TMI Blog2013 (11) TMI 1661X X X X Extracts X X X X X X X X Extracts X X X X ..... he electricity connection was in the name of M/s N.K. Industries, but since the actual user was the assessee, therefore, it was being paid by the respondent/assessee and was duly claimed accordingly. It is the claim of the AO that the premises of M/s N.K. Industries was under construction and, therefore, the assessee was not able to use the property for storage purpose and, therefore, the claim was wrongly made. Secondly it was observed by the AO that the assessee did not disclose before the District Supply Officer, Commercial Taxes Department, insurance company etc. etc. that the assessee was using the factory premises of M/s N.K. Industries and that it was a related concern in as much as the proprietor of M/s N.K. Industries is the brother of the assessee. 4. Dissatisfied with the disallowance, an appeal was preferred before the CIT(A). It was submitted by the assessee before the CIT(A) that the assessee has been claiming the said expenditure from year to year and at least from the asst. yr. 2003-04 onwards and all along the said expenditure was allowed. The CIT(A) was also not satisfied about claim of the assessee though the assessee was able to show from the very assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ety and such claim in the asst. yr. 2005-06 was even higher than the year under appeal. In our view, if the premises are being used by the assessee and the assessee is the actual user of the premises and for actual user is paying electricity expenses, then certainly the claim is to be allowed. The learned counsel has not brought any material on record to dispel the finding of fact recorded by the Tribunal. It has also been observed by the Tribunal that if by considering the overall consumption per unit of electricity vis-a-vis excluded units of M/s N.K. Industries then it will become abnormal. Merely because the area was under construction is no ground for disallowance of the claim. It is already a claim by the assessee that the premises was being used only for storage purpose, whether it is partly constructed or fully constructed or under construction is insignificant. Further merely because the assessee did not inform the other Government agencies about actual user of the premises owned by M/s N.K. Industries is insignificant when one is able to justify and has been able to prove that the premises were actually used by the assessee. In our view, it is finding of fact recorded by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he deletion of disallowance of interest of ₹ 19,60,313, an appeal was preferred by the Revenue before the Tribunal, who also after a detailed analysis and relying on the judgment of the Hon'ble apex Court in the case of S.A. Builders Ltd. v. CIT [2007] 288 ITR 1 found the order of the CIT(A) to be justified and dismissed the appeal of the Revenue. 11. Shri Nikhil Simlote, learned counsel for the appellant submitted that the AO was able to correctly come to the conclusion that interest-free loans had been diverted for non-business purposes and only to that extent that the amounts were diverted to the related concern/people and as defined under s. 40A(2) of the Act, the interest amount was disallowed, while the assessee had paid huge interest to the extent of ₹ 87,09,441 and no occasion arose to divert funds to closely related persons when there was heavy burden on the assessee to pay huge interest to the tune of more than ₹ 87 lacs, rather the assessee ought to have repaid to the creditors on the loans which had interest burden and to reduce its own liability of incurring heavy interest. Therefore, he submitted that on the contrary, he has diverted the busin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rest or not. 13. Insofar as advance to M/s N.K. Industries to the tune of ₹ 87 lacs is concerned, it was claim of the assessee that there was opening debit balance of ₹ 61.41 lacs and at the close of the year the debit balance was ₹ 87.35 lacs and it increased by ₹ 26.01 lacs during the previous year on account of trading transactions. It is admitted fact that even with the said concern, the assessee had trade transactions. It is also a finding of fact that for other relatives the advance was out of own capital of the respondent/assessee and interest-free trade creditors or customers and in our view if we analyse these facts after considering the evidence on record that a finding of fact had been reached by the Tribunal so also the CIT(A) and when this is a finding of fact, no question of law can be said to arise. 14. We may only refer to some of the authorities on this subject, which have come to the conclusion that once the assessee proved that it was for business consideration and as a measure of commercial expediency then interest need not be charged or cannot be disallowed. 15. The Hon'ble apex Court in the case of S.A. Builder's Ltd. ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upply of raw material and the advance was made for the purpose of business within the meaning of s. 36(1)(iii) and not for any other consideration; there was regular course of business between the assessee and the firm; and the advances were made to M in the regular course of business; such advances were made in the course of business for commercial expediency and for the purpose of business; the findings arrived at by the Tribunal were not perverse; the entire expenditure was made from the mixed account. Therefore, there would be a presumption that the advance was made out of the assessee's own funds and not from the borrowed capital. Therefore, the CIT(A) and the Tribunal were right in presuming that the assessee was eligible for the benefit of s. 36(1)(iii). 18. The Allahabad High Court in the case of CIT v. Motor Sates Ltd. [2008] 304 ITR 123 has held that it was finding of fact as found in case that respondent-assessee had capital/reserve/surplus of ₹ 6.10 crores on which no interest was being paid and therefore interest- free advances made by it are covered and ultimately held that there is no question of any disallowance of notional interest on loan taken by it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee-firm out of its own funds and, therefore, it was not entitled to claim deduction under s. 36(1)(iii). This finding is erroneous. The opening balance as on 1st April, 1994, was ₹ 1.91 crores whereas the loan given to the sister-concern was a small amount of ₹ 5 lakhs. In our view, the profits earned by the assessee during the relevant year were sufficient to cover the impugned loan of ₹ 5 lakhs. 21. The Hon'ble Allahabad High Court in the case of CIT v. Radico Khaitan Ltd. [2005] 274 ITR 354has held that the assessee-company had sufficient fund other than the borrowed money for giving the amount in question as loan to its sister-concern, which finding had not been specifically challenged in the present appeal. The conditions of s. 36(1)(iii) of the Act had been complied with and, therefore, the assessee company was entitled to full allowance of the amount of interest paid by it on borrowed capital. 22. In view of above facts and circumstances of the case, the Tribunal has correctly come to the conclusion that the interest was rightly allowable on the basis of the facts found and which have been referred to hereinabove. We do not find any questio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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