TMI Blog2016 (9) TMI 55X X X X Extracts X X X X X X X X Extracts X X X X ..... ce on depreciation on the assets treating them capital working in progress - Held that:- On the examination of the detailed annexure-3 at page 188 of the paper book there appears details of assets costing ₹ 27,83,223/- which were transferred from capital work in progress to fixed assets a/c. under plant & machinery head and were put to use on 3rd May, 2008. Similarly, on page 195 of this paper book shows that assets of ₹ 3,15,984/- under electrical installation head were put to use on 22nd May, 2008. Auditors remark which both the lower authorities are referring to is appearing at remarked-3 of Annexure-3 on depreciation details for FY 2008-09 in form 3CD report is just referring that the addition during the year includes the capital work in progress which means that the addition includes some assets which have been purchased during the year and some assets which were forming of capital work in progress upto previous year were now shifted under the block of assets for the purpose of claiming depreciation. We are of the view that remark of statutory auditors has to be seen in totality that Annexure-3A of the same assets duly certified by the same auditor giving bifurcati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Co-ordinate Bench, Kolkata in the case of Jahangir Biri Factory (P) Ltd. v. Dy. CIT (2009 (3) TMI 215 - ITAT CALCUTTA-C ) wherein it has been held that commission paid to the Directors as per their terms of employment for the work done in their capacity as whole time directors should have been treated as an incentive in addition to salary, bonus and other perquisites and they do not fall under the purview of sec.194H or 194J. It is true that tax is deductible on such commission at the rate prescribed u/s 192 of the Act, since such commission is nothing but part of salary and the appellant has failed to deduct such tax. However, provisions of sec.40(a)(ia) of the Act do not cover expenditure subject to tax deductible u/s 192 of the Act. We are therefore of the view that the impugned amount of commission/brokerage paid to directors is a part of salary and remuneration to the Chairman and Managing Directors and income-tax is required to be deducted at source u/s 192 of the Act. Where the assessee has deducted and deposited the part of TDS during the year and the remaining in the following year on the commission paid to whole time directors which is in the nature of salary is right ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o prove that these are non-business advances, we are of the view that in the given facts and circumstances of the case where assessee has sufficient interest free funds, liquid funds and profit earning business, these advances have been made in the regular course of business for commercial expediency. Accordingly, no disallowance was called for ₹ 91,07,595/- on account of interest expenditure u/s 36(1)(iii) of the Act as the advances were for business purposes, commercial expediency and no nexus being proved by the Revenue for actual diversion of interest bearing funds to non-interest bearing advances. No interference is called for in the order of ld. CIT(A). In the result, appeal of Revenue is dismissed. - ITA No.1986/Ahd/2012, ITA No.2133/Ahd/2012 - - - Dated:- 27-7-2016 - Shri Rajpal Yadav, JM, Shri Manish Borad, AM. For The Appellant : Shri S. N. Soparkar, AR For The Respondent : Shri Prasoon Kabra, Sr.DR ORDER PER Manish Borad, Accountant Member . These cross appeals are directed against the order of ld. CIT(A)-XI, Ahmedabad dated 26.7.2012 in appeal No.CIT(A)- XI/368/Addl.CIT.R-5/11-12, passed against order u/s 143(3) of the IT Act, 1961 (in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the case of Vijya Bank 323 ITR 166 3. Briefly stated facts of the case as culled out from the records are that the assessee is a limited company engaged in the business of manufacturing edible and non-edible oil products. Return of income for Asst. Year 2009-10 was filed on 30.09.2009 declaring total income of Ra.19.40 crores (approximately) and book profit u/s 115JB of the Act at ₹ 13.33 crores (appeoximately). The case was selected for scrutiny assessment and notice u/ 143(2) of the Act was issued on 19.8.2010. Various informations were called for and duly complied by the assessee. During the course of assessment proceedings assessee vide its letter dated 5.12.2011 filed a revised computation of income declaring total income at ₹ 19.93 crores (approximately). After making various additions totaling to ₹ 2,61,94,422/- income was assessed at ₹ 22,55,48,604/-. 4. In appeal before ld. CIT(A) assessee got part relief. Now both the assessee and Revenue are in appeal before the Tribunal. 5. First we take up assessee s appeal in ITA No.1986/Ahd/2012 : Ground no.1 of this appeal read as under :- 1. The learned CIT(A) has erred in confirming the dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry details will be supplied by the assessee showing the type of expenditure, year of incurring such expenditure and provisions of TDS applicable on this expenditure was incurred. If on examining the above details Assessing Officer is satisfied that this impugned expenditure at ₹ 14.40 lacs were allowable in the year in which they were spent subject to deduction of TDS then the same should be allowed in the year under appeal after verifying that the TDS has been paid. Needless to mention that assessee should be provided sufficient opportunity of being heard on the issue. This ground is allowed for statistical purposes. 11. Ground No.2 of the appeal reads as under :- 2. The learned CIT(A) has erred in confirming the disallowance of depreciation of ₹ 16,83,501 on five tankers on the ground that they are not used for business in as much as all the five tankers have been hired to N.K. Roadways P. Ltd. and that the said company has in fact used the tankers as per evidence furnished and that the hire charges was not charged through oversight which was offered voluntarily for taxation. 2.1 The appellant says and submits that the learned CIT(A) is not correct in observi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n transportation business. Making convenient entries in the books of accounts of M/s. N.K. Roadways Pvt. Ltd. towards the diesel expenses is not difficult. Otherwise also, in the normal course of business N.K. Roadways Pvt. Ltd. is purchasing diesel on day today basis. This way the evidence furnished by the appellant towards the purchase of diesel does not prove the fact that the trucks-were used for the purpose of business. The mere purchase of diesel does not conclusively proves that the trucks were used for the purpose of business as the trucks may be idle even after the purchase of diesel. As far as plying the trucks for the purpose of business is concerned, the appellant has filed very weak evidences. It is seen that these trucks were not included in the main memorandum of understanding with M/s. N.K. Roadlines Pvt. Ltd. These trucks were hired out to M/s. NX Roadlines Pvt. Ltd. by way of a supplementary agreement. It is also a matter of fact that the appellant has not declared any income towards truck hire charges. During the appellate proceedings the appellant submitted that income of ₹ 31,936/- is voluntarily declared as hire charges. The above mentioned facts makes t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sets being actually used we observe that on pages 11 to 98 of the paper book dated 6.11.2015 exhibiting invoice no.140 dated 31.3.2009 issued by N. K. Proteins to M/s N/ K. Roadways Ltd. for fuel charges. It is pertinent to now that assessee entered memorandum of understanding on 31.3.2008 with M/s N/ K. Roadways on hiring various commercial vehicles owned by assessee which are exhibited at Annexure-A of the Paper Book. There is no dispute raised by Revenue in regard to depreciation in respect of these vehicles. Further supplementary deed to the Memorandum of Understanding dated 31.3.2008 was executed on 15th November, 2008 wherein assessee agreed for giving on hire the trucks or tankers purchased by it during financial year 2008-09. Impugned 5 trucks which were purchased on 27.3.2009 and were ready to use also form part on the supplementary agreement. We further observe that Hon. Jurisdictional High Court in the case of ACIT vs. Asima Syntex (supra) has dealt with similar issue of allowability of depreciation with regard to the use of the asset in the relevant year by observing as under :- 43. We are, therefore, of the opinion that when there is commencement of the business by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be found in the Act or Rules. Whether the plant and machinery were up to the extent of its efficiency is irrelevant for the purpose of deciding depreciation. The test is that building, plant and machinery are used for the purpose of business. It is not even necessary that in a year it must have been used fora particular number of days. If the intention of the Legislature was that if the plant and machinery is used for a particular number of days, only then one is entitled to get the benefit of depreciation, the Legislature would have made that provision. Earlier, rules were to the aforesaid extent. Even recently, with regard to depreciation of vehicles, law is made clear. Therefore, it is for the Legislature to make a provision in that regard. Unless and until that provision is made, plant, machinery and building used for the purpose of business in a particular year irrespective of the number of days for which it worked, and if worked for the purpose of business, would attract the provisions of Section 32 of the Act. 18. Respectfully following the decision of Hon. Jurisdictional High Court in the case of ACIT vs. Asima Syntex (supra) discussed above, we are of the view that as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant Machinery 27,83,222 3. Electric Installation 3,15,984 Total 1,38,49,192 The above facts clearly indicate that the auditors certified that as on 31/3/2008 the appellant was having a total work-in-progress of ₹ 1,38,49,192/-. This includes capital work-in-progress under the head building of ₹ 1,07,49,986/-. It also includes capital work-in-progress under the heads Plant Machinery and Electric installation of ₹ 30,99,206/-. The auditors in the balance sheet relevant for A.Y.2009-10 had not classified building capital work-in-progress as on 3173/2009. The A.O. had agreed with the observations of statutory auditors and has not disallowed depreciation against capital work-in progress under the head buildings. It is interesting to note that the auditors has specifically mentioned that there exists work-in-progress of ₹ 30.99 lacs under the head Plant Machinery and Electric installations. The appellant had only contended that the auditors observation is relevant for 31/3/2008. In this regard the appellant has furn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .5.2012 placed before ld. CIT(A) for supporting the claim that depreciation of ₹ 4,64,850/- on electrical installation and plant machinery should be allowed and the same reads as under :- 5.Depreciation OH Electrical Installation and Plant Machinery of ₹ 4,64,850: 5.1 The learned AO has disallowed depreciation on electrical installation and Plant Machinery of ₹ 4,64,850 on the ground that it forms part of WIP as per the Note No. 3 of the depreciation chart. The depreciation chart is enclosed. The Note No.3 reads as under: Addition during the year includes an amount of ₹ 30.99 lacs which has been classified under [Opening Balance] Capital WIP in the audited financial statements. - 5.2 In the said chart the word opening balance is left out to be mentioned through oversight. It is not a closing balance. The Annual Report for the year ended on 31st March, 2008 and 31st March, 2009 are enclosed. The opening and closing balance are reconciled as under: . Plant Machinery: - Closing Balance as on 31-03-2008 ₹ 1932.30 lacs Plant Machinery included in WIP last year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ead and were put to use on 3rd May, 2008. Similarly, on page 195 of this paper book shows that assets of ₹ 3,15,984/- under electrical installation head were put to use on 22nd May, 2008. Auditors remark which both the lower authorities are referring to is appearing at remarked-3 of Annexure-3 on depreciation details for FY 2008-09 in form 3CD report is just referring that the addition during the year includes the capital work in progress which means that the addition includes some assets which have been purchased during the year and some assets which were forming of capital work in progress upto previous year were now shifted under the block of assets for the purpose of claiming depreciation. We are of the view that remark of statutory auditors has to be seen in totality that Annexure-3A of the same assets duly certified by the same auditor giving bifurcation of each and every assets to the date of its being put to use and above all the depreciation for the year claimed by the assessee is also duly certified by the same auditor. Therefore, we are of the view that no disallowance was called for on depreciation of ₹ 4,64,850/- on the assets of ₹ 30,99,207/- treatin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Hon. Gujarat High Court in the case of CIT vs. Corrtech Energy P. Ltd, reported in [2015] 372 ITR 97 (Guj.), Counsel for the Revenue submitted that the Assessing Officer as well as CIT(Appeals) had applied formula of rule 8D of the Income Tax Rules, since this case arose after the assessment year 2009-2010. Since in the present case, we are concerned with the assessment year 2009-2010, such formula was correctly applied by the Revenue. We however, notice that sub-section(1) of section 14A provides that for the purpose of computing total income under chapter IV of the Act, no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income which does not form part of the total income under the Act. In the present case, the tribunal has recorded the finding of fact that the assessee did not make any claim for exemption of any income from payment of tax. It was on this basis that the tribunal held that disallowance under section 14A of the Act could not be made. In the process tribunal relied on the decision of Division Bench of Punjab and Haryana High Court in case of Commissioner of Income Tax v Winsome Textile Industries Ltd reported in (200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e year by treating them of capital in nature. These sundry debit balance were the old balances lying in the bank account held by assessee which were not recovered as no transactions were entered through both banks for last many years. Ld. CIT(A) confirmed the disallowance by observing as below :- 9.2 I have carefully considered the rival submissions. It is seen that the appellant has claimed an expense of ₹ 56.000/- under the head sundry debit balances written off. It is also a matter of fact that these are statedly old balance in the bank accounts and the appellant does not have any transaction with these banks for so many years. The facts on record indicate that the income in respect of the above said bank balances had never been accounted for by the appellant as income in the earlier years. Accordingly, the conditions of sec.36(1)(vii) are not fulfilled jn the case of the appellant and accordingly, the appellant cannot write off these advances as per the provisions of sec.36(1)(vii) of the IT Act. In view of these facts, I am inclined to agree with the contention of the ld. A.O. and disallowance of ₹ 56,000/- is confirmed. This ground of appeal is dismissed. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be allowable revenue expenditure by observing as under :- 7. In view of these well accepted legal principles, in our opinion, by necessary implication, either short-term or long-term financing is an integral part of the commission agency business. As a commission agent, one either buys the goods or sells the goods for one's principal. When he acts as a commission agent for sales of goods, he purchases the goods for supply to his principal from his funds and then he is reimbursed by his principal on supply of such goods. A commission agent, therefore, has got to advance amounts from time to time according to the nature of his business. It may be a short-term advance if he is a commission agent for purchase of goods or it may be a long-term advance if it is for sale of goods. We have, therefore, not been able to appreciate as to how the Tribunal approached the problem as if the financial lending which is involved in the business of commission agency is a seperate and exclusive business and not an integral part of the commission agency business. It is an admitted position here before us that the assessee-firm was doing the business as commission agents and dealers in grocery ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n agency business makes advances or lends money to an unknown outsider or to a complete stranger, it would be a part of his commission agency business. In the present case, however, the ITO has not only found that the assessee-firm was making such advances in the course of commission agency business but the ITO, Rajkot, has also recorded the statement of one of the partners of the assesseefirm where Shri Ahmed Ibrahim Sahigra stated, inter alia, that the firm was carrying on money-lending business at Bombay and no licence was necessary for such business and the transactions were recorded in the common trading books of account of the firm. In answer to question No. 10 he stated that M/s. Mohmad Peer Mohmad of Nasik approached them for loan and requested them to send money on their behalf to M/s. Gokaldas Virjibhai of Sangli from whom M/s. Mohmad Peer Mohmad of Nasik had purchased the goods were not prepared to wait for their dues and as the latter enjoyed better credit facility with the assessee-firm they approached them for paying off the dues to the Sangli party. In answer to question No. 17 as to when they post entries for interest in the books, the deponent stated that in the ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Revenue s appeal in ITA No.2133/Ahd/2012 for Asst. Year 2009-10 wherein following grounds have been raised :- i) The Id, CIT (A) has erred in law and on facts in deleting the disallowance of ₹ 36,30,000/- made u/s 40(a)(ia) of the I T Act, ii) The Id. CIT (A) has erred in law and on facts in deleting the disallowance of ₹ 83,98,0007- made on account of non compliance of the provision of Section 194H of the I T Act while making payment of commission to the Directors. iii) The Id. CIT (A) has erred in law and on facts in deleting the disallowance of ₹ 91,07,505/- made on account of on account of interest on non interest bearing advance. iv) On the facts and circumstances of the case, the Ld. CIT (A) ought to have upheld the order of the Assessing Officer. v) It is, therefore, prayed that the order of the Ld. Commissioner of Income tax (A) may be set-aside and that of the Assessing Officer be restored. 37. Ground no. (i) of Revenue s appeal is as under i) The Id, CIT (A) has erred in law and on facts in deleting the disallowance of ₹ 36,30,000/- made u/s 40(a)(ia) of the I T Act, 38. During the course of assessment pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sets out an exception to the scope of section. It craves out an area, out of the area covered by the scope of the section, and takes it away from applicability thereof. As Lush J said, When one finds a proviso to a section, the natural presumption is that, but for the proviso, the enacting part of section would have included the subject-matter of the proviso. As Lord Macnaghaten observed, 'the proviso may be a qualification of the preceding enactment which is expressed in terms too general to be accurate'. No doubt that, more often than not, it is somewhat alien to the proper function of a proviso to read it as providing something by way of an addendum or dealing with a subject which is not directly relevant to the section of which it is a proviso. In other words, normally a proviso operates as an exception, rather than as a substantive provision. However, as was observed by the Hon'ble Supreme Court in the case of CIT vs. Jagannath Mahadeo Prasad (1969) 71 ITR 296 (S.C) where the language is quite clear and no other view is possible, it is futile Jo-go into the question whether the proviso to s. 24(1) operates as a substantive provision or only by way of an exceptio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses can neither be disallowed as per the provisions of sec.40(a)(ia) on the first instance in the earlier years u/s.40(a)(ia) and the same cannot be allowed as per the provisions of sec.40(a)(ia) on payment of TDS during the year under consideration. In view of above, disallowance to the extent of ₹ 14.4 lacs is confirmed. As a result the appellant will get relief of ₹ 36.3 lacs. Addition to the extent of ₹ 26,94,384/- (14,40,000/- + 12,54,384/-) is confirmed. This ground of appeal is partly allowed. 39. Aggrieved, Revenue is now in appeal before the Tribunal. 40. Ld. DR supported the order of Assessing Officer. 41. On the other hand, ld. AR submitted that expenditure of ₹ 36.3 lacs which was not claimed in earlier years but as during the year under appeal due TDS was deducted and deposited, claiming of these expenditures of ₹ 36.3 lacs were justified. Ld. AR further submitted that even in case these expenses had been claimed in the earlier year they certainly would have been disallowed because as per the provisions of section 40(a)(ia) of the Act no TDS was deducted and deposited and should be allowed only in the year when TDS is paid. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act which allows to claim deduction of such expenditure in the year in which due taxes (TDS) are deposited. By claiming this expenditure of ₹ 36.3 in this year there is no impact to the Revenue in terms of tax liability. We are, therefore, of the view that assessee should be allowed deduction u/s 40(a)(ia) of the Act for ₹ 36.3 lacs and therefore, no interference is called for in the order of ld. CIT(A) with respect to this ground. Accordingly this ground of Revenue is dismissed. 46. Ground no.(ii) of Revenue s appeal - ii) The Id. CIT (A) has erred in law and on facts in deleting the disallowance of ₹ 83,98,0007- made on account of non compliance of the provision of Section 194H of the I T Act while making payment of commission to the Directors. 47. During assessment proceedings it was observed by ld. Assessing Officer that commission of ₹ 83.98 lacs was given to the Chairman and Managing Director at ₹ 41.99 lacs each. No tax was deducted at source on this amount during the year. As per ld. Assessing Officer disallowance was called for on this amount of ₹ 83,98 lacs. Assessee submitted that commission paid to Directors was part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the l.T. Act. In view of above the addition of ₹ 83,98,000/- is untenable. Otherwise also the method adopted by the A.O. is prejudicial to the interest of revenue. As per the provisions of sec.192 of the l.T. Act, TDS on salary is deducted at the rate of almost 30 to 33%. In this case the tax has been deducted at the rate of 33%. As per the provisions of sec.194H, the tax is to be deducted @10% only. As the appellant has deducted more tax by following the provisions of sec. 192, accordingly, it cannot be said that by deducting the tax as per the provisions of sec. 192, the appellant had tried to deduct lesser tax at source. In view of above facts, the A.O. is directed to delete addition of ₹ 83,98,000/-. This ground of appeal is allowed. 48. Aggrieved, Revenue is now in appeal before the Tribunal. 49. Ld. DR supported the order of Assessing Officer. 50. On the other hand, ld. AR of assessee submitted that sume of ₹ 83,98,000/- was actually part of salary to the Directors on which TDS was deducted as per section 192 of the Act whereas as per ld. Assessing Officer TDS had to be deducted as provisions of section 194H of the Act. Ld. AR also submitted that p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that commission paid to the Directors as per their terms of employment for the work done in their capacity as whole time directors should have been treated as an incentive in addition to salary, bonus and other perquisites and they do not fall under the purview of sec.194H or 194J. It is true that tax is deductible on such commission at the rate prescribed u/s 192 of the Act, since such commission is nothing but part of salary and the appellant has failed to deduct such tax. However, provisions of sec.40(a)(ia) of the Act do not cover expenditure subject to tax deductible u/s 192 of the Act. We are therefore of the view that the impugned amount of commission/brokerage paid to directors is a part of salary and remuneration to the Chairman and Managing Directors and incometax is required to be deducted at source u/s 192 of the Act. 54. Now coming to question 2 whether section 40(a)(ia) of the Act covers the expenditure incurred on salary or not. Now provisions of section 40(a)(ia) of the Act reads as under :- 40. Notwithstanding anything to the contrary in sections 30 to [38], the following amounts shall not be deducted in computing the income chargeable under the head Pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat where in respect of any such sum, tax has been deducted in any subsequent year, or has been deducted during the previous year but paid after the due date specified in sub-section (1) ofsection 139, [thirty per cent of] such sum shall be allowed as a deduction in computing the income of the previous year in which such tax has been paid :] [Provided further that where an assessee fails to deduct the whole or any part of the tax in accordance with the provisions of Chapter XVII-B on any such sum but is not deemed to be an assessee in default under the first proviso to sub-section (1) of section 201, then, for the purpose of this sub-clause, it shall be deemed that the assessee has deducted and paid the tax on such sum on the date of furnishing of return of income by the resident payee referred to in the said proviso.] Explanation.-For the purposes of this sub-clause,- (i) commission or brokerage shall have the same meaning as in clause (i) of the Explanation to section 194H; (ii) fees for technical services shall have the same meaning as in Explanation 2 to clause (vii) of sub-section (1) of section 9; (iii) professional services shall have the same meaning ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . CIT(A) assessee got relief as ld. CIT(A) deleted the disallowance by observing as below :- 10.3 I have carefully considered rival submissions. I have also perused evidences furnished by the appellant and the case laws relied upon by the Id. A.R. It is seen that interest expenses of ₹ 91,07,595/-was disallowed u/s.36(1)(iii) of IT. Act. As per the provisions of section 36(1)(iii), to claim interest expenses, following conditions should be fulfilled. (i) The Assessee must have borrowed money (ii) The interest should have been payable (iii) Borrowing should be made for the purpose of business. In my considered view, appellant has fulfilled all the above conditions and accordingly it is entitled to claim deduction u/s.36(1)(iii) of IT. Act against interest payment, Perusal of the assessment order reveals that the A.O. has not challenged basic enabling conditions as laid down u/s.36(1)(iii) for the allowance of interest. Since the enabling conditions for allowance of interest u/s.36(1)(iii) are fulfilled, accordingly in my considered view disallowance of interest is unwarranted. 10.4 The only observation made by the A.O. is that the assessee has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s non interest bearing funds. 10.7 It is further seen that appellant was having interest free funds of ₹ 49.02 crores (in the form of paid up share capital of ₹ 6.46 crores and reserves surplus of ₹ 42,55 crores). The A.O. has mentioned that appellant has made interest free loans and advances of ₹ 13.58 crores. Thus, interest free advances made is much below the interest free funds available with the appellant in the form of paid up share capital and reserve surplus. It is held by Hon'ble Mumbai High Court in Reliance Utilities and Power Ltd. 313 ITR 340 that if funds are available, both interest free and. interest bearing, then a pre assumption arise that investments are made out of interest free funds generated or available with the assessee. If the interest free funds were sufficient to meet investment, no disallowance of interest is warranted. Respectfully following the ratio of Hon'ble Mumbai High Court decision in the case of Reliance Utilities Power Ltd. I am inclined to agree with the contentions of the Id. A.R. 10.8 During the appellate proceedings the appellant submitted that the advance made to M/s. N.K. Industries Ltd. o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... crores (approx.) and closing debit balance was at ₹ 13.78 crores and round the year the closing balance has never come below approx. ₹ 10 crores at the end of every month and no justification was given for keeping this heavy advances to this party. However, in the case of Vipul Industries to which sum of ₹ 50 lacs has been shown as deposit and was received back in the subsequent year and in the case of Guru Commodities and Pearl Energy old advances of ₹ 2.50 lacs and ₹ 646627/- were given since about 15 years ago. 63. We find that assessee company is dealing with edible oil and non-edible oil and the gross turnover of ₹ 1478.7 crores and profit before taxes at ₹ 13.49 crores. We further observe that reserve and surplus of ₹ 42.56 crores stood along with 6.47 crores as capital as on 31/3/2008. We also observe that total of share capital reserve and surplus at ₹ 49.03 crores is almost 3 times of loan funds of ₹ 15.36 crores. The reason for observing these financial datas are to analyse that assessee company is having huge turnover, heavy profits, sufficient capital basis and availability of interest-free funds. Further we ..... X X X X Extracts X X X X X X X X Extracts X X X X
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