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TMI Blog2020 (4) TMI 213X X X X Extracts X X X X X X X X Extracts X X X X ..... re disposed-off by this consolidated order. ITA.No.7232/Mum/2018 for AY 2013-14:- 2. The assessee has, more or less raised common grounds of appeal for both assessment years. Therefore, for the sake of brevity, the grounds of appeal filed for the AY 2013-14 are reproduced as under:- 1. The Learned Commissioner of Income Tax (Appeals) erred in confirming the addition made by the learned assessing officer on the ground that there was no commercial expediency in advancing loans to sister concerns and therefore the ratio of the Apex Court in S.A. Builders Ltd. Was not applicable in the appellant's case. 2. Without prejudice to Ground No.1 and strictly in the alternative, the Learned Commissioner of Income Tax (Appeals) failed to appre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to sister concerns are for business purposes and there is a commercial expediency in advancing loans. Therefore, interest paid on loans cannot be disallowed u/s 36(1)(iii) of the Act. In this regard, the assessee has relied upon the decision of Hon'ble Supreme Court in the case of S.A Builders Ltd. vs CIT (288 ITR 01). 4. The Ld. AO after considering relevant submission of the assesee and also taken note of various loans and advances given to sister concerns noted that although, the assessee has advocated the theory of business expediency in advancing loans to sister concerns, but failed to substantiate its claim with necessary evidences to establish the fact that really there is a business connection between the assessee and the sister c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at loans and advances are given to sister concerns/associates towards business purpose and the element of commercial expediency is involved in giving loans and therefore, no interest can be disallowed u/s 36(1)(iii) of the I.T.Act, 1961. The assesee had also taken an alternative argument, in light of the decision of Hon'ble Bombay High Court, in the case of CIT vs Reliance Utilities and Power Ltd. 178 taxmann.com 135 (bom.) and submitted that if, there are funds available both, interest free and over draft and, or loans are taken, then a presumption would arise that loans and advances are out of interest free funds generated are available with the assessee. If interest free funds are sufficient to meet the loans and advances, then no disall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m the additions made by the Ld. AO towards interest of Rs. 29,40,569/-. Aggrieved by the Ld.CIT(A) order, the assesee is in appeal before us. 7. The Ld. AR for the assesee submitted that the Ld.CIT(A) was erred in confirming interest disallowances u/s 36(1)(iii) towards loans and advances given to sister concerns, without appreciating the fact that there is a commercial expediency in advancing loans to sister concerns and the ratio laid down by the Hon'ble Apex Court, in the case of S.A Builders Ltd. (supra) has squarely applicable to assessee case. The ld. AR, further submitted that although, the assessee has made an alternative plea, in light of the decision of Hon'ble Bombay High court, in the case of Reliance Utilities and Power Ltd (s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd both the parties, perused the material available on record and gone through orders of the authorities below. It is an admitted fact that the assesse has made huge borrowing from banks and other financial intuitions and diverted part of such funds to sister concerns to give interest free loans and advances. Further, as per the provisions of section 36(1)(iii), if any borrowed funds is diverted for non business purposes, then interest paid to that extent is not allowable as deduction. In light of the above factual and legal background, if you examine the claim of the assesee that it has given loans and advances to the sister concerns out of business expediency, we find that the assessee has failed to substantiate its claims with the fact t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assesee to explain loans and advances given to sister concerns. Therefore, we are of the considered view that the ratio laid down by the Hon'ble Bombay high court, in the case of Reliance utility power ltd, is also not applicable to the facts of the present case. As regards, another arguments of the assesee, in light of financial statements for the year that the Ld. AO has incorrectly taken loans and advances as per schedule of short term loans and advances of Rs. 3,34,26,601/- as against actual amount of loans and advances to related parties is only at Rs. 2,58,72,330/- and therefore, if at all interest disallowances is required to be made ,then the Ld. AO may be directed to interest disallowances to the extent of loans and advances a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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