9911796707
TMI Blog2021 (9) TMI 882X X X X Extracts X X X X X X X X Extracts X X X X ..... wing grounds before us: "Based on the facts and circumstances of the case and in Jaw SlCOM Limited ('the Appellant') respectfully craves leave to prefer an appeal against the order dated 23 October 2019 passed by the learned Commissioner of Income Tax (Appeals)- 8 ['CIT(A)'] under section 250 of the Income-tax Act, 1961 ('Act) on the following grounds which are separate and without prejudice to each other: On the facts and in the circumstances of the case, the Learned CIT(A) has :- Disallowance of notional Interest of Rs. 78,87,000/- under section 36(1)(iii) of the Act on Loan given to subsidiary General Ground 1. erred in confirming the action of AO in disallowing the notional interest of Rs. 78,84,000/- on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to each other and craves, leave to add, alter, delete or modify all or any of the above grounds of cross objections." 2. Briefly stated, the assessee company had on 30.09.2009 e-filed its return of income for A.Y. 2009-10, declaring a total income of Rs. 78,52,57,174/- under the normal provisions and 'book profit' of Rs. 153,25,77,621/- u/s 115JB of the Act. Original assessment was framed by the A.O vide his order passed under Sec.143(3) of the Act, dated 30.11.2011, determining the total income of the assessee company at Rs. 84,24,90,805/- under the normal provisions of the Act. Thereafter, the CIT, Mumbai, vide his order passed u/s 263 of the Act, dated 03.03.2014 set-aside the assessment order passed by the A.O u/s 143(3) of the Act, da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e sufficient to meet its interest free investments, then, without prejudice to the fact that the assessee had raised interest bearing loans it was to be presumed that the investments in question were made by the assessee from the interest-free funds available with it. It was submitted by the ld. A.R that the aforesaid issue was squarely covered in favour of the assessee by the order of the Hon'ble High Court of Bombay in the case of CIT Vs. Reliance Utilities and Powers Ltd. (2009) 313 ITR 340 (Bom). 5. Per contra, the ld. Departmental Representative (for short 'D.R') relied on the orders of the lower authorities. 6. We have heard the ld. Authorized Representative for both the parties, perused the orders of the lower authorities and the m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssed by the A.O u/s 143(3), dated 30.11.2011, with a direction to him to frame a fresh assessment. In the backdrop of the aforesaid direction of the CIT, the A.O vide his order passed u/s 143(3) r.w.s 263, dated 12.03.2015 disallowed the interest pertaining to the interest-free advance of Rs. 6.57 crore that was given by the assessee to its subsidiary company, viz. SRPL and worked out a disallowance of Rs. 78,84,000/-. On appeal, the CIT(A) upheld the disallowance of the assessee's claim for deduction of interest expenditure of Rs. 78,84,000/- made by the A.O. 7. Before us, the assessee had assailed the disallowance of the aforesaid interest expenditure u/s 36(1)(iii) of the Act, inter alia, for the reason that the assessee had sufficient ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8. Admittedly, the fact that the assessee had sufficient owned funds to source the interest-free advance of Rs. 6.57 crore that was given to its subsidiary company is not in dispute. The controversy involved in the present appeal hinges around the aspect, that as per the department if an assessee had borrowed certain funds on which liability to pay interest is being incurred; and on the other hand had advanced certain amounts to its sister concern or other third parties without charging any interest and without any business purpose, then, the proportionate interest correlating to the amount so advanced without charging any interest was liable to be disallowed u/s 36(1)(iii) of the Act. We are of a strong conviction that the aforesaid view ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upreme Court it was argued that it should have been presumed that In essence and true character the taxes were paid out of the profits of the relevant year and not out of the overdraft account for the running of the business and in these circumstances the appellant was entitled to claim the deductions. The Supreme Court noted that the argument had considerable force, but considering the fact that the contention had not been advanced earlier it did not require to be answered. It then noted that in Wootcomber's case (supra) the Calcutta High Court had come to the conclusion that the profits were sufficient to meet the advance tax liability and the profits were deposited in the overdraft account of the assessee and in such a case it should ..... X X X X Extracts X X X X X X X X Extracts X X X X
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