TMI Blog2015 (7) TMI 1102X X X X Extracts X X X X X X X X Extracts X X X X ..... or purchase of debentures and not for any other purpose by the assessee. Further no evidence was brought on record by the Revenue to show that the assessee has advanced interest bearing funds to its subsidiaries as interest free advance - Decided in favour of assessee Addition made on account of interest free loans advanced to the sister concerns - Held that:- We find that the Commissioner of Income Tax (Appeals) has observed that the assessee had given interest free advances to its subsidiaries in its business requirements. He placed reliance on the decision of the Hon’ble Bombay High Court in the case of CIT-7 Vs. Reliance Communications [2012 (5) TMI 160 - BOMBAY HIGH COURT ] and has held that where interest free borrowed funds are ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... observed that the assessee company has given huge interest free advances to the sister concerns. According to the Assessing Officer, the assessee company has not proved whether the borrowed funds are wholly and exclusively used for business purpose or diverted to giving of interest free advances to sister concerns. Therefore, the entire interest of ₹ 70,93,991/- was disallowed by the Assessing Officer. 5. On appeal, Commissioner of Income Tax (Appeals) held that the Assessing Officer has made disallowance only because the interest free loans have been advanced to sister concerns without making any efforts to find whether the loans given are out of interest bearing loan funds or assessee s own funds. The assessee has submitted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ground of appeal of the Revenue is dismissed. 9. Ground No.3 of the appeal is directed against the order of Commissioner of Income Tax (Appeals) deleting the addition of ₹ 15,37,40,627/- made on account of interest free loans advanced to the sister concerns. 10. Brief facts of the case are that the Assessing Officer observed that the assessee has advanced interest free loans of ₹ 1,32,31,09,867/- to its subsidiaries and no interest is charged on these loans. Therefore, the Assessing Officer added ₹ 15,37,40,627/- as interest income which the assessee would have earned on interest free advances given to its subsidiaries at the market rate of interest at 12%. 11. On appeal, Commissioner of Income Tax (Appeals) delet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. Reliance Communications in Appeal No.3 155 of 2009 and delivered on 28.03.2012. In this case, the Hon. High Court of Bombay relied on the decision of Hon Supreme Court in the case of S.A. Builders in Civil Appeal Nos. 5811 5812 of 2006, reported in (007) 288 ITR 1 (SC). In the case of Reliance Communications, the Hon. High Court decided with following concluding para. Now, having regard to this factual background, both the CIT(A) and the Tribunal held that the investments made in the wholly owned subsidiary and the money advanced to RIL were for furthering the business of the assessee. The findings of both the CIT(A) and of the Tribunal are consistent with the judgment of the Supreme Court in S. A. Builders. Where the assessee, as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ently, we are not inclined to interfere with the order of the Tribunal. There is a finding of fact that interest free funds borrowed are not utilized for the purposes of both the transactions. But quite apart from that, the finding is 4 Compact Oxford Reference Dictionary pages 11 and 436. VBC 15/15 itxa 3155.09-28.3 that the funds were deployed as a matter of commercial expediency and to further the business of the assessee. The latter finding is independent of whether borrowed funds were or were not utilized, for in view of the judgment of the Supreme Court held, the fact that borrowed funds were utilized for making investments or, as the case may be, for making advances would not disentitle the assessee to the deduction so long as busine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore, he deleted the notional interest of ₹ 15,37,40,627/-. The Hon ble Gauhati High Court in the case of Highways Construction Co. Pvt. Ltd. Vs. CIT reported in 199 ITR 702 (Gau.) held as under:- ii) That there was no finding of fact to the effect that actually the loan had been granted to the managing director or any other person on interest, or that interest had actually been collected but the collection of the interest was not reflected in the accounts. The finding of the Income-tax Officer was that the assessee ought to have collected interest. If the assessee had not bargained for interest, or had not collected interest, the income-tax authorities could not fix a notional interest as due, or as collected by the assessee. Ther ..... X X X X Extracts X X X X X X X X Extracts X X X X
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