TMI Blog2019 (5) TMI 348X X X X Extracts X X X X X X X X Extracts X X X X ..... ld clearly fall within the ambit of Section 43A and in turn, directed the Assessing Officer to grant the relief, which was sought to be challenged by the Revenue before the Tribunal. It was brought to the notice of this Court that the issue was squarely covered in favour of the assessee, by virtue of the rulings rendered by the Supreme court in Commissioner of Income Tax, Delhi vs. Woodward Governor India P.Ltd [ 2009 (4) TMI 4 - SUPREME COURT] and Oil and Natural Gas Corporation Ltd, Dehradun, through Managing Director vs. Commissioner of Income Tax, Dehradun. [ 2010 (3) TMI 81 - SUPREME COURT] . In the light of the dictum laid down by the Apex Court, we held that the challenge raised by the Revenue was devoid of any merit and no substantial question of law was involved. The said finding and reasoning will govern the field in this case as well. Disallowance of interest on borrowed funds - interest free advance to a subsidiary company - HELD THAT:- As per the assessment order, the assessee was having a large extent of income and this being the position, the amount that was lent to the sister concern, being only ₹ 2.43 crores, it was not open for the Revenue to have conte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erest free advance to a subsidiary company (a different entity for income tax) unlike in the case of the Supreme court decision in 220 ITR 185 (relied on by the ITAT in this case) where the assessee was the same having different businesses? 4. Whether, on the facts and in the circumstances of the case and the interest free advance being to a subsidiary company unlike in the case of 220 ITR 185 where the interest free advance was by the same assessee to different businesses the ITAT is justified in relying on the same? 2. The sequence of events reveals that the assessment in the case of the respondent/assessee, who is engaged in the manufacture and sale of automotive tyres and tubes, was finalized by the Assessing Officer as per Annexure-A order dated 19.3.2001, in respect of the assessment year 1998-99. Being aggrieved, the assessee took up the matter by way of appeal, which ended up in Annexure-B order, allowing the appeal only in part. Since the assessee was not fully satisfied, the matter was taken up before the Income Tax Appellate Tribunal, who, after considering the facts and figures and also the relevant provisions of law, besides the prec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of Income Tax, Delhi vs. Woodward Governor India P.Ltd [ 312 ITR 254 (SC) and Oil and Natural Gas Corporation Ltd, Dehradun, through Managing Director vs. Commissioner of Income Tax, Dehradun . [ 322 ITR 180 (SC)] . In the light of the dictum laid down by the Apex Court, we held that the challenge raised by the Revenue was devoid of any merit and no substantial question of law was involved. The said finding and reasoning will govern the field in this case as well. 6. Regarding the third question, the learned Senior Counsel for the assessee submits that the issue is squarely covered by the verdict passed by the Apex Court in S.A.Builders Ltd. Vs. Commissioner of Income-Tax (Appeals) another [(2007) 288 ITR 1 (SC)] , which was cited before the Tribunal, as taken note of in 'paragraph 31' of Annexure-C order. The assessee is stated as supported, also by the ruling rendered by the Apex Court in Veecumsees Vs. Commissioner of Income-Tax [(1996) 220 ITR 185 (SC)] . 7. The learned Standing Counsel for the appellant however submits that the decision sought to be relied on by the Tribunal, i.e., [(1996) 220 ITR 185 (SC)] stands entirely ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r their personal benefit, obviously it cannot be said that such money was advanced as a measure of commercial expediency. However, money can be said to be advanced to a sister concern for commercial expediency in many other circumstances (which need not be enumerated here). However, where it is obvious that a holding company has a deep interest in its subsidiary, and hence if the holding company advances borrowed money to a subsidiary and the same is used by the subsidiary for some business purposes, the assessee would, in our opinion, ordinarily be entitled to deduction of interest on its borrowed loans. 9. The Apex Court made it clear that, once it is established that there was nexus between the expenditure and the purpose of the business (which need not necessarily be the business of the assessee itself), the Revenue will not be justified in contending for a proposition as now mooted before this Court. But then, the question is whether there is any reasonable nexus between the expenditure and purpose of the business. This aspect has been considered by the Tribunal as discussed in 'paragraphs 31 and 32' of Annexure-C order, which are also extracted below ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e ld. Counsel for the assessee relied on the decision of the Hon'ble Supreme Court in the case of S.A.Builders 288 ITR 1 (SC). On the other hand, the learned Departmental Representative relied on the orders of the authorities below as well as the decision of the Jurisdictional High Court in the case of V.I. Baby Company, 254 ITR (Ker). 32. We have heard the rival submissions and perused the material available on record including the precedents. The assessee is having maximum funds. The Department has disallowed interest on interest free loans on the ground that the interest bearing loans have been advanced and diverted for non interest bearing funds to M/s.GPEL. However, there is no evidence to show that these loans has been diverted to M/s. GPEL for the purpose of interest free loans. The mixed funds available with the assessee company including the capital and the share capital clearly establishes that the assessee company is having sufficient amount of funds to advance interest free loans to the other companies. When the interest free loans are available with the assessee and the funds being mixed one, the disallowance, under the imagination that only the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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