TMI Blog2014 (2) TMI 1390X X X X Extracts X X X X X X X X Extracts X X X X ..... all be entitled to set off unabsorbed depreciation carry forward from the earlier years - Assessing Officer is therefore, directed to modify his order accordingly. Thus, this ground raised by the assessee is allowed in its favour. Interest for borrowed funds - Advances to sister concerns - HELD THAT:- Assessee has own funds far exceeding the advance made to its sister concerns. Further the claim of the assessee that it had transferred accumulate losses to its sister concerns has not been looked into by the Ld.AO, need less to mention that in such case disallowance of interest expense on the premises that interest bearing funds have been diverted would be incorrect. However the following decisions rendered by various higher judiciary ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany engaged in the business of manufacturing hydrogen peroxide, filed its return of income for the assessment year 2008-09, admitting Nil income after setting off brought forward unabsorbed depreciation of ₹ 10,57,17,523/-. The return was initially processed U/s. 143(1) on 10.02.2010, however, subsequently the case was taken up for scrutiny and the assessment was completed U/s. 143(3) of the Act on 24.12.2010 wherein amongst other disallowances the Ld. Assessing Officer did not allow the assessee the benefit of carry forward of unabsorbed depreciation and further disallowed ₹ 1,82,67,713/- being the proportionate interest relatable to advances extended to the sister concerns. 3. The Assessee and the Revenue has raised sever ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h effect from 01.04.2001.On appeal; it appears that the Ld.CIT (A) had not adjudicated the issue. Before us, the Ld. A.R. submitted that Sec.32 (2) of the Act was amended by Finance Act, 2001, and with effect from 01.04.2002 unabsorbed depreciation would be allowed to be carried forward for an indefinite period. It was also submitted by the Ld. A.R. that the Hon ble Finance Minister in his budget speech had clarified that the unabsorbed depreciation for the period 1996-97 and earlier will not be affected. Ld. A.R. has also relied on the decision of the Hon ble Gujarat High Court in General Motors India P. Ltd. Vs. Dy. Ld. CIT reported in [2013] 354 ITR 244 (Guj.) and also the decision of the Hon ble Madras High Court in the case of Pioneer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,32,000/-. Since the amount advanced to sister concerns was not utilized by the assessee for its business, relying on the decision in the case Abhishek Industries Ltd. Vs. Ld. CIT, reported in 286 ITR 1, the Ld. A.O disallowed interest expenditure of ₹ 1,82,67,713/- and added to the income of the assessee. On appeal, Ld. CIT (A) confirmed the disallowance of interest relatable to an amount of ₹ 7.88 crores advanced to the subsidy company of the assessee M/s.CIN. However, the Ld.CIT(A) held that for the amount advanced to the extent of ₹ 14.17 crores should not be treated as diversion of interest bearing borrowed fund for the purpose of disallowing interest proportionately, because this amount represented transfer of accumu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eeding the advances made to sister concerns, then interest expenditure cannot be disallowed on the premises that the assessee has diverted interest bearing fund to its sister concerns. (i). CIT Vs. Reliance Utilities And Power Ltd. ([2009] 313 ITR 340(Bom) ) Held, dismissing the appeal, that if there were funds available both interest-free and overdraft and/or loans take, then a presumption would arise that investments would be out of the interest-free funds generated or available with the company, if the interest-free funds were sufficient to meet the investments. In this case, this presumption was established considering the funding of fact both by the Commissioner (Appeals) and the Tribunal. The interest was deductible. (ii). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecision of Hon ble High Court of Delhi in the case CIT Vs. Bharti Televenture Ltd., which are identical to the facts of the case before us, we are of the opinion that the Ld. Assessing Officer has erred by disallowing the interest expenditure incurred by the assessee on the premises that interest bearing funds have been diverted to the sister concerns. Therefore, we hereby delete the addition made by the Ld. Assessing Officer, which was further confirmed by the Ld. CIT (A) on this issue. Thus, the ground No.3 raised by the assessee in its appeal is allowed in its favour and consequently the ground Nos.2.1 2.2 raised by the Revenue is decided against the Revenue. 11. In the result, the appeal of the assessee is allowed and the appeal of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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