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2015 (8) TMI 1290 - ITAT CHANDIGARH

2015 (8) TMI 1290 - ITAT CHANDIGARH - TMI - Addition on account of interest free advance given to sister concern - Held that:- It is evident that in assessment year 2006-07, the issue of disallowance of interest u/s 36(i)(iii) of the Act, on interest free advances made to sister concerns was examined by the Assessing Officer and it was held by the Assessing Officer that the interest free advances were made out of interest free funds to the extent available. It was only the excess advances, which .....

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. Having held the interest free advances to be out of interest free funds in assessment year 2006-07, the Revenue cannot now take a totally different view and hold the same advances to be out of interest bearing funds in the impugned year.

Even on merits it is clear from the facts stated above, that the assessee had enough interest free funds to advance interest free sums to its sister concern. - Decided against revenue - ITA No. 1085/Chd/2013 - Dated:- 6-8-2015 - SHRI H.L.KARWA, HON& .....

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ed in deleting the addition of ₹ 18,22,368/- made on account of interest free advance given to sister concern by the assessee, thereby ignoring the judgment of Hon ble Punjab & Haryana High Court in the case of M/s Abhishek Industries Ltd., 286 ITR 1. 3. The only issue involved in this case relates to the allowance of interest on account of interest free advance given to sister concern. 4. The brief facts of the case are that the assessee is engaged in the business of manufacturing cyc .....

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vanced and following the judgment of the Hon ble Punjab & Haryana High Court in the case of CIT Vs. M/s Abhishek Industries Ltd. (2006) 286 ITR 1 (P&H), disallowed interest expenses amounting to ₹ 18,22,368/- under section 36(i)(iii) of the Income Tax Act, 1961 (in short the Act ), vide his order dated 26.11.2010. 5. The CIT (Appeals) vide his order dated 4.9.2013, deleted the addition by stating that the fact that the assessee had enough interest free loans of ₹ 3,02,96,760/ .....

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hat the interest free advances were in excess of ₹ 38,61,399/- and made disallowance under section 36(1)(iii) of the Act only on the excess. The learned CIT (Appeals) further observed that the action of the Assessing Officer in this regard was logical, however, in this year, the interest free amounts raised from Directors and relatives are almost double the amount remaining as interest free advance to sister concern. He, therefore, held that the action of the Assessing Officer in making di .....

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f the learned CIT (Appeals) the Revenue has filed the present appeal before the Tribunal. 7. Before me, the learned D.R. vehemently argued that the present case is squarely covered by the decision of the jurisdictional high court in the case of Abhishek Industries Ltd. (suspra). He argued that the distinction on facts made by the learned CIT (Appeals) was incorrect. The learned counsel for the assessee, on the other hand, relied upon the order of the learned CIT (Appeals). He also produced a cha .....

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that the facts in the present case are that, the assesse had advanced interest free amounts to sister concerns since earlier years. At the same time the assesse had taken interest free loans also since earlier years. In the impugned assessment year, the interest free loans given amounted to ₹ 1,51,86,399/- and the interest free loans taken from family members amounted to ₹ 3,02,96,760/-. In the preceding year i.e assessment year 2006-07, the interest free funds available with the as .....

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e of interest u/s 36(i)(iii) of the Act, on interest free advances made to sister concerns was examined by the Assessing Officer and it was held by the Assessing Officer that the interest free advances were made out of interest free funds to the extent available. It was only the excess advances, which were held to be made out of interest bearing funds and the provisions of section 36(i)(iii) of the Act were applied thereon. In the impugned assessment year, on the very same advances, the Revenue .....

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erest bearing funds in the impugned year. The Karnataka High Court in case of Commissioner of Income Tax Vs. Sridev Enterprises 192 ITR 165 has held : We are in agreement with the view expressed by the Appellate Tribunal. The status of the amount outstanding from Nalanda on the first day of the accounting year is the amount that stood outstanding on the last day of the previous accounting year and, therefore, its nature and status cannot be different on the first day of the current accounting ye .....

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in respect of the said amounts advanced during the previous year would result in a contradictory finding; it will not be equitable to permit the Revenue to take a different stand now in respect of the amounts which were the subject-matter of previous years assessments; consistency and definiteness of approach by the Revenue is necessary in the matter of recognizing the nature of an account maintained by the assessee so that the basis of a concluded assessment would not be ignored without actuall .....

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'ble Apex Court in Munjal Sales Corporation Vs. CIT and Another 298 ITR 298(SC) has held : Held also, that since the opening balance of the profits of the assessee-firm as on April 1,1994, was 1.91 crores, and the profits were sufficient to cover the loan given to a sister concern of ₹ 5 Lakhs only, the Appellate Tribunal ought to have held that the loan given was from the assessee s own funds. 11. The Hon'ble Punjab & Haryana High Court in case of Bright Enterprises Pvt. Ltd. .....

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nvestment would be out of the interest free funds generated or available with the company if the interest free funds were sufficient to meet the investment. 12. The assesses case is also squarely covered by the decision of the Punjab and Haryana High Court in the case of CIT-I, Ludhiana Vs. Rakesh Gupta in ITA No.37 of 2014 dated 2.7.2015, wherein one of the substantial questions was as under : "(i) Whether on the facts and circumstances of the case, the Hon'ble ITAT was right in law in .....

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sessee to his son. The respondent/assessee on the other hand contends that during the assessment year in question 2008-2009, only about ₹ 2.14 crores was advanced by him to his son. It would make no difference. The Tribunal has rightly upheld the detailed and reasoned order of the CIT(Appeals). The CIT(appeals) has analyzed the cash available with the respondent. For instance, the opening balance of capital as on 01.04.2007 was about ₹ 13.45 crores and the closing balance as on 31.03 .....

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