TMI Blog2019 (1) TMI 754X X X X Extracts X X X X X X X X Extracts X X X X ..... not derived any benefit out of such advances to the sister concern. If that is so, the exercise that is required to be done is to examine whether any part of the borrowed funds was diverted to its sisters concerns. This exercise appears to have not been done to the fullest extent. Tribunal has not given cogent reasons as to why the decision in the case of S.A. Builders (2006 (12) TMI 82 - SUPREME COURT) cannot be applied to the facts of the present case as the test in such a case was whether this was done as a measure of commercial expediency. Thus AO has to take a fresh look into the matter, as we are not satisfied on the basis on which the Assessing Officer had come to the conclusion that part of the borrowed funds have been diverte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vestment in the sister concerns, which were made only out of share capital reserves and surpluses ? B. Whether on facts and circumstances of the case the Appellate Tribunal was right in disallowing the entire interest paid by the Appellant, even when the loans were utilized exclusively and wholly for business purposes ? 3. Heard Mr.R.Sivaraman, learned counsel for the Appellant and Mrs.R.Hemalatha, learned Senior Standing Counsel for the Revenue. 4. The Assessing Officer while completing the assessment vide order dated 27.12.2010 held that the assessee claims entire interest paid on its borrowed capital as its expenditure. However, part of the borrowed funds has been diverted to its sister concerns. Further, the Assessing Office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,24,93,492 3. The AO contended that the assessee advanced the borrowed funds to the sister concerns (without interest) and hence disallowed the entire interest on borrowed funds amounting to ₹ 6177,008/- claimed u/s.36(1)(iii). 4. It is submitted that the appellant had made the above advances made to the sister concerns out of its own funds and not the borrowed funds. The appellant had total funds of ₹ 53.09 crores (share capital+Reserves) on 01.04.2007). The advances to sister concerns were made out of these funds. Hence the contention of the AO is erroneous. 5. Admitting but not accepting the contention of the AO, even if the advances were made by the appellant to its sister concerns out of borrowe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the conclusion that the assessee cannot claim that the entire loans advanced to the sister concerns have been given out of its own funds and the funds in the business comes in a common kitty. 7. The Tribunal while testing the correctness of the order passed by the First Appellate Authority has not given any elaborate independent reasoning but has quoted the order passed by the CIT(A) in para 5 of the impugned order. The assessee claimed that these funds were given to the sister concerns bearing in mind the commercial expediency and relied upon the decision in the case of S.A.Builders Ltd., Vs. Commissioner of Income-Tax (Appeals) Chandigarh [288 ITR 1 (SC)] . The Tribunal would state that the return benefit is not an essential requirem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isters concerns. This exercise appears to have not been done to the fullest extent. Further more, the decision in the case of Abhishek Industries (supra) is no longer good law in the light of the decision of the Hon'ble Supreme Court in Hero Cycles (P) Ltd v. Commissioner of Income-Tax (Central), Ludhiana [2015 379 ITR 347 ], wherein, it has been held as follows:- Once it is established that there is nexus between the expenditure and the purpose of business (which need not necessarily be the business of the assessee itself), the revenue cannot justifiably claim to put itself in the arm-chair of the businessman or in the position of the Board of Directors and assume the role to decide how much is reasonable expenditure having rega ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Income-tax Vs. Reliance Utilities Power Ltd, [2009 313 ITR 340 (Bombay)] , wherein, it has been held that if there are funds available both, interest-free and overdraft and/or loans are taken, then a presumption would arise that investments would be out of the interest-free fund generated or available with the company, if the interest-free funds are sufficient to meet the investments. 12. Thus, considering the facts and circumstances of the case, we deem it appropriate that the Assessing Officer has to take a fresh look into the matter, as we are not satisfied on the basis on which the Assessing Officer had come to the conclusion that part of the borrowed funds have been diverted by the assessee to its sister concerns. Thus, we are ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
