TMI Blog2017 (1) TMI 770X X X X Extracts X X X X X X X X Extracts X X X X ..... funds, is also not found acceptable on the ground that the assessee company took a loan for the first time under C.C. account of ₹ 2.16 crores and term loan of ₹ 2.56 crores from the Bank of Baroda, during the financial year 2005-06 out of which the assessee has extended the advance to the aforesaid sister concern during the financial year 2005-06 also. This proves that the assessee needed such a huge bank loan, because share capital, reserve and profits of the Company, which stood at ₹ 8.44 crores as on 31.03.2010. Therefore, we are of the considered opinion that capital reserve standing at ₹ 6.38 crores as on 31.03.2010 stands already utilized towards investment in fixed assets. Hence, there was no surplus fund ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st or any other value received during the year. The AO examined the reply of the assessee and noted that the assessee has claimed a huge amount on account of interest and bank charges to the tune of ₹ 69,29,242/-. Therefore, the AO has drawn the inference that the assessee company has borrowed loan from Banks at the prevailing market rates for the purpose of regular business needs. Even if the amount of only secured loan is taken into consideration at ₹ 4,60,27,437/- balance as on 31.03.2011. In nut-shell, the AO noted that the assessee was in dearth of funds during the year and to overcome this requirement, the assessee company took secured as well as unsecured loans. The amount of ₹ 69.29 lakhs paid as interest and bank ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... axman.com 546 (Kerala), wherein it was held that interest free loan if not been given to subsidiary company, the assessee would have meet its funds requirement from internal sources. As regards contention of the assessee that advances to sister concern was given out of reserves and profits available with the company was also found incorrect, because of two reasons, firstly, the consequence of availability of funds over the years, the reserves, profits and share capital of the company were duly standing in balance sheet of the company even in financial year 2005-06, yet in that year assessee took a Bank loan for the first time under CC account of ₹ 2.16 crores and term loan of ₹ 2.56 crores from Bank of Baroda and after taking su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; 1.40 crores as on 31.03.2009, wherein the assessee held 50% shares. The advance to M/s. Pro Laboratories Private Limited, Roorkee was to the tune of ₹ 36.11 lakhs as on 31.03.2009, wherein the assessee held approximately 40 % shares. It was submitted that these advances given in the earlier years have been reduced during the year in the case of Cecil Pharmaceuticals. It has come down to ₹ 1.4 crores to ₹ 1.29 crores and in the case of Pro Laboratories, it has marginally increased from ₹ 36 lakhs to ₹ 39 lakhs. It would be seen from the balance sheet that unsecured loans have gone down to ₹ 67 lakhs to ₹ 54 lakhs. The share capital and reserves to the tune of ₹ 6.38 crores. Thus, it could ver ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ized from the said funds, is also not found acceptable on the ground that the assessee company took a loan for the first time under C.C. account of ₹ 2.16 crores and term loan of ₹ 2.56 crores from the Bank of Baroda, during the financial year 2005-06 out of which the assessee has extended the advance to the aforesaid sister concern during the financial year 2005-06 also. This proves that the assessee needed such a huge bank loan, because share capital, reserve and profits of the Company, which stood at ₹ 8.44 crores as on 31.03.2010. Therefore, we are of the considered opinion that capital reserve standing at ₹ 6.38 crores as on 31.03.2010 stands already utilized towards investment in fixed assets. Hence, there was ..... X X X X Extracts X X X X X X X X Extracts X X X X
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