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TMI Blog2016 (7) TMI 1525X X X X Extracts X X X X X X X X Extracts X X X X ..... raised by the assessee being (i) The ld. Commissioner of Income Tax (Appeals) erred in confirming the re-assessment proceedings u/s.143(3) r.w.s 147 of the Act as valid (ii) The ld. Commissioner of Income Tax (Appeals) erred in sustaining the disallowance of interest aggregating to 7.62,89,206/- claimed u/s.36(1)(iii) of the Act without appreciating that the loans were advanced without interest to Group companies for business purposes and (iii) the ld. CIT(A) erred in sustaining the disallowance of fee paid to Registrar of Companies (ROC). 3. At the time of hearing, the ld. Counsel has not pressed ground No. three, being fees paid to Registrar of Companies and we adjudicate first two grounds. 4. The Brief facts of the case are that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issued and the ld. Authorised Representative filed explanation at para 6.2 as under:- ''We submit that the advance given to M/s. Empee Distilleries Limited is out of the interest bearing funds is erroneous and not justified. This is because of the fact, we have availability of non interest bearing funds of 73 Crores being the share application money earlier. In any event, the money advanced to M/s. Empee Distileries Limited should not be considered as diversion for non business purpose in as much as the group development especially in the contest of common management, unity and control as well as inter-lacing of funds should be taken into consideration and the monies advanced are used only in the business of the other group company. In t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee company has provided interest free loan of 76,80,01,522/- to the group companies on the concept of commercial expediency and to protect mutual interest of group companies. Further the assessee company could not explain with details compelling reasons to make interest free loan to M/s. Empee Distilleries Ltd and others. The ld. Commissioner of Income Tax (Appeals) found diversion of interest bearing fund for non business purpose and doubted the genuineness. The assessee company has received interest bearing unsecured loans from M/s. Empee Sugars & Chemicals Ltd and debited the interest charges in the profit and loss account and accommodated interest fee advance to group concern M/s. Empee Distilleries Ltd. The lender company M/s. M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of M/s. Empee Holdings Ltd and M/s. Empee Distilleries Ltd and administrative office of M/s. Empee Sugars Authorised Representative having common address. The assessee company provided unsecured loans to M/s. Empee Distilleries Ltd on concept of protection of mutual trust with Business expediency and prayed for setting aside the order of CIT(A) and allow the grounds of payment of interest to group company. 7. Contra, the ld. Departmental Representative relied on the order of Commissioner of Income Tax (Appeals) and argued on disallowance were the transaction of non charging of interest on advance paid to M/s. Empee Distilleries Ltd shall not be called as business expediency as same having common Directors and share holders and prayed fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oans was routed through the assessee company. The income of the assessee company is only on redemption of mutual funds and no business activities are carried in the previous year. The explanations that the interest free loan provided to M/s. Empee Distilleries Ltd are out of interest free funds cannot be accepted as the financial statements of the assessee company could not support arguments of the ld. Authorised Representative. The ld. Authorised Representative relied on the decision of CIT vs. Hero Cycles (323 ITR 518) (P & H) but we are of the opinion that the assessee company on one hand obtain Interest bearing loans from the same management company and give interest free loans to other company in the same management and set off interes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oans compared to earlier years. The factual matrix that the assessee has not charged any interest on advances to M/s. Empee Distilleries Ltd. But claimed interest in profit and loss account for advances from group company. The ld. Authorised Representative explained that advances are made on commercial expediency and interest expenditure has to be allowed. We considering the apparent facts found on verification All the three companies are under same management and with common shareholding. We are not convinced with the concept of change of opinion as the financial statements clearly shows that the interest was paid on advances but not charged in respect of advances provided to the group company. Further increase in unsecured loans and asses ..... X X X X Extracts X X X X X X X X Extracts X X X X
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