TMI Blog2016 (5) TMI 1182X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s 36(1)(iii) on alleged interest free advance ignoring the facts that the said advance was given out of own funds - Held that:- 5. Once, it is established that for a given situation, the assessee has not borrowed any money, for that matter, putting it reverse, the assessee has used his owned funds or interest free funds, there is no question of proving that the funds so taken from owned or interest free funds are used for business purposes. There being no claim of any interest expenditure, no question of deduction to be allowed under section 36(1)(iii) of the Act arises. Once it is presumed that the lending as in the present case is made out of owned funds, assessee need not show the business expediency for the same. An assessee or for that matter any person is free to use his own funds the way he wants. In the present case, as the assessee has used owned funds for such lending, we do not find any need to go into the question of commercial expediency - Decided in favour of assessee - ITA No.848/Chd/2015 - - - Dated:- 12-4-2016 - SHRI H.L.KARWA, VICE PRESIDENT AND MS. RANO JAIN, ACCOUNTANT MEMBER For The Appellant by : Shri Subhash Aggarwal For The Respondent : Shri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authorities below, while the learned D.R. relied on the orders of the lower authorities. 6. We have heard the learned representatives of both the parties, perused the findings of the authorities below and considered the material available on record. The findings of the learned CIT (Appeals) recorded at page 12, para 4.3 of his order, which read as under : 4.3 I have considered the facts of the case, the basis of addition made by the Assessing Officer the arguments of the AR during the course of appellate proceedings. The AR has contended that the appellant is rightly entitled to the additional depreciation on the additions made during the year, which have no connection with the old claims recovered from the buyers on old supplies. However, the appellant is claiming depreciation on tools and dies. At the same time, it is also getting reimbursement of the amount expended on tools and dies from buyers. The appellant has been debiting the expenses on tools and dies as a capital expenditure in its books of account whereas the reimbursement from the buyers is reduced from the opening balance on receipts meanwhile, the appellant claims additional depreciation on the said tools and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... besides raising the issue on merits, the assessee submitted that for the assessment year 2007-08 in ITA No.967/Chd/2012 in assessee's own case under similar facts, 15% rate of interest was considered to be reasonable. Following the decision of the I.T.A.T., the learned CIT (Appeals) held the interest at the rate of 15% as reasonable rate of interest to be paid to the persons specified under section 40A(2)(b) of the Act. Thereby, the learned CIT (Appeals) restricted the rate of interest to 15% as against 18% claimed by the assessee and 12% allowed by the Assessing Officer. 11. Aggrieved by this, the assessee has come in appeal before us and reiterated the submissions made before the lower authorities. It was also stated at the Bar that the bank interest during the relevant assessment year was to the tune of 15.7%. The learned D.R. relied on the order of the learned CIT (Appeals) and further stated that the rate of interest at 15% is quite reasonable. 12. We have heard the learned representatives of both the parties, perused the findings of the authorities below and considered the material available on record. The findings of the learned CIT (Appeals) with respect to this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M/s Technico Strips Tubes Pvt. Ltd., which was returned back during the year. However, during the year, the assessee has given another ₹ 30,00,000/- to the sister concern. The explanation of the assessee was that the amount in earlier year was given for purchase of certain land, while as regards the amount given during the year, it was stated that the assessee had enough owned funds, and the money being lent out of owned funds, no interest is attributable to the same. The Assessing Officer disallowed an amount of ₹ 3,62,132/- being proportionate interest on amounts given to the sister concern, under section 36(1)(iii) of the Act, stating that there is no proof that the advances were given out of business expediency. 16. Before the learned CIT (Appeals) , same submissions were made, which were made before the Assessing Officer and reliance was placed on the judgment of Punjab Haryana High Court in the case of Bright Enterprises Pvt . Ltd. Vs. CIT in ITA No.224 of 2013, dated 24.7.2015. The CIT (Appeals) distinguished the case of Punjab Haryana High Court in Bright Enterprises Pvt . Ltd. (supra) stating that in the said case, the concerns were in hotel business a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion has been laid down in very clear terms by the Jurisdictional Punjab Haryana High Court in the case of Bright Enterprises Pvt. Ltd. (supra) and Kapsons Associates Investments (P.) Ltd.'s case (supra). When it is presumed that no interest expenditure has been incurred for lending money, no disallowance under section 36(1)(iii) can be made. 20. Before parting, we would like to deal with the argument of the learned D.R., to the effect that even if there are sufficient funds, the business expediency for lending the money has to be proved by the assessee. For this, we would like to understand the provisions of section 36(1)(iii) of the Act. Section 36 comes under Chapter IVD of the Act, which deals with the computation of income under the head 'profits gains of business or profession'. Section 36 deals with other deductions, while sub-section (1) to section 36 reads as under : (1) The deductions provided for in the following clauses shall be allowed in respect of the matters dealt with therein, in computing the income referred to in section 28- - - - - 21. Thus, the provisions of section 36(1)(iii) of the Act relates to deductions to be allowed while co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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