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TMI Blog2018 (7) TMI 1476X X X X Extracts X X X X X X X X Extracts X X X X ..... '). 2. Facts apropos are that assessee engaged in the business of financing and investments had filed its return of income for the impugned assessment year declaring loss of Rs. 84,55,310/-. Main business of the assessee was providing financial support to concerns in an industrial group called Shriram group. Ld. Assessing Officer noted that assessee had advanced a sum of Rs. 926,59,85,044/- to 102 persons. As per the ld. Assessing Officer, assessee was selective in receiving interest. Ld. Assessing Officer noted that assessee owed a sum of Rs. 1058,41,56,014/- to the group companies, from which advances were given. Ld. Assessing Officer found from the Profit and Loss account that assessee had received interest of C10,09,62,087/- whereas it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pt of Rs. 13,34,06,510/- during the previous year relevant to assessment year 2009-2010. According to it, due to the cash system of accounting followed, for some years interest receipt could be lower than the interest payment and in some other years it could be viceversa. Relying on the decision of Co-ordinate Bench in its own case for assessment year 2009-2010 (ITA No.1690/Mds/2013, dated 27.11.2013) assessee stated that commercial expediency of its investments was upheld by this Tribunal. Assessee also pointed out that the persons to whom it had advanced money had repaid substantial sums. 4. However, ld. Commissioner of Income Tax (Appeals) was not appreciative of the above contentions of the assessee. According to him, assessee had rece ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctions are between related enterprises and it is correct on the part of the Assessing Officer to invoke the concept of matching principle because the disallowance is not governed only by the provisions of 5.36(1)(iii) but is also covered by the provisions of Sec, 40A(2)(b) of the Act. 5.6. Further, as per the indenture of partnership made at Chennai on 01/04/2006, of the Appellant Firm, loans and advances or over-withdrawal from the firm by the partners would result in collection of simple interest @ 12%. For easier comprehension, the relevant Clause no.11 of the partnership deed is captured and provided below. 10.As and when required the firm can obtain loans and or advances from the partners and such loans and or advances which shal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch interest free diversions undertaken by the Assessing Officer is found to be in order and therefore the grounds of appeal of the Appellant are dismissed''. He thus upheld the order of the ld. Assessing Officer. 5. Now before us, the ld. Authorised Representative strongly assailing the order of the ld. Commissioner of Income Tax (Appeals) submitted that assessee was following cash basis of accounting. According to him, this was clearly mentioned in the return of income filed. Ld. Authorised Representative submitted that assessee had received substantial interest from loans and advances given by it. As per the ld. Authorised Representative, investment and loans given by the assessee were only for business purpose. Contention of the ld. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... difference. That apart, copy of the partners current account placed at paper book page 10, shows that debit balances in partners current account arose more on account of losses suffered in the earlier years, than due to any drawings by the partners. It might be true that it had received interest only from four individuals to which it had advanced amounts during the relevant previous year. This does not mean that assessee had not received interest from other parties in other years. During the previous assessment year 2009-2010, it had received interest of C13,34,06,510/- from persons to whom it had advanced loans. Hence in our opinion, it is obvious that disparity between interest received and interest payment arose not on account of any sel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sioner of Income Tax (Appeals). Therefore, we sustain the order of the Commissioner of Income Tax (Appeals) in deleting the disallowance made under Section 14A of the Act. The grounds raised by the Revenue are rejected''. Thus assessee has been considered as an investment company and making investments was part of its business. Hon'ble Jurisdictional High Court also in the case of CIT vs. Shriram Investments (Firm), (2015) 54 taxmann.com 15 also held that deduction u/s.36(1) (iii) of the Act had to be allowed in respect of interest paid, if capital was borrowed for the purpose of business or profession. As already mentioned by us, there is no finding by any of the lower authorities that disparity between interest receipts and payments aro ..... X X X X Extracts X X X X X X X X Extracts X X X X
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