TMI Blog2005 (4) TMI 603X X X X Extracts X X X X X X X X Extracts X X X X ..... to the present Reference are as follows:- The respondent-assessee has been assessed to income-tax in the status of a Company. During the assessment year under consideration, it had advanced a sum of ₹ 37,47,583 to its sister concern, namely, M/S Prem Engineering Works (P) Ltd on various dates. Whereas the services provided by the said sister concern for job work came to the extent of ₹ 21,58,191/-. The respondent-assessee has also given the opening debit balance of ₹ 30, 34,337/- in the name of sister concern. The Assessing Officer was of the view that the respondent-assessee having paid interest on over-draft facilities, it should not make any interest free advances to its sister concern and, accordingly, disallowed a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... High Court in the case of DNSecheron Electrodes Pvt. Ltd. v. CIT reported in 149 ITR page 400. Where the facts of the case were that the ITO disallowed part of the interest paid by the assessee on the capital borrowed by it for the purpose of its business on the ground that the assessee has given advances to some concerns without charging interest and this was upheld by the CIT (A) and Tribunals. On reference the Hon'ble M.P. High Court held that the disallowance of part of the interest was not justified. It is interesting to note that the appellant has given similar interest free advances to similar other parties who are doing the same job work/supply of machinery or the appellant but no adverse view has been taken by the AO in respect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erest-free advances were as follows:- M/s Polymech Sugar Mills Rs.33,00,000/- M/s Godawari Sugar Mills. Rs.17,00,000/- Rs.50,00,000/- It at all it to be considered that the assessee has interest free advances to its sister concern, reasonable presumption that when the assessee has its own capital and interest free advances, the same could have been utilized in the said non business advances. It cannot, therefore, be presumed that the assessee has made interest free advances out of funds borrowed from the bank on which interest has been paid. The over-draft from the bank has been clearly taken for wo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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