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2015 (9) TMI 1232

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..... ssessee has offered amounts in a later year considering all the years for calculation of interest. The fact that assessee has business interest in various concerns which helps in its own business by way of supply of raw-material for critical products and also for transportation of goods for export, we are of the opinion that the advances are for the purpose of business and commercial expediency is established. For these reasons, we uphold assessee’s contentions and reverse the orders of the AO and CIT(A) on this issue. AO is directed to delete the disallowance of interest, claimed on other borrowals, so made in these two assessment years. - Decided in favour of assessee. - I.T.A. Nos. 258 & 259/HYD/2015 - - - Dated:- 23-9-2015 - Smt. P. Madhavi Devi, Judicial Member And Shri B. Ramakotaiah, Accountant Member For the Petitioner : Shri A. V. Raghu Ram, AR For the Respondent : Shri S. Moharana, CIT-DR ORDER Per B. Ramakotaiah, A. M. These two are assessee s appeals against the separate orders of the Commissioner of Income Tax (Appeals)-4, Hyderabad dated 30-01-2005. Since common issue is involved in both the appeals, Assessing Officer (AO) and CIT(A) s or .....

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..... given to sister-concerns for business purposes. AO did not agree and held that assessee has failed to prove the nexus between loans obtained and its utility entirely for the purpose of business. Assessee also contended that it has charged interest in a later year and since interest amount was already accounted for and assessed, there is no need for disallowance of the interest claim on borrowed funds during the assessment years. AO did not agree with the contentions and disallowed the interest attributable to the amounts advanced to the sister-concerns as above, as in the original order. 6. Ld. CIT(A) has summarized assessee submissions in para 7 of the order as under: 1. The advances were made out of own funds and not borrowed funds in respect of which a clear finding has been given by the Appellate Tribunal in assessment year 2002-03 vide para 44 of the order. 2. The borrowings of the company have in fact reduced from ₹ 103.87 crore in F.Y. 2003-04 to ₹ 85.09 in F.Y. 2004-05 relevant to assessment year 2005-06. 3. The Income Tax Appellate Tribunal has held in the earlier years that the advances are given for the purpose of business. 4. The as .....

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..... ercial expediency. On this issue the AO has given a clear finding that: The assessee s AR vide letter dated 26-08-2013 for A.Yrs. 2005-06 and 2006-07 has submitted that the assessee had no transactions of purchase or sale of materials between Natco Pharma Ltd and Natco Organics Ltd., during the year as the plant of Natco Organics Ltd was under construction during the year and further, the production started in the said concern only during the financial year 2011-12. It is clear from the above that there is no nexus of any commercial expediency for the said advance or loan given by the assessee company to its sister concern for the assessment year under consideration, as the said sister concern was still under the process of being set up. On this count also, the claim of the assessee that as the relief was allowed on the basis of commercial expediency in earlier years by the Hon'ble ITAT and the same should be considered for the year under consideration, is not acceptable . 9. The above finding has not been controverted by the assessee nor any submission made in this regard. In view of the above, I uphold the addition made by the AO and the above grounds of appeal a .....

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..... tstanding amount of ₹ 23.05 Crores as on 31-03-2005. Advance was only ₹ 10,45,38,154/- as on 31-03-2006. This factual information indicates that out of ₹ 18.72 Crores advanced up to 31-03-2004 that was already established to be for the purpose of business. As far as AY 2006-07 is concerned the outstanding advance being less that advance of RS 18.72 crores it can not be stated that assessee advanced funds for non business purposes. There was repayment of advances, so AO erred in coming to a conclusion and disallowing the amount. AO considered that entire amount was for nonbusiness purposes. We are unable to understand how an amount which was already advanced in earlier years right from AY. 1999-2000 onwards and held to be from own funds and for business purposes can be considered as advanced out of borrowals so as to disallow interest claim. There is no logic in disallowing the amount by the AO and confirmation by the CIT(A). 10. As far as further advance of ₹ 4.33 Crores during the year is concerned, it is to be seen that assessee has sufficient funds of its own to advance to its sister-concerns. In fact Hon ble Bombay High Court in the case of CIT Vs. Re .....

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