the loan advanced to the sister concerns and as a corollary to that, it concluded that the borrowed money was not utilized for the purpose of advance to the sister concerns, as had been noted by the Assessing Officer. What had weighed with the Tribunal is the fact that the entire interest free funds included owner's own capital and accumulated profits and other interest free credits and loans and if the total interest free advances including the debit balance of the partners did not exceed the total interest free funds available with the assessee, interest was not disallowable merely on account of the utilization of the funds for non-business purposes. Thus, as can be seen the Tribunal actually relied on the findings given in case of Torrent Financiers Ltd. (supra) and furthermore there was ..... X X X X Extracts X X X X X X X X Extracts X X X X
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