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TMI Blog2019 (3) TMI 90X X X X Extracts X X X X X X X X Extracts X X X X ..... ccordingly, for the sake of convenience, these appeals are being disposed of by this common order. 2. In all the three appeals, the assessee is contesting the decision of learned CIT(A) in confirming addition of interest income of Rs. 58.00 lakhs, Rs. 66.95 lakhs and Rs. 29.00 lakhs made by the AO in Assessment Years 2005-06 to 2007-08 respectively. 3. The facts relating to the case are stated hereunder in brief: The assessee company belongs to the Embassy Group and is involved in the business of real estate development. The original assessment for all the three years was completed under section 143(3) of the Act. The Revenue carried out search and seizure operations in the case of Shri. Sanjay Ghodawat Group of cases located at Kolhapur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Supreme Court in the case of SA Builders Vs. CIT (2007) 288 ITR 1 in order to contend that the transaction made out of commercial expediency will not call for disallowance of interest expenditure. 5. The AO was not convinced with the contentions of the assessee and accordingly added interest in all the three years as stated below: 2005-06 58,07,800/- 2006-07 66,94,560/- 2007-08 29,00,000/- 6. In the appellate proceedings, the learned CIT(A) noticed that the assessee has paid advance amount to M/s. TIPL every month i.e., the assessee paid a sum of Rs. 56.36 lakhs every month for first few months and subsequently Rs. 72.50 lakhs was paid every month from August 2005 to March 2006. Accordingly, the learned CIT(A) took a view that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the amount advanced to the sister concern was not utilized for the construction of the project and hence it was held that the amount advanced was not for any business expediency and it was a loan transaction. Accordingly, it was held by Ld CIT(A) that the assessee was not entitled for any deduction of interest attributable to such advance. 8. The learned CIT(A), while adjudicating identical addition made in AY 2006- 07 and 2007-08, has also considered the position of own funds available with the assessee. He noticed that the own funds available with the assessee in the form of share capital and reserves and surplus were far less than the amount advanced to M/s. TIPL. Hence, the learned CIT(A) rejected the contentions of the assessee that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irmed the addition. He further submitted that the quantum of advance given was wrongly taken by the tax authorities. He reiterated that the advances were given towards business dealings only and further there was no agreement to charge interest on the above said advances. Accordingly he contended that the tax authorities are not justified in computing interest income, when there is no such agreement between the parties. Accordingly he contended that the Ld CIT(A) was not justified in confirming the addition made by the AO in all the three years under consideration. 10. The Ld D.R, on the contrary, submitted that the assessee did not have any interest bearing funds and hence the loan funds only has been diverted by the assessee to M/s TIPL. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... given by the assessee to M/s TIPL. In any case, this ledger account copy and the nature of business transactions have not been examined by Ld CIT(A). 12. We also notice that there is lack of clarity on the facts surrounding the issue. The assessee claims that it has not diverted any loan funds for giving impugned advances and it has used only its rental income proceeds for giving the advances. However, the Ld CIT(A), after analyzing the financial statements of the assessee, has given a finding that the assessee does not possess interest free funds equivalent to or in excess of the advance given. The Ld A.R also submitted that the quantum of advance mentioned by the tax authorities is not correct. 13. In view of the above, we are of the op ..... X X X X Extracts X X X X X X X X Extracts X X X X
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